Court of Appeal for Ontario clarifies that labour arbitrators have jurisdiction over long-term disability claims by unionized employees

The Court of Appeal for Ontario recently considered whether labour arbitrators or the courts have jurisdiction over unionized employee claims for their long-term disability (LTD) benefits.[1] In this case, the Court of Appeal determined the matter was outside of the court’s jurisdiction. Leave to appeal to the Supreme Court of Canada was denied on January 14, 2021.

Pursuant to a collective agreement, Ms. Hutton’s employer had agreed to provide LTD benefits coverage to its employees and contracted with The Manufacturers Life Insurance Company (Manulife) to be the benefit provider. The collective agreement provided that eligible employees were entitled to LTD benefits under the Hospitals of Ontario Disability Income Plan (HOODIP), “or [an] equivalent [plan]”. Any disputes concerning an employee’s entitlement to LTD benefits under HOODIP would be subject to grievance and arbitration pursuant to that agreement. However, that provision did not explicitly provide for grievance and arbitration for disputes under an “equivalent” plan.

Ms. Hutton was injured in a car accident and sought LTD benefits from Manulife. She filed a union grievance against her employer, which settled, and an action against Manulife. Manulife brought a summary judgment motion to dismiss Ms. Hutton’s action, arguing that the court lacked jurisdiction over the claim. The motion judge agreed, as did the Court of Appeal for Ontario. In determining whether a benefit plan that is ancillary to a collective agreement falls within exclusive arbitral jurisdiction, the essential question is whether that plan “can be characterized as constituting or forming part of a collective agreement” so as to be enforceable by arbitration. In this case, the LTD benefits plan at issue formed part of the collective agreement. This was enough to conclude the grievance and arbitration provisions of the collective agreement applied to LTD disputes.

The court rejected Ms. Hutton’s argument that because her benefits were provided by Manulife and not HOODIP, the grievance and arbitration procedures under the collective agreement did not apply. Although the dispute arose under Manulife’s policy and not HOODIP, the court read in the words “or equivalent”. The employer contractually bound itself to provide all employees with LTD coverage, and must therefore be a party to any dispute concerning an employee’s entitlement even though the coverage itself was provided by a third party.

Implications:

1. Long Term Disability claims by unionized employees will usually fall within the jurisdiction of labour arbitrators, even when the employer engages a third-party insurer to provide coverage.
2. However, insurers providing benefit coverage to a unionized workplace should carefully review the collective agreement, benefits policies, and any other relevant agreements to ensure that employee disputes will be considered to have arisen pursuant to the collective agreement, and therefore between the union and the employer rather than the worker and the insurer.
3. A summary judgment motion is an effective and efficient way for insurers to seek the dismissal of benefits claims brought by unionized workers.
4. As leave to appeal this decision to the Supreme Court of Canada has been denied, this decision is authoritative and can be relied on in future matters, unless it is overturned or overridden by subsequent case law or legislation.

[1] Hutton v The Manufacturers Life Insurance Company (Manulife Financial), 2019 ONCA 975, leave ref’d 2021 CanLII 1096 (SCC).