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HomeMy WebLinkAbout1990-0866.Rhodes.92-11-09 " , - , " " , ¡ ! Ii, ,,'. t ONTARIO EMPLOYES DE LA CQURONNE .. ,; CROWN EMPLOYEES DE l'ONTARIQ . 1111 GRIEVANCE COMMISSION DE . SETTLEMENT REGLEMENT BOARD DES GRIEFS . 180 DUNDAS STREET WEST, SUITE 2100, TORONTO, ONTARIO, MSG IZ8 TELEPHONE Ir~LEPHONE' (4161 326- J J88 180, RUE DUNDAS OUEST, BUREAU 2100, TORONTO (ONTARIO), MSG lZ8 FACSIMiLEITÈLECOPfE: (4161 'J26-1J96 866/90 IN THE MATTER OF AN ARBITRATION Under THE CROWN'EMPLOYEES COLLECTIVE BARGAINING ACT Before THE GRIEVANCE SETTLEMENT BOARD BETWEEN OPSEU (Rhodes) Grievor - and - The Crown in Right of ontario (Ministry of the Attorney General) Employer BEFORE: N. Oissanayake Vice-Chairperson I I. Thomson Member H. 'Roberts Member ... ~ '" " FOR THE N. Coleman UNION Counsel Gowling, Strathy & Henderson Barristers & Solicitors FOR THE _ L. McIntosh EMPLOYER Counsel Crown Law Office-Civil Ministry of the Attorney General HEARING September 28, 1992 I I -- . I I 'f 2 . DECISION The grievor, Ms. Linda Rhodes, grieved that she has been denied long term income protection (LTIP) benefits contrary to the collective agreement. She sought benefits for the period July 26, 1986 to October 1, 1989, on which date she commenced receiving LTIP benefits. The Board conducted hearings on this matter and issued .,.-, ~ its decision on November 18, 1991- Its ultimate conclusion and remedial direction (with Board Member Roberts partially dissenting) is contained in the following final paragraph of the decision: It follows from our findings above that the grievor was eligible to receive LTIP benefits as provided under article 42 of the collective agreement for the period claimed for, July 26, 1986 to october 1, 1989~ The employer is hereby directed to provide those benefits. We remain seized in the event the parties encounter difficulty in implementing this award. The Board reconvened on September 28, 1992 because the parties were in dispute as to the grievor's entitlement pursuant to the Board's decision. The parties had no difficulty agreeing upon the principal amount payable by way of LTIP for the period July 26, 1986 to October 1 1989. They had agreed the amount to be $ 44,717.68 and that principal amount had been paid out to the grievor following the issuance of the Board's decision. The diffiCUlty revolves around the .. ~ 3 issue of interest claimed by the union on the principal amount. The union claims that interest is payable upon all of the monies that were not paid to the grievor for the period. The union contends that since the LTIP payments became payable over a period of time, it is reasonable to reduce the amount by one half as per the uHallowell House Formulall. ( See, Ontario Labour Relations Board, Practice Note No. 13) . The parties have agreed that if interest is payable the appropriate rates must be governed by s. 127 of the Courts of Justice Act. Thus the union proposes the following calculation: --(-A) Pre-award interest Amount of Benefits x 1/2, (As per Hallowell Formula) x Interest x Number of months / 12 Applying the above formula the union made the following claim. For 1986 prinèipal amount of $6087.22 x Interest rate of 11% x 1/2 (Hallowell House) x 5/12 = $ 139.50 For 1987 principal amount of $ 14,047.44 x Interest rate of 10% x 1/2 = $ 702.37 -- . - " 4 In addition the union claims that since the LTIP benefits payable in 1986 ($ 6,087.22) were outstanding throughout 1987, that amount attracts interest at the 1987 rate of interest. Thus the union calculates $ 6,087.22 x 10% = $ 608.72. Thus the total interest claim for 1987 is 702.37 + 608.72 = $ 1.311.09 For 1988 principal amount $ 14,047.44 x Interest rate of 10.75% . . ~ . -' , . x 1/2 =: $ 755.05 The interest on the 1986 amount of $ 6,087.22 at 10.75% is $ 654.38 The interest on the 1987 amount of $ 14,047.44 x 10.75% is $ 1,510.10 Thus the total interest claim for 1988 is $ 755.05 + $ 654.38 + $ 1,510.10 = $ 2,919.53. For 1989 For the period January to september 1989 (The grievor commenced receiving LTIP in october) $ 10,535.58 x interest rate of 13.5% x 1/2 x 9/12 = $ 533.36 From october to December - $ 10,535.58 x 13.5 x 3/12 = $ 355.58 Interest on 1986 amount is $ 6,087.22 x 13.5% = $ 821.77 Interest on 1987 amount is $ 14,047.44 x 13.5% = 1,896.40 .:. , . 