Executive Summary: Key Legal and Evidentiary Issues

• Scope of an arbitrator’s “residual jurisdiction” after a prior judicial review judgment has annulled an earlier award, allowed the grievance, and remitted the file solely to fix the sums owing under the grievance.
• Effect of the earlier Jugement Hamilton and the doctrine of res judicata (chose jugée) on the City’s ability to raise a new argument based on clause 4.02 of the collective agreement at the second arbitration stage.
• Characterisation of the City’s complaint as a true breach of natural justice or a disguised attack on the merits of the arbitrator’s second award, and the proper standard of review for such a challenge.
• Application of Vavilov and related appellate case law to determine when reasonableness versus correctness applies, particularly for functus officio, res judicata, and procedural fairness questions in labour arbitration.
• Interaction between minimum vacation pay standards in the Loi sur les normes du travail (LNT) and collectively bargained vacation and holiday provisions, including what counts as “salaire” and what constitutes the “indemnité de vacances” under the collective agreement.
• Assessment of whether an arbitrator acts unreasonably by declining to consider a new, previously available interpretive argument (clause 4.02) that would effectively undermine a final Superior Court judgment which had already allowed the union grievance.

Facts of the case

In January 2010, the Association des pompiers de Montréal inc. (the Association), representing firefighters employed by the Ville de Montréal (the City), filed a grievance on behalf of sixteen firefighters. The grievance challenged the City’s method of calculating vacation pay (“indemnité afférente au congé annuel” or vacation indemnity) under the collective agreement. The core allegation was that the firefighters’ vacation indemnity was lower than the statutory minimum established by article 74 of the Loi sur les normes du travail (LNT), which requires employers to pay 4% or 6% of the employee’s “salaire brut” (gross salary) during the reference year, depending on years of continuous service.
The LNT defines “salaire” broadly at article 1(9) to include monetary remuneration and pecuniary advantages due for the work or services of a salaried employee, a definition that undisputedly includes overtime pay. The Association argued that the City’s practice did not comply with this minimum standard because, in calculating vacation indemnity, the City ignored overtime earnings even though they clearly form part of “salaire brut” for the purposes of the LNT.
Under the firefighters’ collective agreement, vacation days were granted according to years of service and were taken “avec plein salaire” (“with full salary”) under articles 9.01 and 9.02. For example, a firefighter with two to six years of service was entitled to 21 calendar days of vacation “avec plein salaire”. To compute what it paid for vacation, the City multiplied the firefighter’s number of vacation days by his “salary” as defined in the collective agreement—namely, annual base salary under clause 2.01 plus, where applicable, seniority bonuses under clause 2.03. Overtime was not treated as part of salary under the collective agreement and was paid separately.
The Association maintained that, especially for firefighters who worked substantial overtime, this method produced a vacation indemnity lower than 4% or 6% of their true gross yearly earnings, contrary to article 74 LNT. It sought a declaration that the City was in breach of article 74 LNT and article 9 of the collective agreement, payment of the difference between the vacation indemnity paid and the proper quantum under the LNT, plus interest, and an order requiring the City to identify all other affected firefighters not listed in the original grievance.

