Executive Summary: Key Legal and Evidentiary Issues

• Jurisdictional conflict arose over whether the Superior Court or a grievance arbitrator should hear disputes involving retired unionized Air Canada employees.

• The essential character of the dispute centered on Air Canada’s practice of granting free and reduced-rate travel passes (FRT Passes) to retirees and whether this practice was contractual or discretionary.

• The scope and application of management rights under Article 3 of the collective agreement were scrutinized, particularly regarding the unilateral modification of retiree benefits.

• The distinction between individual contracts and collective bargaining agreements was pivotal in determining the appropriate forum for the dispute.

• The definition of the class for the class action hinged on union status during employment, impacting which retirees could participate.

• No costs or damages were awarded at this stage, as the matter was limited to jurisdictional issues.

Facts of the case

Carole Davies, a retired Air Canada employee who had worked for the company for over 29 years and was unionized during her employment, filed an originating application on September 18, 2023, to institute a class action on behalf of all retired Air Canada employees. The core allegation was that Air Canada failed to fulfill its longstanding practice and contractual obligation to provide free and reduced-rate transportation plan flight passes (FRT Passes) to retirees, a benefit previously extended to employees with at least six months of service and continued into retirement. Davies claimed that Air Canada breached this undertaking by issuing higher-priority passes to active employees, thereby diminishing the value and priority of the passes held by retirees. Many retirees, she argued, had relied on this benefit when deciding to retire, expecting to continue enjoying travel privileges based on seniority.

Policy terms and clauses at issue

The dispute revolved around whether the granting of FRT Passes was governed by the collective agreement or arose from individual contracts. Air Canada maintained that the passes were a discretionary benefit falling under its management rights as outlined in Article 3 of the collective agreement, which reserves control and direction of employees to the company. The collective agreement did not explicitly mention FRT Passes, and Air Canada had consistently refused to include them in collective bargaining. The respondent, however, argued that the company’s longstanding practice and explicit promises created individual contractual obligations independent of the collective agreement.

Procedural history and lower court decision

Air Canada responded by filing a declinatory exception, arguing that the dispute, at least for unionized retirees, fell under the exclusive jurisdiction of a grievance arbitrator, not the Superior Court. On May 29, 2024, the Superior Court dismissed Air Canada’s application, holding that the court had jurisdiction to adjudicate the matter, as the FRT Passes were not expressly covered by the collective agreement and could arise from individual contracts.

Appeal and appellate decision

Air Canada appealed the Superior Court’s decision. The Quebec Court of Appeal, in a judgment dated October 27, 2025, allowed the appeal in part. The majority held that, for class members who were unionized while employed at Air Canada, the essential character of the dispute fell within the scope of the collective agreement, specifically under management rights, and thus was within the exclusive jurisdiction of a grievance arbitrator. The court declared that only a grievance arbitrator appointed under the collective agreement could hear the dispute for unionized retirees. However, the class action could proceed in the Superior Court for retirees who were not unionized during their employment. The dissenting judge would have dismissed the appeal entirely, supporting the Superior Court’s jurisdiction over all retirees.

Ruling and overall outcome

The outcome of the appeal was a partial victory for Air Canada. The Court of Appeal restricted the class action to non-unionized retirees, ruling that disputes involving unionized retirees must be resolved through grievance arbitration as per the collective agreement. No costs or damages were awarded at this stage, as the decision was limited to jurisdictional issues and did not address the merits of the underlying claims. The total amount ordered in favor of the successful party cannot be determined, as no monetary award was made in this interlocutory decision.