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HomeMy WebLinkAbout1982-0439.Black.85-05-28439182, 23183 266183, 267183 594183, 618183 125184, 126184 IN THE MATTER OF AN ARBITRATION Under THE CROWN EMPLOYEES COLLECTIVE BARGAINING ACT Before THE GRIEVANCE SETTLEMENT BOARD. Before: :.r For the Griever: For the Employer: Hearing: February 11, 1985 OPSEU (Coil Black) and Griever .- The Crown in Right of Ontario (Ministry of Revenue) Employer E. 8. Jolliffee, Q.C. Vice-Chairman R. Russell Member G. Peckham Member M. Cornish Cornish & Associates Barristers EC Solicitors G. Sholtack Legal Services Branch Ministry of Revenue -2- SUPPLEMENTARY DECISION This ma~tter had its origin in a series of grievances, the last of which followed the termination of the griever's employment on March 31, 1983. He had served with the Ministry of Revenue since 1965, holding the rank of Tax Auditor 3 from 1.969. Evidence and argument relating to the first grievance, 440/82, was-heard by the Board on 24 days between January and August. After much consideration the Board issued a decision dated January 10, 1985, setting aside as invalid an Employee Perfor- mance Appraisal in respect of the period from September 1, 1981, to February 28, 1982. The griever and counsel for both parties came before us againon February 11. During thedaytheysigned a Memorandum of Settlement, annexed hereto as Schedule "A". On February 12, a decision was issued approving the settlement, subject to .determination of two issues referred to the Board. The ~first issue is now being decided; the second will be decided, if need be, at .a later date. It' is necessary to discuss herein only those parts of the Memorandum of Setttlement which bear directly on the first issue. -3 - The memora~ndum begins by providing as follows: 1. The griever's termination on March 31st, 1983 and the termination letter will be revoked and the grievor will be reinstated to his position as a Tax Auditor 3 with full seniority and no loss' of benefits as if he had been continuously employed from his date of hire t&the date of reinstatement, which shall be effective from February lst, 1985. By the second paragraph the employer agrees to revoke four appraisals and. by the third paragraph it also agrees to revoke a one-day suspension in 1982 and a five-day suspension in 1983, thus disposing of the six grievances remaining after the Board's disposition of 440/82. The fourth paragraph provides as follows: 4. The employer agrees to reinstate'the grievor on the payroll of the Ministry of Revenue effective AprillJ983 and to pay to thegrievor the sum of approximately $68,322.93 representing the gross salary which he would have earned but for the employer's suspensions and termination (that is his gross salary for the 6 suspended days and from April 1, 1983 to Jan 31, 1985 minus the usual employment deductions which are approximately as follows: CPP - $1,237.93; Superannuation Pension - $2,835.41; 1% Pension Adjustment:. $675.10; UIC - $1,037.76: Union Dues - $579.00: Supplementary Life - $1,223.12; Leperdent Life - $7.04; and LTIP - $163.16, which would have been deducted had he been employed. By the fifth paragraph it is agreed that the payments above are to be adjusted in respect of the one-month period : - 4 - commencing January 1, 1985, to reflect the requirements of a new collective agreement. The seventh paragraph is of immediate importance since it must be decided now. It is as follows: 7. Subject to the order of the Grievance Settlement Board, pursuant to paragraph 10. herein, as to manner of calculation, the employer agrees to pay to the grievor at the rate of 11.5% the interest owing on the lost wages pursuant to paragraph 4. above. The problem posed by the above language is stated in sub-paragraph (a) of parag.raph 10: How should the interest in paragraph 7 be calculated and in particular is the employer only obliged to pay interest on the net figure which is payable to the grievor after income tax and the other employment deductions referred to in paragraph 4,'or must interest be.paid on the gross salaryowing? The above question clearly defines the issue to be decided at this time. The other issue (referred to in sub- paragraph (b) of paragraph 10) cannot receive consideration until such time as Revenue Canada rules on the tax liability of:~~the grievor in respect of the-years 1983, 1984 and 1985. Whether interest is payable does not constitute an issue. 1 The parties have agreed in paragraph 7 that interest is ‘, payable at 1 1.5 per cent which is consistent with prev decisions of this Board and also most recent awards in private sector,. and in general approved by the Courts. -5- ious the For example it was said by Seaton J.A. in Re Westcoast Transmission -- - Co. Ltd. and Majestic WileyCo.ntractors Ltd 139 D.L.R. (3d) 97: ---- -- - ;r For most arbitrations I would expect that the arbitrators could calculate an interest factor in arriving at "the loss suffered" or "the cost incurred" or "an equitable adjustment" in price. 