The first arbitration and the Hamilton judgment

The grievance was referred to arbitrator Me Denis Tremblay. The parties filed detailed admissions describing the City’s practice: firefighters on vacation were paid their periodic salary for the number of vacation days/ weeks, calculated solely on base annual salary plus seniority bonuses, with no inclusion of overtime earnings. Some firefighters who worked significant overtime therefore had total earnings well above base salary plus seniority bonuses, but their vacation pay remained tied only to that lower base.
At the first arbitration, the Association argued that article 74 LNT sets an order-public minimum vacation indemnity based on the statutory definition of “salaire” in article 1(9) LNT; therefore, the City could not contract out of this standard via collective agreement definitions that excluded overtime. The City responded that, although article 74 LNT is of public order, the specific definition of “salaire” in the LNT was not itself an immutable minimum standard. In its view, parties were free in a collective agreement to define “salaire” differently for purposes of vacation indemnity, including by excluding overtime from the base on which the 4% or 6% is calculated, provided the resulting scheme remained lawful.
In December 2014, the arbitrator sided with the City and dismissed the grievance. He reasoned that while the percentage (4% or 6%) in article 74 LNT is of public order, the parties in a collective agreement could legitimately negotiate a narrower definition of “salaire” for calculating vacation indemnity and had in fact chosen to base the indemnity only on the salary scales in clause 2.01 (plus the seniority bonus), excluding overtime. On that view, the City’s practice did not violate the LNT.
The Association sought judicial review in the Superior Court, invoking article 93 LNT, which renders null any collective agreement clause that derogates from the LNT’s public-order protections. It argued that the arbitrator’s approach effectively allowed the parties to gut article 74 LNT by redefining the base to which the 4%/6% applies. In its pleadings, the Association expressly asked the Court not only to quash the arbitral award but also to allow the grievance and remit the matter to the arbitrator solely to determine the amounts owed to each firefighter.
Before the Superior Court (Hamilton J.), the City maintained the same position it had taken before the arbitrator: that the LNT’s “salaire” for vacation purposes could be replaced by the narrower, collectively bargained notion of salary that excludes overtime, and that the vacation indemnity under article 9 of the collective agreement complied with article 74 LNT when understood that way. Both parties agreed that, if the arbitral decision were quashed, the Court should allow the grievance and send the file back to arbitrator Tremblay for the limited task of fixing the sums due.
In November 2015, in what is known as the Jugement Hamilton, the Superior Court allowed the Association’s application. The Court held that the calculation of the City’s vacation indemnity under the collective agreement must respect the public-order minimum in article 74 LNT and that when that article refers to “salaire”, one must adopt the statutory definition in article 1(9) LNT, which includes overtime. The judge emphasised that allowing the parties to redefine salary for article 74 LNT purposes would deprive the statutory minimum of substance: telling employers they must pay 4% or 6% without specifying “4% or 6% of what” is meaningless if the base amount is left to be contracted away.
Concluding that the arbitrator’s contrary reading was unreasonable and that there was only one permissible answer, the Court quashed the award, allowed the union grievance, and returned the file to arbitrator Tremblay strictly “pour qu’il exerce sa juridiction résiduelle quant à la fixation des sommes dues en vertu du grief.” The City did not appeal the Hamilton judgment, which therefore became final.

The second arbitration and the new clause 4.02 argument

Almost five years later, in November 2019, the parties returned before arbitrator Tremblay. At this second stage, the City advanced a new argument it had never raised previously: it contended that the amounts paid under clause 4.02 of the collective agreement—governing paid days off “pour tenir lieu de congés payés à l’occasion des jours fériés” (for holidays)—should be treated as part of the overall “indemnité de vacances” for comparison with the minimum required by article 74 LNT.
Clause 4.02 awarded five days off, constituting an additional week of vacation, plus paid time off for any additional municipal holidays decreed by the City. The City now argued that these holiday payments formed part of the global vacation indemnity (“Indemnité prévue”) under the collective agreement. On this theory, when determining whether the City met the statutory minimum, one had to add together:

• The vacation amount calculated under articles 9.01–9.02 (vacation days with full salary, based on base pay plus seniority bonuses); and
• The amounts paid under clause 4.02 for holidays.
  The City characterised this as a pure “quantum” issue — a difficulty of calculation within the arbitrator’s reserved “juridiction résiduelle pour la fixation des sommes dues”. It argued that this was precisely the segment of jurisdiction Hamilton J. had remitted to the arbitrator. To support its interpretation, the City called a senior labour relations adviser to testify that, in practice, the days in clause 4.02 had always been treated as vacation days.
  The Association opposed the introduction of this new theory. It argued that neither at the first arbitration nor on judicial review had the City claimed that clause 4.02 formed part of the relevant vacation indemnity. On the contrary, the parties’ joint admissions and the evidence had presented the indemnity calculation as based solely on articles 9.01 and 9.02. According to the Association, when Hamilton J. quashed the award and allowed the grievance, he necessarily did so on the basis of that shared factual framework—namely, that the convention-based vacation indemnity equalled only the amount generated by articles 9.01–9.02, without any clause 4.02 overlay.
  In the Association’s view, allowing the City now to re-label clause 4.02 payments as part of the indemnity would effectively re-open issues already determined by the Hamilton judgment and would place the arbitrator in the position of sitting in appeal on that prior Superior Court decision. The issue, it argued, was res judicata (chose jugée) and therefore beyond the arbitrator’s power to reconsider. Substantively, the Association also maintained that clause 4.02 dealt with holiday pay in a distinct regime from the vacation regime in article 9 and could not be amalgamated into the same indemnity calculation.

