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HomeMy WebLinkAboutP-2006-1143.Gary Sumner et al.07-08-21 Decision Public Service Grievance Board Commission des griefs de la fonction publique Nj ~ Ontario Suite 600 180 Dundas Sl. West Toronto, Ontario M5G 1Z8 Tel. (416) 326-1388 Fax (416) 326-1396 Bureau 600 180, rue Dundas Ouest Toronto (Ontario) M5G 1Z8 Tel. : (416) 326-1388 Telec. : (416) 326-1396 P-2006-1143,P-2006-1495,P-2006-1522,P-2006-1591,P-2006-1592, P-2006-1593, P-2006-1655, P-2006-1656,P-2006-1688,P-2006-1907,P-2006-1920,P-2006-2087,P-2006-2088 IN THE MATTER OF AN ARBITRATION Under THE PUBLIC SERVICE ACT Before THE PUBLIC SERVICE GRIEVANCE BOARD BETWEEN Gary Sumner et al. Grievor - and - The Crown in Right of Ontario (Ministry of Health and Long-Term Care) Employer BEFORE Kathleen G. O'Neil Vice-Chair FOR THE GRIEVOR Gary Sumner, Alistair Greig, Ruth Adamcewicz, Edna Hunt, Marnie Russell (Grievors) FOR THE EMPLOYER Sean Kearney Senior Counsel Ministry of Government Services HEARING June 28, 2007. 2 Decision This decision deals with the employer's preliminary objection to thirteen grievances, filed by Managers working at Whitby Mental Health Centre and North Bay Psychiatric Hospital, which have been consolidated for hearing. The grievors all claim that the employer breached their terms and conditions of employment when their lump sum payments paid out as pay for performance in 2004, were retroactively recharacterized in late 2005, so that 2% was considered base salary, rather than a lump sum payment. They claim a 2% salary increase for 2004/05 and 2005/06 separate and distinct from, and in addition to, the pay for performance award. The employer asks that the grievances be dismissed at the outset, as the grievors have not made out a prima facie case for the remedy claimed, and the issue underlying the grievance has already been dealt with in Pedder et al. and the Crown in Riszht of Ontario (Ministrv of Community Safety and Corrections) #P-2005-3706, P-2005-3707, P-2005-3708, P-2005-3709, P-2005-3710, P-2005- 3711, P-2005-3712, P-2005-3819 (O'Neil). In that case the grievors claimed that a 2% increase to their salary range on April 1, 2004 and 2005 should have been implemented as an increase to their individual rates of pay, prior to the application of their pay for performance awards. The Board found that the grievors were not so entitled, as the employer had not offered a 2% general salary increase in addition to their merit awards. Rather what the employer had offered was an extension of the salary range within which the grievors could move to the extent permitted by their merit award. There is no dispute between the parties as to the facts; the issue is whether the facts asserted establish the basis for a possible finding of a breach of the grievor's terms and conditions of employment. In correspondence to the Board, the Ministry objected to the matter being set down for hearing at all, as the issue had already been decided in Pedder, cited above. The Board determined that there appeared to be additional issues, such as the propriety of the treatment of retroactivity and recharacterization of previously awarded amounts that were not necessarily covered by the Pedder decision. Nonetheless, these grievances do flow from the same series of changes to the managerial payment scheme dealt with in Pedder, which are important to understand as a basis 3 for the discussion of the disposition of these grievances. Those changes were described as follows in Pedder at pp. 3 and following: The factual backszround to the dispute In late 2005, when the events leading to this dispute occurred, the grievors were all at the maximum of the salary range for their classification, OCR16. A number of changes to their compensation package had been announced in 2005, and were implemented starting with the final pay of the year on December 29,2005. One of the changes was announced as "an increase of 2%" to their salary ranges, retroactive to each of April 1, 2004 and April 1, 2005. From the evidence and submissions before the Board, it is clear that the source of this dispute is the fact that the grievors understood this information to mean that their individual rates of pay would be increased by 2%, as they fell within the salary ranges affected, prior to the receipt of their pay for performance awards. Thus, they expected their percentage merit awards to be applied to a base salary rate that had been increased by 2%. By contrast, in announcing a 2% increase to the salary ranges, the employer's evidence indicates it intended and implemented only an increase, or extension, to the range, providing a 2% higher potential maximum salary, rather than a 2% increase to individual salary rates. As part of an overall shift to what was described as purely performance-based compensation for managers, there were no general, automatic, "across-the-board" increases intended or approved for managers. All progression within a salary range was to be as a result of individual performance as reflected in an annual pay for performance award. The percentage amount of the award flowed from an established grid according to whether a manager was assessed as falling into the categories of "did not meet", "met most", "met all", or "exceeded" key performance commitments. If managers "met all" performance expectations, as each of the grievors did, their award was 5% for each of the fiscal years 2003-04 and 2004-05. What was approved and offered by the employer was a two-step