Why am I experiencing this error when I use the W3C validator?
(XHTML 1.0 Strict)

Line 62, Column 8: document type does not allow element "li" here; missing one of "ul", "ol" start-tag.
<li><a href="#">Policy Manual</a></li>The mentioned element is not allowed to appear in the context in which you've placed it; the other mentioned elements are the only ones that are both allowed there and can contain the element mentioned. This might mean that you need a containing element, or possibly that you've forgotten to close a previous element.
One possible cause for this message is that you have attempted to put a block-level element (such as "<p>" or "<table>") inside an inline element (such as "<a>", "<span>", or "<font>").

This is the XHTML:

<div id="nav_column">
<ul>
<li><a href="home.htm">Home</a></li>
<li><a href="#">News Archive</a></li>
<li><a href="#">Bargaining Archive</a></li>
<li><a href="#">Press Releases</a></li>
<li><a href="#">Association Minutes</a></li>
<li><a href="#">Calendar</a></li>
<li><a href="#">Pension &amp; Benefits</a></li>
<br/><br/><br/>
<li><a href="#">Policy Manual</a></li>
<li><a href="#">Committees</a></li>
<li><a href="#">Labour Relations</a></li>
<li><a href="#">TC Members</a></li>
<li><a href="#">Serco Members</a></li>
<li><a href="#">Promotional Items</a></li>
<li><a href="#">Awards</a></li>
</ul>
</div><!--end nav_column-->

The problem is the 3 <br /> tags you are using in the middle of the ul. If you want them to be separated like that simply make a separate list or div with an extra class with a top margin.

Bingo! Thanks so much. I got a validation. I'll separate the nav_column DIV into two separate DIVS, and create a .nav_column class for them.

Or just change the code like this?

<li><a href="#">Pension &amp; Benefits</a> <br/><br/><br/></li>

Only thing that can go between an ordered or unordered list is a list item, at least if people have explained it to me right. But from inside a list item you can do more.

For the list item you want spacing above
<li class="topspacing">item</li>

CSS:
.topspacing {margin-top: 1em;}