Crown corporation underpaid, overpaid employees over five-year period
Canada Post cannot recover overpayments made to employees over five years because it failed to notify workers their wages might be clawed back, Ontario's Divisional Court ruled.
The December 5, 2025 decision upheld an arbitration award that denied the Crown corporation's attempt to recoup money paid to postmasters and Senior Assistants who were "acting" in higher classification positions.
The employer lost its recovery rights by remaining silent while employees relied on the inflated income.
When silence becomes surrender
The dispute began in 2016 when the Canadian Postmasters and Assistants Association filed a grievance alleging employees acting in higher positions weren't receiving proper pay increments "as if appointed" to those roles. Canada Post denied the claim and continued paying employees according to its own interpretation until Arbitrator Wayne Thistle's first award in 2021 determined the correct calculation method.
That decision revealed some employees had been underpaid while others had been overpaid.
The critical factor that sealed Canada Post's fate was its silence. After the union filed the grievance, the employer did not notify affected employees that recovery might be sought if overpayments were discovered, even though the issue was discussed between the parties at the national level and between counsel.
The arbitrator found within a time period that began eight years before and spanned five years, some employees had been overpaid, and the hardship this created for workers who relied on the higher income.
Arbitrator Thistle applied the equitable defense of estoppel, concluding employees should not be forced to repay money when the employer made overpayments over a lengthy period, employees did not cause the error, and workers received no warning about potential recovery.
"After a careful review of the collective agreement, statutory provisions, prior arbitration awards and court decisions, I have concluded that the Corporation has violated the agreement and the affected Grievors are not compelled to pay any compensation to the Corporation because of the overpayments."
Collective agreement clause backfires
Canada Post argued that Article 35.11 of the collective agreement entitled it to recover overpayments. The provision, titled "Recovery of Overpayments," stated: "When an employee has been overpaid through no fault of her own and the overpayment is in excess of fifty dollars ($50.00), the paying office will, before recovery action is implemented, advise the employee of the intention to recover the overpayment."
The clause went on to detail a hardship process limiting recovery to 10 percent of pay per period.
But Arbitrator Thistle rejected this interpretation. He found the clause addressed only the mechanics of recovery, not whether recovery was permitted in the first place. The arbitrator held: "this clause is in relation to a process to manage the overpayments and has nothing to do with the entitlement to recover overpayments."
The Divisional Court agreed this interpretation was reasonable, noting that when no defense to recovery exists, Article 35.11 governs the process—but here, a defense had been established through estoppel.
Why courts defer to arbitrators on overpayments
The court emphasized that labour arbitrators have flexibility when applying equitable principles like estoppel, quoting Supreme Court precedent: "Labour arbitrators are not legally bound to apply equitable and common law principles ― including estoppel ― in the same manner as courts of law."
Canada Post argued the arbitrator should have conducted a detailed technical analysis of estoppel's three requirements, but the court found the award's reasoning sufficient given the grievance context and the arbitrator's specialized expertise in labour relations.
The court dismissed Canada Post's judicial review application and ordered it to pay the union $5,000 in costs. The parties did not present evidence quantifying the total overpayments at stake.
See Canada Post Corporation v. Canadian Postmasters and Assistants Association, 2025 ONSC 6469