delivery of the applicable pay-for-performance award. The first of the two steps was progression within the newly extended salary range up to the maximum. Using as a base the grievors' salary rate as of March 31, the last day of the previous fiscal year, their base salary rate was increased up to the new maximum, effective April 1, the first day of the new fiscal year. This first step absorbed whatever portion of the percentage award was necessary to reach the new maximum of the range. The second step was to payout any remaining portion of the percentage merit award in the form of a lump sum. This was the thrust of the uncontradicted evidence of the employer's witness, Risa Caplan, a senior Corporate Compensation Specialist with the Ministry of Government Services, the central governmental agency charged with the responsibility of recommending managerial pay changes. The evidence is persuasive that the grievors were paid according to the above sequence, as intended by the employer. ... In percentage terms, given that the maximum had been increased or extended by 2%, this meant that the first 2% of the grievors' 5% merit award, effective each of April 1, 2004 and 2005, was delivered by way of progression within the newly extended range, and resulted in a 2% higher rate of pay each pay period. The rest, 4 or 3%, was delivered by way of a lump sum, which did not increase the base salary any further. When the grievors saw a lump sum of 3% as their pay for performance award on their pay stubs, they concluded there had been a miscalculation, that they were missing 2% of their 5% award for performance. These grievances followed. The 3% lump sum is consistent with what the employer's evidence showed was intended. The grievances raise the question as to whether it is also consistent with what was promised to them in writing. The pay treatment of the grievors now before the Board was the same as that of the grievors in Pedder, in that the same formula for increases was used. Of course, the amounts paid out as a result were different, as the two groups of grievors were in different job classifications. Some of the communications were different as well because a different Ministry is involved here. The Pedder grievors worked in Corrections, the current grievors work in the Ministry of Health and Long Term Care. However, the message was essentially the same, and consistent with the communications dealt with in Pedder.. As well, the current group of grievors have formulated their complaint from a different angle, grounding it in a more detailed way in what went before, which highlights why they found the change so problematic. When the changes described above were announced in late 2005, to be retroactively effective April 1, 2004 and 2005, the grievors' compensation included pay increases relative to the fiscal years 02/03 and 03/04. In those two fiscal years the grievors had, like all other members of the MCP pay for performance plan, received increases effective the first day of the new fiscal year in a manner which gave them both an across-the-board increase, and an increase to the salary range maximum before the percentage award for performance was applied. The numbers, which are not in dispute, set out in a table prepared by the parties, shows that effective April 1,2002, the grievors' salary revision was based on a 1.95% across the board increase, plus a compounded 1 % revision to the salary range maxima separate from (i.e. before) the pay for performance percentage was applied. For someone like Mr. Sumner, who was already at the maximum on April 1, 2002, this meant he benefited from three separate, compounded percentage increases: 1.95% across-the-board, 1% increase to the maximum salary, and then a 4% pay for performance increase, which generated a lump sum, since he was already at the maximum of the range. 5 Similarly, effective April 1, 2003, he received a 1.95% across-the-board increase, plus a compounded 2% increase to the maximum, which was then used as the base for the calculation of his 5% performance award. As well, by the time the retroactive compensation changes were announced in late 2005, the grievors had already been informed of, and had received payments in respect of, their pay for performance awards for the performance period 2003/04, which were effective April 1, 2004, about which more will be said below. Two structural things changed in the salary revisions announced in late 2005 and made retroactively effective April 1, 2004. Firstly, there was no across-the-board increase. Secondly, the increase to the maximum was done only as a range extension, not as an increase to the salary of everyone then at the maximum. These changes are the fruit of the employer's decision to increase its managers' salaries only by merit. The only salary movement now available is as a result of the pay-for-performance award. If the pay for performance award is zero, there will be no wage increase. Starting with the changes effective April 1, 2004, this meant that the percentage awarded was calculated on the previous year's salary, when in the two previous years it had been calculated on a base salary newly enriched by both an across-the-board increase and an increase to the maximum of the range to which all those who had reached the maximum were automatically moved. This change from the concept of an increase to the maximum salary to the concept of an increase to the range within which one can move only by merit, together with the absence of