'Ihe interest factor would not be interest upon the loss or cost of adjustment but part of the loss or cost of adjustment,calculated at the timeof the handing down of the award. The dictum quoted above appears to be another way of saying what is now generally accepted: that unless there are reasons to the contrary, interest at the appropriate rate is an integral part of compensation in any case where compensation is to be awarded. Although earlier arbitration awards --- and a few in recent years --- have taken a contrary view, the weight of authority now is that interest should be a part of compensation if the employee is to be "made whole." This is based on the underlying princ.iple clearly stated by Professor Weiler in Re - International Chemical Workers, Local 3.46 and Canadian Johns --~ - -- Manville Co. Ltd. (1971) 22 L.A.C. 396 at pg. 397: -- - 6 - The purposeof damages for breach of contract is not to punish but to compensate, and the function of compensation is to place the aggrieved party in a monetary position as near as pssible to that in which he would have been had the contract been performed. The issue raised here, however, is new. It was not discussed except by implication, in any of the cases brought to our attention. The parties have not asked the Board to decide whether interest is payable. The parties do ask the Board to decide whether interest is payable on then gross amount of the agreed compensation or on the 'net amount after the deductions which would have been required by law or by the applicable collective ag;eement had the grievor continued in employment after March 31, 1983. The starting point of the judicial approach is generally considered to be Hadley LBaxendale et al (1854) 9 Ex. 341. The -- Court said at p. 354: . . . the damages which the other party ought to receive in respect of such breach of contract should be such as may fairly and reasonably be considered either arising naturally, i.e., according to the usual course of things, from such breach of contract itself, or such as may reasonably be supposeddto have been in the contemplation of both parties, at the time they made the contract, as the probable result of the breach of it. -7 - Without going into the numerous elaborations which appear in subsequent cases -- or in legislation --- suffice it to say that both the Court of Appeal in Saskatchewan and the Court of Appeal in British Columbia have endorsed the principle that, in proper cases, arbitrators have a discretion to a'ward interest as a part of compensation. The generally accepted formula for calculating compensation is that provided by the Ontario Labour Relations Board in Hallowell House Ltd. and Service Employees -- -- - International Union, Local 183 (1980) O.L.R.B. Rep. 35 (P.C. Picher), adopting the rule stated by Lord Denning in Jefford + Gee (1970) 1All E.R. 1202 at p.1207, who observed that interest is not awarded for general wrong done but is specific compensation..... "for being kept out of money which ought to have been paid...." . In Air Canada and Canadian Airline Employees Association -~ The inclusion of interest is, in mv ooinion. necessary to put the grievor back into the position * she would have been had the Company not wrongfully suspended her... (1981) 29 L.A.C. (2d) 142, Ms. P.C. Picher (who had also authored the O.L.R.B. decision in Hallowell) undertook a.lengthy and -- scholarly review of the authorities as part of her supplementary award. She concluded (at p. 161) that: -8- Both Hallowell and Air Canada have been followed and ___-- applied in a number of-cases recently. Nevertheless, we cannot .C find that either case or other cases cited (such as Knudson 348/80 and Gingell 44 and 172/84) expressly addressed the . . distinction between gross income and net income. It seems likely that the matter was overlooked by counsel and.never argued. In this case,' where the parties agree that interest is indeed payable, the distinction has been vigorously argued by Ms. Cornish, counsel for the grievor, and Mr. G.W. Sholtack, counsel employer. They could not.~settle it in the course of for the negotia issue. tions and they therefore ask this Board to resolve the In our view, the issue turns on a series of questions and the necessary answers thereto. The questions arise from the items enumerated in paragraph 4 of the Memorandum of Settlement. In finding the answers.we have in mind Lord Denning's observation in Jefford v. Gee, already quoted, that interest is specific compensation '..... for being kept out of money which ought to have been paid....." In other words, we must be concerned with money the grievor would actually have received~for his ownuse had he continued to be employed after March 31, 1983. There are eight items specified in paragraph 4, which Mr. Sholtack said would not have been paid to the grievor during - 9 - his continued employment between termination on March 31, 1983, and February 1, 1985, the date