5 Interest on 1988 amount is $ 14,047.44 x 13.5% = 1,896.40 ,Thus the total interest claim for 1989 is $ 533.36 + $ 355.58 + $ 821.77 + $ 1,896.40 + 1,896~40 = $ 5,503.51 For 1990 The full amount of $ 44,717.68 at interest rate of 14.5% = $ 6,484.06 For 1991 From 1991 to the end of November 1991 (issuance of award) $ 44,717.68 x 11.5% x 11/12 = $ 4~713.98 According to the above calculations the total amount of pre-award interest claimed is $ 21,071.67. Together with the principal amount of LTIP $ 44,717.68 the total amount owing at the end of ,November 1991 is $ 65,789.35. (e) Post-Award Interest The union claims post-award interest as follows. For 1991 the claim is for December at 'the rate af 11.5%. Thus $ , , 65,789.35 x 11.5% x 1/12 = $ 630.48. From January to March 1992 the whole amount was still outstanding. Thus $ 65,789.35 x 9% x 3/12 = $ 1(480.26. In April 1992 the principal portion of the award i.e. , the benefits in the amount of $ 44,717.68 was paid out to the -" ."~ ~ . '. . 6 grievor in accordance with the Board's direction. What remained outstanding was the interest portion of $ 21,071.67. Thus the union calculates post-award interest up to the end of october 1992 as follows. $ 21,071.67 x 9% x 7/12 = $ 1,106.26. Therefore the total amount post-award interest- claimed is $ 630.48 + $ 1,428.26 + $ 1,106.26 ~ $ 3.217.00. As a result of the foregoing calculations, the union's claim for interest is $ 21,071.67 (pre-award) and $ 3, 21 7 . 0,0 (post-award) for a total of $ 24.288.67. The employer's position Init"ially employer counsel submitted that if the Board I had considered the union's request far interest and decided not to award any, then the Board was functus. Upon being advised by the Board that the Board had not considered that issue but had left that to be determined later by remaining seized expressly, counsel did not pursue the functus argument. Counsel nevertheless made two 'substantive arguments with regard to interest. . ,.-. .. (1 ) ShOUld interest be awarded at all Counsel noted for the record that she reserved the right to challenge the Board's jurisdiction to award interest in the first place, but chose not to argue that issue before the Board. She argued however that interest should not in any . p. . . 7 event be awarded in this case. She pointed out that interest was not claimed in the grievance form and that as a result the potential obligation to pay interest was not within the contemplation of the employer during the grievance procedure. It is pointed out that if interest had been claimed in the grievance form that would have provided an added incentive to the employer to settle the grievance. Counsel submits that since the union did not claim interest "up frontll, the Board should not allow interest at arbitration. It is further submitted that at the time the employer was faced with the gr"ievance, there was a serious legal issue as to whether the Board had jurisdiction to deal with such a grievance and as a result the employer may not have been as open to settling the grievance as it otherwise would have been~ She further points out that the monies owed to the grievor are in the nature of insurance payments and not like wages denied. She notes that while interest is awarded routinely on wages owed, she had not been able to find a decision where interest was awarded in a case like this. Finally, counsel points out that, when the employer paid out the principal amount of benefits, there were no statutory deductions made, and that this amounts to a windfall to the grievor. " t . ¡, 8 We do not consider any of the above reasons as justification for denying interest in this case. While the settlement desired portion of the grievance form did not mention interest expressly, the employer ought to have reasonably known that if the grievance is upheld, the Board can be, and most likely will be,~, called upon to award a "make- whole" remedy. 'Where as a result of a breach of the collective agreementl an employee is deprived the use of money to which he or she was entitled, interest is routinely claimed and awarded by arbitration boards. Thus it should not have come as any great surprise to the employer that the grievor would seek interest for the period during which she was denied LTIP benefits. In this particular casel in his opening statement, union counsel made it clear that he would be seeking interest. In the circumstances, we do not see how the employer could have been prejudiced in terms of any opportunity to settle the grievance or conducting the defence. It may w811 be the case tbat the-employer and the union had a genuine difference of opinion as to the Board's jurisdiction to hear this grievance. It is the right of any party to the collective agreement to take any legal position or raise any legal argument as it deems fit. However that cannot affect the grievor's entitlement if the grievance is ultimately successful. Interest is a compensatory and "make whole" remedy. It is not a punitive remedy awarded against ,; . . 