across-the-board increases, clashed with the expectations of the managers involved, leading to the grievances dealt with in Pedder and the ones now before the Board. As in Pedder the question becomes whether the Board should find that the changes were not just something unexpected and unwelcome in certain respects, but also a breach of the grievor's terms and conditions of employment or some enforceable promise. The main points made by these grievors not dealt with in Pedder relate to the retroactive change in the characterization of the lump sums paid out. For the pay for performance period 2003/04, for which the performance award is effective April 1, 2004, taking Mr. Sumner as an example, based on figures and dates which are not in dispute, a lump sum performance award was paid out on December 16, 2004, calculated on the previous year's salary maximum, as an interim measure. At that point, no increase to the salary grid had been announced. Then in October, 6 2005, it was announced that the grid would be extended twice, a first 2% increase to the range effective April 1, 2004, and a second effective April 1, 2005. However, it was made clear in communications from the employer that there would no accompanying automatic adjustment to an individual's salary, that the MCP employees would thereafter progress through the salary ranges solely based on performance at a rate determined by their individual pay for performance awards. Given that the salary ranges had been extended, but there was to be no automatic movement within the salary ranges, no one was at the maximum salary, at least notionally, until the lump sums previously paid out as performance awards were recalculated. In the case of employees in a similar situation to Mr. Sumner's - at the maximum with a previously determined 5% performance rating - the lump sum of 5% paid out in December 2004 was relabelled to reallocate the amount representing the newly available room on the grid as retroactive salary (2%), and the rest as a lump sum (3%), for a total of the same 5% performance award. Going forward, the grievors then had their regular salary increased by 2%, which would provide a higher base for the calculation of vacation, benefits and pension. The grievors assert that when they received the first performance pay-out the employer promised that the lump sum would not be used as a basis for such calculations, which promise it breached when it was partially recharacterized as salary. The grievors refer to this as having been promised an "unfettered" lump sum. As remedy for this alleged breach, the grievor's claim a 2% salary increase. This part of the claim is based on a November 25, 2004 letter which announced the percentage performance award and included the following language: As you are aware, the MCP Pay for Performance Plan specifies that employees are eligible for awards based on their performance from April 1, 2003 to March 31, 2004. There are two types of performance awards under the Plan: - Increases to base salary for eligible employees whose salary is within the salary range for the job class; - Re-earnable lump sum awards for eligible employees whose salary is at the maximum of the salary range for the job class. They are not included in calculating premium, severance or termination payments, or to be treated as earnings for benefit and pension purposes. They are subject to the usual salary-related deductions, i.e., income tax Canada Pension Plan and Employment insurance. Your performance rating for 2003/04 is "met All Key Performance Commitments" for a performance award of 5%. Your performance award will be based on your salary effective April 1, 2004 and will be reflected on your December 16th pay. 7 Mr. Sumner argued that this letter promised a lump sum of 5%, because the rating was 5%. At the time of the letter, and the pay-out on December 16, 2004, it was true that both the rating and the lump sum were 5%. That changed when the range was extended as described above, so that the performance award or rating was 5%, but the lump sum was 3%, as the extension of the range had provided previously unavailable movement room of 2% within the salary range. Given the circumstances in the fall of 2004, the fact that the grievors read this letter as promising a lump sum of 5% is understandable. Nonetheless, the wording of the above letter does not attach a 5% percentage to the lump sum. It describes two potential ways to deliver the performance awards, one taking an employee up to the maximum, and then another for those at the maximum. The Board is not of the view that the November 25, 2004 letter promised anything that was not delivered. Firstly, it did not promise a 5% lump sum. It promised a 5% rating, which would be delivered as a lump sum if the individual was at the maximum. Both those things were true in the fall of 2004, and that is what the grievors received as a result of the follow-through on the above communication. That communication also said that the performance award would be based on the salary effective April 1, 2004, and that part of the equation changed as a result of the late 2005 announcements. Nonetheless, in effect, the grievors are contending that a promise of a 5% lump sum persisted beyond the changes announced in the fall of 2005, and that it was breached by those changes. The Board cannot accept that contention, firstly because a close reading of the above letter shows that a 5% lump sum was not actually promised. An award of 5% was promised. What