of his reinstatement. Counsel therefore argues that the total of such items should be deducted from the g.ross amount of approximately $68,322.93 before the calculation of interest payable. The eight items were stated in paragraph 4 to be as follows': 1. Canada Pension Plan: $1,237.93. Would the grievor have received that amount in 1983 and 1984? The answer clearly is that he would not have received it; in the normal course it would have been remitted to the C.P.P. by the employer. Whether it will ever become payable to the C.P.P. is a matter to be determ~ined by those who administer the C.P.P. The remaining quest-ion is whether the griever would.be adversely affected on retirement if no credit is given for'the contribution of $1,237.93 in respect of 1983~and 1984.' We think not. At his level the grievor will undoubtedly receive the maximum payable by C.P.P. on retirement. He had been con-tinuously employed from 1966 until March, 1983, at an above-average salary. 2. Superannuation Pension: $2,835.41. That amount would not have been received~ by the griever in 1983 or 1984. Moreover, he will never ~receive it, except as part of his pension entitlement after he retires at some future date. - 10 - 3. One percent Pension Adjustment: $675.1.9. The answer must be the same as in 2 above. 4. UIC: $1~,037.76. This amount would not have been paid to'thegrievor. It would havebeenremitted by the employer to the Commission. 5. Union Dues: $579.00. The grievor would not have received this amount. Dues would have b~ee~n remitted to the Union. 6. Supplementary Life premiums: $1,223.12. The money would not have been received by the griever and he is not adversely affected unless his standing under then Plan is prejudiced- by the lapse in payment of premiums --- which is something the parties can easily determine. ._.. ,; 7. Dependent Life: $7.04. The an'swer is the same as in 6 above. 8. LTIP: $163.16. The answer is the same as in 6 above, since the Plan is carried by an insurance company. ::_ We are obliged to conclude that the grievor, had his employment continued, would not have received any of the payments specified abov.e, and also that, subject to the qualifications c .l - mentioned in respect of 6, 7 and 8 above, the grievor has not been adversely affected in a monetary way by the suspension of such payments. It is assumed that; as part of the agreed settle- .i ment in paragraph 4, the amounts specified will be restored to the recipients entitled thereto. In the result we are bound to conclude that the griever is entitled to receive interest on the gross amount specified in paragraph 4, (approximately- $68,322.93) less the'total of the deductions also specified,.which is $7,758.52. The difference represents the net salary the grievor would have actually received had his ~employment continued from April 1, 1983, ~to Januar~y 31, 1985. The difference is $60,564.41. That is th.e- amount upon which.interest must be calculated. The. parties have agreed that interest on lost compensation is payable at the rate of 11.5 per cent per annum.' It must, however, be reduced in accordance with Lord Denning's "rough and ready" formula; adopted by the Ontario Labour Relations Board in the Hallowell case. The initial,.step, it will be noticed, is to divide the total interest by two. The reason of course is that (in retrospect) there was no interest due on lost compensation at the beginning of the period,.April 1, 1983, but thereafter interest steadily grew until it was due ins full at the end of the period, January 31, 1985. . .~ -.. “‘~.“’ ,.. ,’ .:,I;;: - 12 - The formula should be applied in the following way, having in mind that the grievor was denied employment from April 1, 1983, to January 31, 1985, a period of 22 months. I = P x 11.5 x 22 7 100 I-2 Our award is that, in addition to his lost salary, the grievor is entitled to be.paid the amount resulting from the calculation above. If.any adjustment becomes necessary by reason of the provision in paragraph 5 of the Memorandum of Settlement, the same formula can be used to determine what amount, if,.any, m'ay be payable in interest on the adjustment in respect of the one-month period from January 1, 1985. The whole of the principal and interest due became payable on February 1, 1985, the effec~t,ive date of the settlement. As and from that date, the griever is also entitled to interest on the balance payable but unpaid. The calculation of such additional interest will necessarily be made in days at the rate of 11.5 per cent per annum but, because the whole amount was due on February 1, 1985, the amount owing thereafter must not be divided by two. -13 - The remaining issue referred to the Board involves the problem of the .-. griever’s tax liability in the years 1983, 1984 and 1985. Pending a ruling by Revenue Canada, that issue cannot be decided until a later date. For that reason, income tax deductions have not been discussed herein. Date&ii: Toronto t-his 28thday of May, 1985 EBJ:sol