Successor Employer Estopped From Firing Workers

Written by Daniel Standing, LL.B., Content Editor, First Reference Inc.

In 2023 CanLII 111663 (BC LA), a British Columbia successive employer learned that it couldn’t take over with a totally clean slate. It ran into a roadblock when it tried to implement its plan to fire some incapacitated workers who were unlikely to ever return. While legal, perhaps, it ran up against the principle of estoppel, making it unfair to proceed as it wished. The case is a cautionary tale to unionized employers looking to change course on important issues.

Background

For more than 20 years, the employer did not formally request medical updates from employees receiving LTD benefits, nor did it fire the employees simply by virtue of the benefit period stretching past two years. The evidence showed that no matter the length of absence, the workers’ jobs were secure.

Then, following a round of negotiations, the employer determined it would change its practice, cutting loose six employees at the two-year mark, and three more who had been absent for nine, eight and three years, respectively. Not surprisingly, the union took umbrage, filing a grievance claiming the employer was estopped from terminating the employees.

Estoppel is a legal doctrine that prevents someone from asserting a right or claim that is contrary to their previous actions or statements. In the context of employment and labour law, estoppel can play a significant role in holding employers accountable for their actions or promises made to employees.

The arbitrator’s decision

The arbitrator in this case accepted the Union’s argument that past practices and other types of extrinsic evidence could help interpret the intent of the parties regarding certain clauses in the agreement. However, the arbitrator also considered other interpretive rules, such as the importance of clearly expressing significant promises and the presumption that parties are aware of relevant legal precedents, as outlined in the Pacific Press case, a 1996 BC arbitration decision appealed to the Court of Appeal for British Columbia.

The key issue at hand in our successor employer case involved the eligibility language in article 10.1 of the collective agreement, specifically in relation to an employer’s right to dismiss for non-culpable causes related to long-term absences. The arbitrator argued that a reasonable interpretation, considering the law on non-culpable discharge and the rule about important promises being clearly expressed, suggested that the clause intended to exclude employees not scheduled to work at least 20 hours per week. The eligibility for benefits was seen to extend to those on leave, in line with being “customarily scheduled. It didn’t apply, however, to those who had no reasonable likelihood of return. That, said the arbitrator, would be a major concession by the employer; it would have to be clearly stated.

Despite the employer’s past practice of not terminating employees on LTD and continuing benefit coverage, the arbitrator maintained that the term “employee” was crucial, subject to dismissal for cause, including non-culpable cause. The arbitrator emphasized that a promise to relinquish the right to terminate for well-established grounds of non-culpable cause would be considered a very important promise and needed to be clearly expressed.

The arbitrator trained his keen analytical eye to the question of estoppel, citing the essential elements outlined in the case law. Basically, the modern estoppel doctrine aims to prevent unfair harm by requiring three conditions: clear representation by one party that it won’t rely on legal rights, reliance by the second party and real harm if the first party changes its position.

The arbitrator acknowledged the employer’s contention that the elements of estoppel were not met. The employer argued that there was no meaningful past practice, but the arbitrator disagreed, pointing to the agreed statement of facts indicating the employer’s practice since 2001 of not terminating employees on LTD.

The employer’s objections to the relevance of past practice to the collective agreement and the weight of past practice for a successor employer were also addressed. The arbitrator held the claimed estoppel related to a specific and important benefit provision, article 10.2, and that past practice did not amount to indulgences or gratuitous benefits.

Regarding the employer’s assertion that any past practice before its acquisition of the operation was unknown, the arbitrator sided with the union, suggesting that the employer should have been aware or, at the very least, ought to have known at a senior level.

Ultimately, the arbitrator found that the employer’s active maintenance of the practice of retaining long-term absent LTD recipients and providing them access to the benefit package constituted an unequivocal representation. The arbitrator concluded there had been detrimental reliance by the union and the affected employees, estopping the employer from changing this practice until the union had the opportunity to negotiate in the next bargaining round.

Key takeaways

First, the case highlights that even after a change in ownership, a successive employer may not start with a clean slate and can be estopped from altering established practices, cautioning unionized employers against abrupt shifts in crucial policies.

The arbitrator’s decision underscores the significance of clear expressions in employment agreements and the potential impact of estoppel, which can arise by the parties’ conduct, even when they are silent.