changed in late 2005 was how that was delivered as a result of the extension to the maximum. Further, the 2004 memo was overtaken by the later changes, in that among other things, the grievors' salary range was increased effective April 1, 2004. As to the point that the lump sum promised in 2004 was to be "unfettered", i.e. not affecting other aspects of compensation such as pension and vacation pay, the Board does not find that this argument can go the distance the grievors wish. There is no suggestion that the amount that was considered a lump sum after the retroactive extension of the salary range was treated in any different way than the lump sum previously paid out. Given that the grievors acknowledge the employer's right to make retroactive changes to the compensation scheme, and there is no evidence that there was a term or condition of the grievor' s employment that a salary range could 8 not be retroactively extended, the fact that the lump sum payment received by the grievors in 2004 was partially recharacterized as salary movement within that range, does not amount to a breach. The grievors did not actually lose any of that lump sum. Some of it was relabelled as retroactive salary, but this is not a loss of money; it is a change of category of compensation. In a related point, Mr. Sumner asserted that he relied to his detriment on representations made by the employer that lump sum pay for performance awards would not be treated as earnings for pension and benefit purposes, only to have the retroactive change made in late 2005, resulting in a pension adjustment in February 2006. In order to make out a prima facie case in this respect, the grievors would have to show at the very least, that some detriment was experienced, or some promised compensation was not paid to them. The evidence does not support a finding that the grievors received less compensation as a result of the retroactive changes than they had before. Rather, the material before the Board indicates they received a retroactive salary increase which then carried forward as a 2% higher wage on every pay check. Further, there is nothing in the material before the Board that indicates that the fact that the new salary was treated as pensionable earnings was a breach of some term or condition of the grievor's employment. Nor is there any other fact before the Board that amounts to a prima facie case for detrimental reliance based on a promise made by the employer. As noted above, the lump sum portion of the recalculated performance award was treated in the way the employer had set out in the 2004 memo, and the grievors concede that the employer is entitled to make retroactive changes to their compensation. Approaching the matter as a question of retroactivity, Mr. Sumner asserted that the changes announced in late 2005 had the result that while the maximum of his classification's salary range was increased 2% for 2004/05, he did not receive any retroactive pay for the 2% salary revision for 2004/05, contrary to past practice in previous fiscal years. The agreed figures make clear, however, that in re-allocating 2% of the performance award to progress the grievors to the new salary range maximum, the employer was delivering retroactive pay due as a result of the range extension. The result was 2% less than what the grievors expected because the employer was not also at the same time delivering an additional 2% automatic or "across-the-board" increase as the grievors had experienced for the two preceding fiscal years, but that is not a basis on which the Board could find that retroactivity was not paid. 9 In a related point, Mr. Sumner refers to a memo dated July 16, 2004 to Human Resources Directors concerning the MCP Pay for Performance Plan which indicated that provisions previously set forth for the 02/03 fiscal year remained in effect, and that the Pay for Performance Grid remained in effect for fiscal year 03/04. Further it said that the procedures for the 03/04 fiscal year built on the 02/03 procedures. Similarly, Mr. Sumner refers to a communication entitled "KeyStones" dated September 23,2004, which focussed on the setting of the percentage rates for performance awards and their distribution. That communication indicated, among other things, that starting in September 2004, the Chair of Management Board would be able to set pay for performance rates after the end of a fiscal year. This was followed by the statement that the "changes to the grid don't impact the 2003/2004 P4P awards anticipated to be paid out in December 2004." To the extent that the grievors believe that the changes announced in late 2005 changed the pay for performance grids, or their performance awards, the material submitted does not support that contention. There is no evidence that the pay for performance grids, the various percentages attached to performance evaluation, or the percentage awards, changed for these grievors. As indicated above, what changed was how they were delivered, as a result of the extension of the salary range, and the absence of any preceding or simultaneous automatic or "across the board" increase. In another point related to the two "grids", Mr. Sumner asserted that it was arbitrary for the employer to issue a series of communications on pay for performance throughout 2004 and spring 2005, without any indication of plans to integrate salary range adjustments into the pay for performance grids and then announce and retroactively apply this decision in the fall