Executive Summary: Key Legal and Evidentiary Issues

• Meaning of “regular rate of wages” and “normal hours of work” for paid personal leave under section 206.6 of the Canada Labour Code for a federally regulated, unionized railway employee.

• Choice between the 20-day average formula in section 17(a) of the Canada Labour Standards Regulations and any alternate method “agreed on under or pursuant to a collective agreement” under section 17(b).

• Proper characterization of the “basic day” concept in the collective agreement between Canadian Pacific Kansas City Railway (CPKC) and the Teamsters Canada Rail Conference (TCRC), and whether it was intended to govern personal leave pay.

• Use of other leave provisions in the collective agreement, such as bereavement leave and family-related or compassionate leave, to infer any common intention about how statutory personal leave should be paid.

• Application of the Vavilov reasonableness framework to the Canada Industrial Relations Board’s interpretation of the Code and Regulations and to its factual findings about industry practice and the parties’ conduct.

• Financial consequence that, absent any valid collectively bargained method under section 17(b), CPKC must compensate the employee’s personal leave day using the higher 20-day average method and bear costs after its judicial review is dismissed.

Facts of the case
Canadian Pacific Kansas City Railway (CPKC) employed Darren J. Arthur as a train conductor working on the spareboard to cover conductor and brakeperson vacancies. His hours and earnings varied day to day depending on terminal, miles travelled and various allowances. On January 24, 2021, Mr. Arthur took one day of personal leave under section 206.6 of the Canada Labour Code, which entitles eligible employees to up to five personal leave days per year, the first three of which are paid after three months of continuous employment. CPKC accepted that the leave was owed but calculated his pay using the “basic daily rate of pay” for brakepersons set out in the collective agreement with the Teamsters Canada Rail Conference (TCRC), paying him $193.19 for the day. Mr. Arthur filed a monetary complaint with the Labour Program, asserting that this amount did not reflect his proper entitlement. A labour affairs officer determined that, because Mr. Arthur’s hours of work varied, his personal leave pay should be calculated under section 17(a) of the Canada Labour Standards Regulations, using the average of his daily earnings over the previous 20 workdays, rather than under section 17(b) via the basic day. The Head of Compliance and Enforcement revised the calculation to $569.38, excluding “held away from home terminal” payments, and issued a payment order against CPKC.

Proceedings before the labour board
CPKC sought review of the payment order, and the matter proceeded as an appeal before the Canada Industrial Relations Board. The Board heard four days of evidence and submissions from CPKC, Mr. Arthur and TCRC, while similar cases involving the same issue and employer were held in abeyance. The central legal question was whether a CPKC employee governed by this collective agreement and working variable hours must be paid for personal leave using the statutory 20-day average in section 17(a), or whether the parties had agreed on a different valid method under section 17(b). CPKC argued that the “basic day” definition in the collective agreement, long used in various contexts, was an agreed-upon method for calculating regular wages and should therefore govern personal leave. The Board interpreted section 17 in light of its text, context and purpose, including the broader objective of section 206.6 to mitigate the financial impact of short personal absences. It found that the basic day is a limited, minimum payment concept, typically used when an employee is called but does not perform a full tour of duty or when deadheading, and does not reflect what conductors and brakepersons normally earn. The Board also examined other leave provisions, including bereavement leave (which pays what the employee would have earned had they worked), family-related leave and compassionate leave, and concluded that the collective agreement contained multiple, differing approaches to leave pay and loans rather than one consistent method. It held that the parties had not agreed on any method that could clearly be extended to statutory personal leave under section 206.6 for purposes of section 17(b). On that basis, the Board confirmed that section 17(a)’s 20-day average formula applied, and it further held that “held away from home” payments must be included in the earnings average when calculating Mr. Arthur’s personal leave pay. CPKC’s appeal was dismissed.

Judicial review before the Federal Court of Appeal
CPKC applied for judicial review in the Federal Court of Appeal, arguing that the Board had misinterpreted section 17 by effectively adding a requirement that any collectively agreed method under section 17(b) must reflect what an employee could have expected to earn on the leave day. CPKC asserted that section 17(b) simply allows parties to contract out of the 20-day average method in section 17(a) through any collective-agreement calculation, and that the Board improperly curtailed freedom of contract. CPKC also contended that the Board unreasonably minimized or misunderstood evidence about the prevalence and function of the basic day and failed to respect the complex industry practice underlying wage calculations for running-trade employees. In the alternative, CPKC argued that, even if the basic day did not qualify, the bereavement leave formula in the collective agreement should be treated as an agreed method applicable by analogy to personal leave under section 17(b). The court reviewed the Board’s decision under the Vavilov reasonableness standard, emphasizing that statutory interpretation by the Board is presumptively reviewed for reasonableness rather than correctness and that the court’s task is to assess whether the decision is justified and coherent in light of the legislation and evidence. The court accepted that section 206.6 of the Code and section 17 of the Regulations form part of a minimum-standards regime designed to soften the financial impact of short-term personal absences and support work–life balance, especially for employees with irregular schedules. It held that the Board reasonably read section 17(b) as allowing a collectively agreed method without demanding a provision explicitly labelled as personal leave, while still requiring a demonstrated intention that the method actually be used for statutory personal leave. The court found it reasonable for the Board to characterize the basic day as a limited minimum payment that does not represent normal earnings, and to conclude that neither the basic day nor the bereavement leave provision, viewed against the range of leave arrangements in the collective agreement, established a consistent method clearly intended to govern personal leave under section 206.6.

Outcome and costs awarded
The court dismissed the application for judicial review by Canadian Pacific Kansas City Railway, leaving intact the Board’s decision in favour of Darren J. Arthur and the interpretation that requires using the 20-day average formula, including “held away from home” earnings, to calculate his paid personal leave. As a result, Mr. Arthur and the Attorney General of Canada were the successful parties in the judicial review. Following an agreement between the parties, the court ordered CPKC to pay costs of $6,000 plus disbursements to Mr. Arthur and $6,000 plus disbursements to the Attorney General of Canada, with no separate damages award specified in this appellate decision.