The second arbitral award

In a March 11, 2020 award, arbitrator Tremblay accepted the Association’s preliminary objection. After reviewing the Hamilton judgment, he concluded that the Superior Court’s choice not only to quash his first award but to directly allow the union’s grievance had fully disposed of the merits. In his view, Hamilton J. had:

• Defined the legal framework by holding that article 74 LNT’s “salaire” must be understood according to article 1(9) LNT;
• Identified the factual basis for comparing the contractual and statutory vacation indemnities using articles 9.01–9.02 of the collective agreement and the LNT; and
• Expressly allowed the grievance, leaving to the arbitrator only the residual task of identifying which firefighters were owed money and in what amounts “en vertu du grief auquel il a fait droit”.
  On that reading, the arbitrator concluded he no longer had jurisdiction to revisit the structure of the contractual indemnity itself or to add new elements (such as clause 4.02 payments) into the comparison that had underpinned the Hamilton judgment. Any attempt to do so, he reasoned, would amount to questioning the Superior Court’s determinations and would overstep the limited residual mandate that judgment had conferred on him.
  He therefore declared himself “sans compétence” to decide whether clause 4.02 amounts should be included in the vacation indemnity calculation. Instead, he ordered the City to identify the firefighters covered by the grievance and to compute the sums owed to each “selon les critères élaborés par la Cour supérieure”, reserving jurisdiction only to resolve any application difficulties arising from that implementation.

The judicial review of the second award

The City then applied to the Superior Court for judicial review of this second arbitral decision. It advanced two main lines of attack.
First, it alleged a violation of natural justice and procedural fairness. The City claimed that the arbitrator’s refusal even to consider its new clause 4.02 argument deprived the parties of a definitive answer on an important interpretive issue and created a “perpetual denial of justice”, since the issue could never be resolved elsewhere. It characterised this as an error going to procedural fairness (and thus, in its view, attracting either no formal standard of review or correctness) rather than merely a disagreement over the merits of the arbitrator’s reasoning.
Second, on the merits, the City argued that the arbitrator had wrongly declared himself functus officio. It maintained that functus officio applies only where a decision-maker has already finally decided a question, which, it said, had not occurred regarding clause 4.02. In its view, since neither the first award nor the Hamilton judgment discussed clause 4.02, that issue remained within the arbitrator’s reserved residual jurisdiction to fix the sums due under the grievance. The City insisted that the first round of litigation was confined to the notion of “salaire” in article 74 LNT, not to the full configuration of the contractual indemnity, and therefore that nothing prevented the arbitrator from adjudicating clause 4.02 now. It asked the Court to quash the second award and itself declare that the “additional week” in clause 4.02 must be included in the calculation of sums due under the grievance.
The Association, for its part, argued that the City’s challenge was, in substance, directed at the merits of the arbitrator’s interpretation of his mandate and of the res judicata effect of the Hamilton judgment, not at the fairness of the process. The appropriate standard of review, it submitted, was reasonableness under Vavilov. It emphasised that the first arbitration and the Hamilton proceedings had not been limited to an abstract definition of “salaire”, but had necessarily involved comparing the total indemnity under the collective agreement — as defined by the parties’ own admissions based on clauses 9.01–9.02 — to the statutory minimum. If the City believed clause 4.02 had to be accounted for, it should have raised that point then. Having chosen not to do so, it was now barred by res judicata principles from reshaping the framework of the indemnity after the grievance had already been allowed by a final court judgment.