of2005. The material before the Board does not provide a basis for a finding that the salary range adjustments were integrated into the pay for performance grids. They remained separate. The pay for performance grid is a list of what percentage performance award is associated with what level of performance. Salary range adjustments are changes to the minima or maxima of a classification's wage grid. They do not in themselves say where any individual will be placed. What the material supports is a finding that the fact that the extension of the salary range announced in 2005 was not accompanied by an automatic movement of any individual to the maximum, or an across the board increase, meant that the grievors' 5% performance awards were not completely delivered in a lump sum. On a retroactive basis, 2% was delivered as an ongoing salary increase, and 3% as a lump sum. Nonetheless, as employer counsel underlined, 10 their performance awards were not reduced or changed from 5% to 3%. Nor is there any evidence that the percentages in the pay for performance grid for the relevant years changed. The grievors also outlined the history of the Management Pay for Performance Plan from 2001 onwards, which is not in dispute, but which does not form a basis for the relief the grievors are seeking. It is clear that there were across-the-board and automatic increases as well as performance awards during the earlier years of the plan. However, the chronology does not form a sufficient basis to find that the grievors could succeed in establishing that it was a term or condition of employment that the employer would not retroactively introduce the type of changes announced in late 2005. If anything, it confirms that the employer routinely announced compensation changes for managers on a retroactive basis. More specifically, there is nothing in that chronology, or the other material before the Board, that provides a basis for a successful grievance based on the idea that there was a past practice of providing automatic increases in a manner which would cause the Board to find that it was a continuing term or condition of employment that the grievors were entitled to a salary increase prior to and in addition to pay increases based on the performance award. As employer counsel noted, the amounts and percentages have varied, and the past practice includes legislated periods of total pay freezes such as under The Social Contract Act. While acknowledging that retroactive changes to the compensation plan are a fact of life in the civil service, and that the employer has the right to make changes to the compensation plan, the grievors assert that reasonable notice of any change should be required, and that retroactive implementation should not involve changing the characterization of money already paid out. Employer counsel argued that there was no authority for the principle that the employer can only do retroactive changes in the manner the grievors suggest, and that in the end, the grievors are asking for exactly what the Pedder grievors were asking. On balance the Board agrees with the employer's submission, as there is nothing in the material submitted that supports an obligation to implement changes only in a prospective manner, or upon a certain amount of notice, or only in a way that leaves lump sums characterized as lump sum payments rather than retroactive salary. Much of the material submitted indicates instead that it has been a longstanding feature of the managers' terms and conditions of employment that pay increases are implemented and calculated retroactively and with a variety of kinds of changes. 11 The grievors also assert that the retroactive changes detrimentally affected their promised compensation, and thus should be seen as a breach of their terms and conditions of employment. In this respect, employer counsel argues that the ultimate flow-through of the changes announced in 2005 was positive because it increased the grievors' salary and pensionable earnings. If the employer had not recalculated to give the grievors the benefit of the range extension, employer counsel submits they would have lost out because their pensionable earnings for the future would have been lower. Indeed, the Board finds no basis in the facts and documents put forward to conclude that the grievors' terms and conditions of employment were changed in a way that decreased their compensation. Rather, the evidence supports a finding that the compensation package increased, but not in a way, or in the amount, that the grievors anticipated. At various points in his submissions, Mr. Sumner refers to employment policies highlighting the employer's commitment to fairness, consistency, transparency and timely communication. Although it is clear that communication of the changes involved here did not result in transparency to the extent anticipated by the grievors, this does not amount to a prima facie case for the 2% salary increase claimed by the grievors as remedy. There is no basis in the material submitted for a finding that the changes were not applied to the grievors in a consistent or fair manner as compared to other employees. In sum, having carefully considered the submissions and material put forward by the grievors, in light of the findings in Pedder, cited above, and for the above reasons, the grievances are dismissed for want of a prima facie case that the grievors' terms and conditions of employment have been breached. Dated at Toronto this 21st day of August, 2007.