9 a party for having acted in bad faith. In most discipline and discharge cases the employer believes in good faith that it had just cause for the penalty imposed. In most contract I interpretation cases the employer believes in good faith that I its interpretation of the collective agreement is the correct I one. However, where that is found not to be the ,case at arbitration arbitrators do not refuse to award 'interest in I consideration of the employer'· s good faith. Nor does it matter in our view that the money being claimed is not unpaid wages but LTIP payments. Again it is the "make whole" objective that justifies an award of interest. The fact is that the employee was denied the use of a certain amount of money to which she was entitled under " the collective agreement. Whether that money constituted wages or some other form of entitlement, in our view, is irrelevant. The employer had chosen to pay the principal amount of LTIP benefits to the grievor, without making the statutory deductions. We have no information as to why this was done. There is no suggestion that this was done at the grievor's request or that the grievor had agreed to give up her right to interest in return for having the benefit of use of the amount of statutory deductions until the end of the tax year. ' ~ -, < -: 10 In,the circumstances, the employer's unilateral action does not justify denial of the grievor's f~ll remedial rights. (2) Whether interest should apply to the period before the date of the grievance Counsel submits that interest should be limited to the period following the grievance. We see no justification for that. There was no objection taken, either on the -basis of timeliness of the gr ievance or otherwise, to the grievor's claim for LTIP payments for the full period going back to 1986. The Board found that she was eligible for LTIP payments for the full period. There is no rational justification to award LTIP payments for the full period, but limit interest to the period after the filing of the grievance. Employer counsel make submissions on the calculations used by the union. Union counsel agreed with employer counsel that for the 3rd and 4th quarters of 1986 the interest rate of 10% should be used instead of 11%. So that is no longer in dispute. What is in contention is the union's calculation ._-,~ of interest on outstanding amounts, for each subsequent year at the applicable rate of interest for that year. For example for 1986 the outstanding amount of principal was $ 6,087.22. In addition to claiming interest on this amount at the 1986 rate, the union claims interest on this amount for each of the subsequent years dur ing "'which the amount remained unpaid. ;. I, ,. -, 11 since the amount of LTIP of $ 6,087.37 remained owing to the grievor during each of those subsequent years, we find the union's claim to be justified. Counsel for the employer fina'lly submits that in calculating interest after October 1989, when the insurer ,- allowed the grievor LTIP, the principal amount of $ 44,717.68 , - should continue to be divided by 2, because the exact amount payable did not crystallize until the Board issued its award. We disagree. The Board's decision does not create any entitlement. What it does, is make a factual finding of the entitlement that existed under the collective agreement. The Hallowell House formula divides 'the principal amount, by one half in recognition of a situation where the monies become payable over a period of time. That rationale does not apply after the point of time when the full amount becomes due and payable. It follows from the foregoing that, we have not accepted 1 any of the arguments offered by the employer against the I' grievor's claim for interest. Except for the arguments we have set out above, employer counsel did not take issue with the methods of calculation proposed by the union if the Board rejects its arguments on the grievor's right to receive interest. We approve of the calculation methods used by the union in principle and direct that interest be paid in . ~ . ~ . 12 accordance with those calculation methods. While we have set out the exact calculations used by the union, we have not I , verified their accuracy. We leave it to the parties to I workout the same and remain seized in the event there are disagreements in that regard. Dated this 9th day of November,1992 at Hamilton, ontario . I ,~ð7-0,~ .N. Dissanayake vice-Chairperson I ~r (2 Thomson _. Member ' ' HI Dissent" {without written reason H. Roberts . Member