The Superior Court’s analysis on judicial review

The Superior Court (Ferland J.) first clarified the applicable standards of review. On alleged breaches of natural justice or procedural fairness, the Court explained that it does not defer to the administrative decision-maker’s process: it directly asks whether, in context, the proceedings were fair. This exercise is functionally akin to applying a correctness standard but is conceptually distinct, as it concerns the fairness of the process rather than the substantive outcome.
Here, the Court found no breach of natural justice. The City had been fully heard on its clause 4.02 theory at the second arbitration: it presented its calculations, filed evidence, and even adduced uncontradicted testimony from its senior labour relations adviser regarding how clause 4.02 had historically been applied. The Association also had the opportunity to argue against the City’s interpretation. The arbitrator’s eventual refusal to accept the City’s position was therefore a determination on the merits of his jurisdiction and the legal framework, not a denial of the City’s right to be heard. Because the City’s complaint targeted the outcome, not the fairness of the procedure, the Court reclassified this as a challenge to the merits of the award, to be reviewed for reasonableness.
Turning to the merits, the Court considered whether the functus officio and res judicata issues fell within the narrow class of questions warranting correctness under Vavilov (e.g., general questions of central importance to the legal system or jurisdictional boundary disputes between administrative bodies). While functus officio and res judicata are systemically important doctrines, the Court held that, in this case, they were being applied in a concrete, fact-specific labour arbitration setting. The arbitrator was not asked to reshape the doctrines themselves but to apply well-settled principles to the particular procedural history of this grievance. Under Vavilov, such applications are presumptively reviewed for reasonableness, and the Court found no basis to depart from that presumption.
On functus officio, the Court accepted that labour arbitrators can retain residual jurisdiction over remedial questions, including the quantification of amounts owed, and that functus officio is applied flexibly in administrative settings so that tribunals can complete the tasks assigned by their enabling legislation and by earlier judgments. However, the key issue was not whether the arbitrator could ever revisit remedial aspects, but whether the clause 4.02 question in reality belonged to the already decided merits of the grievance (by virtue of the Hamilton judgment) or to the reserved remedial phase.
The Court agreed with the arbitrator that the clause 4.02 issue went to the heart of the grievance’s merits: it determined the composition of the collective-agreement vacation indemnity that had to be measured against the LNT minimum. In both the first arbitration and the Hamilton judicial review, the parties had presented the contractual indemnity as calculated solely under articles 9.01–9.02, and their joint admissions, together with the Hamilton reasons, showed that the entire analysis proceeded on that premise. To accept the City’s new clause 4.02 theory at the remedial stage would, in substance, alter the factual and legal framework on which Hamilton J. had based his decision to allow the grievance.
On res judicata, the Court applied Civil Code article 2848 and Québec case law confirming that the authority of the thing judged extends not only to the formal operative part of a judgment but also to the necessary implicit determinations and essential reasons that underpin it. Moreover, res judicata precludes parties from raising in later proceedings arguments of law or fact that they could and should have advanced in the earlier case if those arguments go to issues already adjudicated.
Here, the same parties were litigating the same object (compliance of the City’s vacation indemnity with article 74 LNT and the entitlement to top-ups under the grievance) on the same cause (alleged violation of LNT minimum standards). In the first round, the City had expressly admitted how the contractual indemnity was calculated and consented that, if the award were quashed, the grievance should be allowed on that basis. The Hamilton judgment accordingly allowed the grievance, explicitly comparing the convention-based indemnity (as presented via articles 9.01–9.02) to the LNT minimum and holding that some firefighters had indeed received less than they were statutorily due. The Court concluded that the implicit but necessary corollary of that judgment is that the contractual indemnity for comparison purposes did not include clause 4.02 amounts.
In light of that, the City was barred from invoking clause 4.02 as a new component of the indemnity at the second arbitration. Whether or not clause 4.02 had been expressly discussed, the City could have raised that point earlier; having failed to do so, it could not now undermine the finality of the Hamilton judgment by reshaping the vacation indemnity’s components. The arbitrator’s decision to refuse to revisit that settled framework and to confine himself to his residual mandate was, in the Court’s view, clearly within the range of reasonable outcomes.

Final outcome and relief

The Superior Court dismissed the City’s application for judicial review of the second arbitral award. It held that there had been no violation of natural justice or procedural fairness, that the applicable standard of review on the merits was reasonableness, and that the arbitrator’s conclusion—that he lacked jurisdiction to entertain the City’s new clause 4.02 argument because of the res judicata effect of the Hamilton judgment and the limited scope of his residual mandate—was reasonable in law and in light of the procedural history.
The Court returned the matter to arbitrator Tremblay so that he could continue to exercise his residual jurisdiction, if necessary, to resolve any remaining implementation issues. It awarded legal costs (“frais de justice”) in favour of the Association des pompiers de Montréal inc. as the mise-en-cause and successful party. However, neither the Hamilton judgment nor this later decision quantifies the vacation-pay differentials owed to firefighters or the precise amount of costs. The arbitrator remains responsible for calculating the specific monetary sums due under the grievance, and the Superior Court judgment only orders costs in principle, without stating an exact figure. As a result, while it is clear that the Association ultimately succeeds in maintaining its grievance and in defeating the City’s late clause 4.02 argument, the total monetary amount awarded or ordered in its favour cannot be determined from the decisions themselves.