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Home My WebLink About1982-0439.Black.85-09-27IN THE MATTERS OF AN AR Under NATION THE CROWN EMPLOYEES COLLECT1 BARGAINING ACT Before THE GRIEVANCE SETTLEM Between: For the Griever: For the Employer: Hearing: .’ OPSEU (Co11 Blat and ltario The Crown in Right of or; (Ministry of Reven u&J E. 8. Jolliffe, Q.C. Vie ze-Chairman R. Russell M lem bei G. Peckham M Iem ber L. Sterling Counsel, Cornish & Associates Barrist’ers & Solicitors G. Sholtack Senior Solicitor Legal Services Branch Ministry of Revenue July 26, 1985 \ TE‘EP”ONEl 416/598-0699 439182 59@33 23183 618183 266183 125184 267183 126184 r BOARD Grievor Employer I TEIRD SUPPLEMENTARY DECISION / On January 10, 1985, this Board rendered a decision upon a grievance presented by Mr. Co11 Employee Performance Appraisal for tl 1981, to February 28, 1982. The case \ however, six other grievances to be he; 267/83, 618/83 and 594/83, and these..ir discharge. Black in respect of an e period from September 1, as GSB 440/82. There were rd, 23183, 439182, 266/83, eluded a grievance against On February 11, 1985, the p appearing before the Board submitted E in respect of all the upending cases agreement was subject to determinatil questions relating to the calculati subject also to pending negotiations liability. On February 12, 1985, the BoaI supplementary. decision incorporatin settlement and stating: "subject to f issues referred to above, as required -.the Board is pleased to'give full ej settlement agreed to by the parties, decision was. reserved on questions sp the Memorandum. Ii irties -and their counsel L r $ Memorandum of Settlement ,eferred to above. Their n by the koard of certain on of compensation, and in respect of income tax d issued an order or first 1 verbatim the terms of ture determination of the by the Memorandum itself, feet and approval to the and it is so ordered." A cified in paragraph 10 of After considerati'on, the Board on May 15 rendered a Second Supplementary Decision in respect of the questions raised I by sub-paragraph (a) in paragraph 10 of the Memorandum. Such questions related to the calculation of interest and whether certain amounts should be deducted from gross compensation before arriving at the net figure upon which interest would be payable. It was held that the following were deductible: Canada Pension Plan contribution: Superannuation contribution; one per cent pension adjustment; !~ Unemployment Insurance contribution: Union dues; Supplementary Life premiums: Dependent Life premiums: Long Term Income Protection premiums. I These deductions produced a ~, total ~0f S7,758.52, held to be deductible- because they would not havebeenreceived by the grievorhad he beenemployed during the.~ period following his d i scharge. I I In concluding the~second supp'lementary decision of May I -3- 15, the. Board stated, referring to sub-paragraph (b) in paragraph 10 of the Memorandum: The remainirg issue referred to 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. I As suggested by the Board, the parties again appeared on July 26 and.made representations in respect of the ruling as to income tax liability made by.Revenue Canada. After discussions, -4- . the parties arrived at agreementas to the times at which payment of compensation should be made and the calculation of~interest thereon. The remaining issue, implicit in sub-paragraph (b) of paragraph 10, was whether the income tax deductions (which would have been made had the grievor continued in employment after his discharge) are properly deductible from the compensation for which the Employer is liable. The problem was posed by the solicitor for the Employer in the-following words: Paragraph 10 of the Settlement which refers to the gross amount of $68,322.93 is apre-income tax amount. Themajor deduction from that figure would have been for withholding tax. That figure can be quantified and would not depend on the decision of Revenue Canada that we are awaitirg. Thus, does interest have to be paid on the amount of the salary that would have been deducted and remitted to Revenue Canada? The income tax deduction had also been raised in a preliminary way by sub-paragraph (a) of paragraph 10, as follows: How should interest inparagraph 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 the interest be paid on the gross salary owing? It.must be kept in mind, however, that paragraph 4 of the Memorandum had specified the amounts of "the usual employment deductions," which were discussed in the Board's second supplementary decision, but no amount was specified fo,r income tax deductions. The Employer's solicitor has since pointed out .