June 18, 2014 By: Steve Waller
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For many years, labour arbitrators have interpreted management rights clauses in a purposive rather than a literal manner. This means that even management rights clauses, that on their face give employers absolute power, are “read down” to require that the exercise of those powers be ‘reasonable’. In short, most arbitrators have interpreted collective agreements as implicitly authorizing only ‘reasonable’ management action. After initial judicial resistance, this approach has come to be accepted by the Courts.

As one aspect of this approach, arbitrators long ago devised a test to determine when unilateral employer rules or policies are enforceable by discipline. Named after the 1965 case in which the test was first articulated, the KVP test requires that to be enforceable, a policy or rule unilaterally introduced by the company, and not agreed to by the union, must satisfy the following conditions:

  1. It must not be inconsistent with the collective agreement;
  2. It must not be unreasonable;
  3. It must be clear and unequivocal;
  4. It must be brought to the attention of the employee affected before the company can act on it;
  5. The employee concerned must have been notified that a breach of the rule could result in his discharge (if the rule is used as a basis for discharge); and
  6. It should have been consistently enforced by the company from the time it was introduced.

The second requirement – that the policy or rule be reasonable – is the core of the KVP test, and must be carefully applied to the facts of each case. Policies that arbitrators have found are reasonable in some other workplace, or even in most other workplaces, might not be reasonable in your own workplace. The answer will depend on the extent to which the rule or policy interferes with the particular interests of each affected employee group. Unions should therefore be diligent in assessing the effect of every unwelcome policy or rule on the particular interests of the affected employee group.

In its 2013 decision in Irving Pulp, the Supreme Court of Canada approved the KVP test, and adopted a standard of ‘reasonableness’, that balances the employer's interest in enforcing the rule against the legitimate interests of the affected employees who are expected to comply: 

Determining reasonableness requires labour arbitrators to apply their labour relations expertise, consider all of the surrounding circumstances, and determine whether the employer’s policy strikes a reasonable balance. Assessing the reasonableness of an employer’s policy can include assessing such things as the nature of the employer’s interests, any less intrusive means available to address the employer’s concerns, and the policy’s impact on the employees [emphasis added].’

In Irving Pulp, the Supreme Court of Canada struck down, as unreasonable, a policy requiring employees to submit to random drug and alcohol testing. The Court did so despite the fact that the workplace in question was indeed dangerous, and despite the fact that drug and alcohol abuse would indeed pose a serious safety risk in that workplace. The Court noted that random testing was a serious intrusion on employees' privacy. It ruled that to justify random testing, the employer would have to establish that it had encountered a serious problem of drug or alcohol abuse amongst this particular group of employees, and that there was no less intrusive way to effectively deal with it.

The Supreme Court's decision has caused a stir amongst employers. Employers had relied on a competing line of arbitration decisions that had focused not on the effects on employees personal interests, but rather on the degree of risk that substance abuse inherently poses in any safety-sensitive workplace. By invoking the KVP test, the union in this case shifted the focus to the harmful effects that the new policy would have on the privacy interests of its members in particular.

There is a lesson here. Where policies intrude on employees' personal privacy, or otherwise harm their personal interests, those policies are not valid unless the employer can justify them by establishing some competing management interest that ought to override the interests of that particular employee group. An employer who wants to impose an attendance management system, for example, might not be able to – unless it can demonstrate a serious past problem with the particular employees group's attendance. Similarly, an employer that wants to introduce workplace surveillance cameras might not be entitled to – unless it can demonstrate that there is a serious problem of theft or workplace violence that outweighs that particular employee group's right not to be filmed.

The KVP test is not new but the Supreme Court has breathed new life into it. Enterprising unions will look for opportunities to apply the KVP test for their members' benefit.

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Labour Law