This case considered the employer's long-standing practice of paying of paying certain groups of employees vacation pay on their overtime hours at "vacation entitlement rates". Other employees were paid at the minimum rates required by the Canada Labour Code. The original employer, Saskatchewan Wheat Pool, began this practice. Saskatchewan Wheat Pool's collective agreements did not specify the rate of vacation pay on overtime hours. When Saskatchewan Wheat Pool took over Agricore United it was renamed Viterra. Viterra, as the new employer, negotiated new collective agreements with the Union. The rate of vacation on overtime hours was not discussed in bargaining and no significant changes were made to the language relating to vacation pay or to the language relating to overtime hours.

More than a year after the new agreements were finalized Viterra's new management discovered the practice of paying certain employees vacation entitlement rates. Viterra began paying all employees at the Canada Labour Code rate without consulting the Union. The Union filed a grievance which was allowed on the grounds that the collective agreement implicitly required the higher rates of pay and that Viterra's past practice had effectively become part of the collective agreement. The arbitration panel's decision was upheld on judicial review.

The Saskatchewan Court of Appeal rejected the arbitration panel's position that the payment of vacation entitlement rates was already incorporated into the collective agreement, but it upheld the panel's finding on the issue of past practice and estoppel. The Court concluded that it was reasonable for the arbitration panel to find that Viterra had effectively represented that it would continue paying certain employees vacation entitlement rates by failing to indicate otherwise during bargaining. The Court also found that the panel reasonably concluded that the Union relied on this representation to its detriment. As a result, the tests for establishing estoppel were met and the Court found that the panel had reasonably concluded that Viterra was unable to change this practice without negotiation with the Union.

Of particular significance to the Court was the fact that the issue between Viterra and the Union was compensation. The Court held that generally, in labour relations, compensation is not changed without bargaining. The Court appeared to view this fact as enhancing the reasonableness of the panel's decision.

This decision continues to strengthen the jurisprudence on the doctrine of estoppel that parties to a collective agreement can be prevented from unilaterally changing past practices even when there is no basis for the practice in the collective agreement. As such, employers should be aware that any longstanding practice could be considered a part of the collective agreement, subject to change only through bargaining. This will be particularly so when the practice is long-standing or relates to compensation issues.

Note: This a reprint of an article by Michael Torrance of Rose Fulbright Canada LLP.