Ontario hotel owner jailed after ignoring arbitrators’ decisions

The United Food and Commercial Workers Union has obtained a significant decision from the Ontario Superior Court of Justice. The court held an employer liable in contempt of court for failing to abide by and adhere to arbitration decisions and orders issued by three different arbitrators appointed under a collective agreement. John Evans takes an in-depth look.

Ignore an arbitrator’s order and you may suffer the wrath of the court in the strongest terms.

The United Food and Commercial Workers Union, Locals 175 and 633 has obtained a significant decision from the Ontario Superior Court of Justice. The court held an employer, the Rainy Lake Hotel in Fort Frances, Ont., liable in contempt of court for failing to abide by and adhere to arbitration decisions and orders issued by three different arbitrators appointed under a collective agreement entered into under the Labour Relations Act, 1995.

This court decision is noteworthy as Justice Patrick Smith held the president of the employer, Ladislav Syrovy, in contempt of court pursuant to rule 60.11(6) of the Rules of Civil Procedure and ordered that he be jailed for 30 days for his misdeeds.

Because the employer had continuously failed, among other things, to pay benefit contributions, provide payroll and deduction information to the affected employees and to provide T4s to employees, the union filed grievances and proceeded to arbitration under the collective agreement and the Labour Relations Act, 1995.

The arbitrators imposed orders against the hotel which directed that it comply with its obligations under the collective agreement. The hotel and its president failed to comply with the arbitration orders and essentially ignored them.

Two of the arbitrators granted relief in favour of the union by issuing future compliance orders. In those cases, a quia timet order was imposed. This equitable remedy is rarely used but nevertheless available to an arbitrator to ensure, as much as possible, the future compliance with the obligations contained in a collective agreement. Even faced with these extraordinary remedial obligations, the hotel and its president refused to comply.

Taking an arbitration decision to court

Arbitration decisions in Ontario can be filed in the Superior Court where there has been a failure to comply with any of its terms.

Such arbitration decisions are entered in the same way as a judgment or order of the court and are enforceable as such under s. 48(19) of the act.

The contempt motion

The union brought a contempt motion against the hotel, its corporate entity and its president, the directing mind of the corporation, on Aug. 30, 2005, in Fort Frances.

On Sept. 16, 2005, in a tersely worded decision, Justice Smith found the corporation and its president in contempt. He ordered Syrovy and the corporation carrying on business as the hotel jointly to pay a fine of $25,000 by Oct. 15, 2005. If the fine was not paid by that date, it would increase by $1,000 per month.

He also issued an arrest warrant for Syrovy and sentenced him to imprisonment for a period of 30 days, and the warrant was to be enforced by the Ontario Provincial Police.

Costs were also awarded to the union in the amount of $15,000.

After reviewing the applicable case law, Justice Smith said the primary purpose of a contempt order was to ensure compliance with the court’s procedures. The secondary purpose was to punish those found in contempt and to act as specific and general deterrence.

The court’s remedial response

The court reviewed factors to be applied in determining the appropriate remedy after concluding there was no real dispute and that Syrovy and the numbered company had acted in contempt of court. In doing so, the court was very critical of the hardship caused by the conduct of Syrovy as employees were denied health-care coverage because contributions were not remitted.

As well, the court found a complete absence of any mitigating factors. More importantly, the court noted various aggravating factors such as:

•lack of remorse;

•no efforts to rectify the situation or comply with the arbitral decisions; and

•a pattern of wrongdoing that was blatant and continuous and not otherwise characterized as a single breach.

Arbitration decisions must be complied with and respected to the fullest extent possible. If a party chooses to ignore an arbitration decision, then they may be called before the court and found in contempt.

It is not every case where large financial fines, costs or jail time for corporate officers will be ordered. Nevertheless, the court has the power and authority to impose such sanctions where, as in the case of Rainy Lake Hotel and Syrovy, the conduct warranted the remedies provided.

For more information see:

U.F.C.W., Local 175 & 633 v. Rainy Lake Hotel, 2005 CarswellOnt 4695 (Ont. S.C.J.)

Court pierces the ‘corporate veil’

Syrovy’s counsel argued the court could not or should not “pierce the corporate veil” and hold him personally liable.

Further, it was even suggested in materials filed with the court that the union had committed unfair labour practices during the last round of bargaining which resulted in a collective agreement, signed by Syrovy, that was too financially onerous.

No apologies were provided to the court and no steps taken to comply with the orders issued by the arbitrators.

The court said: “There is no doubt that the actions of Mr. Syrovy constitute an interference with the orderly administration of justice. For him to escape liability by shielding himself behind a corporate veil … would make a mockery and an abuse of the process of this court.

“Enforcing collective agreements is in the public interest; otherwise, the entire foundation of labour relations will crumble.”

The power to enforce court orders (and arbitration decisions) is critical and imperative to the rule of law and the notion of justice in Ontario. Justice Smith elaborated on this principle when he said:

“The courts of our country view breaches and their orders very seriously. The civil and criminal contempt provisions of the law are founded on the principle that a court must have the power to uphold its dignity and its process.”

Stay motion dismissed, hotel owner arrested by Ontario Provincial Police

After the decision of Justice Smith was issued, Syrovy brought a motion in the Superior Court of Justice seeking to stay the effect of the decision and the imprisonment order.

For reasons yet to be delivered as of press time, Justice Zelinski dismissed the motion without prejudice to Syrovy’s right to seek similar relief before the Court of Appeal if an appeal was advanced. Syrovy was ordered to pay further costs to the union in the amount of $2,000.

On or about Oct. 4, 2005, Syrovy was taken into custody and incarcerated by the Fort Frances division of the Ontario Provincial Police.

What the judge said about jail time

Justice Smith said incarceration is usually only used as a tool of last resort, but he had no choice in this case and he wanted to send a clear message to the public that courts will not tolerate this type of conduct.

“There is no reasonable prospect that Mr. Syrovy will obey any court directives or pay a fine. In these circumstances, given his history of defiant disobedience, I find that any personal sanction other than incarceration would be ineffective and bring the administration of justice into disrepute.”

John Evans served as counsel for the United Food and Commercial workers in this case. He is a partner with Cavalluzzo Hayes Shilton McIntyre & Cornish LLP in Toronto. He practices exclusivey in the area of labour law representing and advising trade unions and employees.

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