-5- that "paragraph 10 of the settlement which refers to the gross amount of $68,322.93 is a pre-income tax amount." Nevertheless, the,exactlanguage of paragraph 4 in the Memorandum provides as follows: Ihe employer agrees to reinstate the grievor on the payroll of the Ministry of Revenue effective April l/l983 and to pay to the grievor the sum of approximately $68,322.93 representin the gross salary which he would have earned but for the employer's suspensions and termination, that is his gross salary for the 6 susperded days and from April 1, 1983 to January 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; Dependent LifeS7.04; and DIP-$163.16, which would have beendeducted had he been employed. It seems clear from paragraph 4 that the Employer agreed to pay as compensation the principal amount of $60,564.41, being the difference between gross pay of $68,322.93 and specified deductions totalling $7,758.52. On the other hand, sub-paragraph (a) of paragraph 10 -L- also agreed to by the parties .;-- expressly posed the income tax question and its.bearing;on the . calc,ulation of interest: "... in particular is the employer only obliged to pay interest on the net fig.ure which is payable to the grievor after income tax and the other employment deductions...? --- In answering the question it is necessary to consider three different possibilities and their respective consequences, as follows: -6- * (1) Let it be assumed that the grievor was not discharged and had not been previously suspended for six days. In that event, he would have received his net salary in respect of six days plus nine months in 1983, 12 months in 1984 and one month in 1985, i.e. 22 months plus 6 days. He would not have received the usual income tax deductions remitted to.Revenue Canada by the Employer, and his total tax due (or credit to be refunded) would have been determined each year by Revenue Canada after receipt of his tax return. (2) Let it be assumed that following the grievor's discharge in 1983 he did not succeed in gaining reinstatement. In that event there would have been no income tax deductions by the Employer in respect of the period following discharge, and _ the grievor's tax liability (or credits due) in subsequent years would have been entirely between himself and Revenue Canada. (3) Let it be assumed (as actually occurred) that the grievor was reinstated 22 months after his discharge, under an agreement whereby he was to receive compensation which would place him as nearly as possible in the same .financial condition : he would.have bee~n in had he not been discharged. Further, let it be assumed it was agreed he should receive a specified amount as principal and also (as agreed in paragraph 7 of the Memorandum of Settlement) interest at the rate of 11.5 per cent on "the lost wages." Finally;let it be assumed that the parties agreed, as . - 7 - part of their settlement, that payments on account of principal should be made in several instalments, ~together with interest on the unpaid balances. .The question raised is whether interest would be payable on the tax deductions which were not made but would have been made had the grievor not been discharged. It is clear that in respect of the year 1985 (and ~subsequent years) the Employer is obliged to make the usual tax deductions from the salary payable. Such deduc-tions would not reach the grievor but he could claim credit,for them in his tax returns. The Board has not been informed whether tax deductions would also be made in respect of the principal and interest payable as compensation. If they'are so deducted, the grievor would claim the appropriate credits; if they are not deducted,~he would be obliged to declare them as income and pay taxi accordingly. Thus the eventual result would be the same, whether or not deductions are made at the source. It emerges from the comparison set out above that in no event would income tax deductions ever come into the hands of the grievor. If and when made, he wpuld of course receive the ,appropriate credit from Revenue Canada-at the appropriate time- . -8- In the Board's view tax deductions are separate and apart from the "lost wages" referred'to in paragraph 7 of the Memorandum of Settlement. The deductions did indeed result from the requirements of the Income Tax Act, based upon the grievor's salary entitlement, but the deductions were in no event payable to him, although he could later take credit for them in calculating his tax liability. The Board therefore concludes that the deductions form no part of the principal on which interest is payable. If further c.larification is requir~ed~, the Board :will entertain inquiries or representations by either party. Dated at this 27th day of September, 1985 Member