In a decision released Wednesday, the court said arbitrator Guy Dufort's previous work for Canada Post and history as a Conservative candidate in Quebec casts doubt on his impartiality.
"In light of the unique context of labour relations and the special law, the court concludes that a reasonable and sensible person might worry that the arbitrator is biased because of these two reasons," says a summary of the decision.
Labour Minister Lisa Raitt had named Dufort to hear the case after retired judge Coulter Osborne quit the job amid concerns that he was not bilingual.
Though Dufort was on a list of potential arbitrators approved by the Canadian Union of Postal Workers, the union said they were unaware of the depth of his ties to the Conservatives and Canada Post and objected to his appointment as soon as they learned of the links.
The union says Dufort's Facebook page contained links to Conservative groups under the "activities and interests" section, and he was "friends" on the social networking site with both Raitt and Tory MP Steven Fletcher, the junior minister responsible for Canada Post. The links have since been removed.
"The union has written to Lisa Raitt, asking that a mediator be appointed to facilitate the collective bargaining process instead of appointing another 'friend' to force a winner-takes-all final offer selection on the parties as mandated by the back-to-work legislation," CUPW said in a statement.
The government is now considering its options, and Raitt's office had little to say on the matter.
"Our government took action and passed a law to restore delivery mail to Canadians. We acted in the best interests of Canadian in doing so," the minister said in a statement provided by her office.
"The CUPW provided Mr. Dufort's name on their short list of potential arbitrators put forth in November 2011. It would not be appropriate to comment at this time as we are currently reviewing the decision."
Canada Post also weighed in on the ruling, saying it's crucial both sides reach an agreement soon.
"With increasing labour costs and mail volumes decreasing at a faster pace than ever before, it is imperative that Canada Post secure a new collective agreement with the Canadian Union of Postal Workers," Canada Post spokesman Jon Hamilton said in an email.
"Today's decision represents another disappointing delay in achieving a new collective agreement."
Canada Post locked out some 50,000 of its employees last year after a series of rotating strikes by the union. The dispute ended with federal back-to-work legislation that forced workers to accept wages that amounted to less than Canada Post's last offer.
Arbitration hearings to settle the dispute stalled again in May after the Federal Court agreed to hear the case.
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