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HomeMy WebLinkAbout1983-0418.Sekhon.98-04-21EMPLOV~S DE L4 CouRoNNE DE L’ONTARIO COMMISSION DE SETTLEMENT RliGLEMENT ‘DES GRIEFS 1(u, DUND4.S STREET WEST SU”EeW TORONTO ON h46G IZ8 180, RUEDUNOAS OUEST8 BUREAU Bw. TORONTO (Of4 MSG 1ZB GSB #04 18/83 OPSEU #83578 IN THE MATTER OF AN ARBITRATION Under THE CROWN EMPLOYEES COLLECTIVE BARGAINING ACT BETWEEN BEFORE FOR THE UNION FOR THE EMPLOYER HEARING Before THE GRIEVANCE SETTLEMENT BOARD OPSEU (Sehkon) -and- The Crown in Right of Ontario (Ministry of Health) Grievor Employer M.K. Saltman L. Robbins A. Merritt R. Ross Wells Vice-Chair Member Q Member Counsel, Gowling, Strathy & Henderson Barristers & Solicitors Leslie M. McIntosh Counsel, Crown Law Office Civil Ministry of the Attorney General Written Submissions dated February 10, March 4, March 10, 1997 May 6, 1997 (Executive Session) SUPPLEMENTARY DECISION On May 17, 1995, after protracted legal proceedings, the Board issued its award granting the Grievor long-term income protection (“LTIP”) benefits effective January 31, 1982. ‘The Board remained seised to deal with outstanding issues and with matters of implementation. Pursuant to the Board’s award, payment of the principal amount owing, less statutory deductions, was forwarded to the Grievor on May 17, 1996. There is no dispute as to the amount of the principal sum paid to the Grievor. The dispute relates to the entitlement to interest owing on that sum. The Board is satisfied as to its jurisdiction to award interest on monetary compensation, not as a penalty but as a compensatory measure designed to make the Grievor whole for the loss sustained as a result of the Employer’s breach of the collective agreement: see Rhodes 866190; Re Canada Post Corporation and Canadian Union of Postal Workers (O’Brien) (1995) 19 L.A.C.(3d)211 (Swan) (the “Canada Post” case). Apart from the non-payment of wages, the Board has previously awarded interest on unpaid LTIP benefits: see Rhodes, supra. 2 Entitlement to interest may be divided into two main components: pre- award and post-award interest. As for pre-award interest, although there is a discretion as to whether to award interest, in our view, none of the factors advanced by the Employer in this case constitute a basis upon which to refuse such an award. In particular, although there was no specific reference to interest on the face of the grievance, the Board has broad remedial powers, which would include the awarding of interest in appropriate circumstances: see Rhodes, -. Moreover, whether or not lack of co-operation may.be a reason for withholding interest, the facts of this case do not support such a finding. Although it was suggested that, having moved to British Columbia, the Grievor was unavailable to be examined by a physician of the insurer’s choice in Ontario, the evidence reveals that, on more than one occasion, the Grievor was examined at the request of the insurer. Furthermore, contrary to the assertion of the Employer, it cannot be said that it was any particular piece of evidence (and, specifically, the report of Dr. McFarlane) which persuaded the majority of the Board that the Grievor was totally disabled. Accordingly, there is no basis upon which to restrict pre-award interest to November 2; 1993, the date on which Dr. McFarlane’s report was received by counsel for the Employer. Similarly, there is no rationale for limiting the award based on the delay of the Union in prosecuting its claim. Although there were substantial delays in this case, these delays resulted from legal positions taken by the parties (relating to jurisdictional objections, applications for judicial review, etc.) as well as requests for adjournment. 3 In any event, there was nothing to suggest that the delays were designed to prolong the proceedings or that the Union bore greater responsibility for the delays than did the Employer. In sum, therefore, there would appear to be nothing which would detract from the general entitlement to be made whole by an award of pre-award interest: see the Canada Post case. As to the amount of pre-award interest, the Board adopts the formula in Hallowell House Ltd. and S.E.I.U.. Lot. 183 [I9801 1 Can. L.R.B.R. 499, [I9801 O.L.R.B. Rep. 35 (P.C. Picher) (the “Hallowell House” formula), which provides a means of calculating interest on amounts accruing over a period of time: see also 0.L.R.B Practice Note No. 13, “Awarding of Interest”. Under this formula, which takes into account the manner in which the loss accrues, interest is calculated by multiplying one-half the principal amount owing by the appropriate interest rate by the period over which payments ought to have been made. As to the appropriate interest rate, although the Hallowell House formula refers to the Bank of Canada rate in the month in which the complaint was filed, having regard to the significant fluctuation in interest rates over the relevant period, the Board directs that the rate be established by averaging yearly rates of interest as determined by the Bank of Canada from the date of the grievance to the date of the Board’s award. The interest rate so established is to be applied to the gross amount owing to the Grievor, and not to the net amount paid, as argued by the Employer, as it is the Employer’s 4 obligation under the collective agreement to pay the gross amount owing. The fact that the Employer, acting as agent for the Grievor, remits income tax on this amount does not alter the Employer’s obligation to pay the gross amount to or on the Grievor’s behalf. As to post-award interest, the parties agreed that there should be interest on the principal amount due and owing as of May 17, 1995, the date of the Board’s award, and on unpaid monthly benefits from December 1, 1995 to May 1, 1996. The parties ,also agreed on a rate of post-award interest of 10 percent. Although the Employer maintained that post-award interest should be paid on the net amount only, for the reasons set out above, we find that post-award interest should be paid on the gross amount owing. What remains to be decided is whether post- award interest should be paid on the pm-award interest which remained outstanding after the principal amount was paid on May 17, 1996. In respect of this matter, the Board proposes to follow the approach adopted in Rhodes, which is consistent with the usual practice in the courts of awarding post-judgment interest on the total amount of the judgment obtained, which includes the applicable pre-judgment interest. The Board directs that interest be calculated in accordance with the principles articulated above and that payment of the appropriate amount be made 5 forthwith. The Board remains seised to deal with matters of implementation. DATED AT TORONTO, this 21*’ day of April, 1998. LA M. K. Saltman Vice Chair &yP& L. Robbins Member “I Dissent” (dissent attached) A. Merritt Member DISSENT Having read the Supplementary Decision, I find that I must resoectfully dissent. The Sekhon award of May 1995 which found for the grievor, was, in my opinion, in error and I so wrote in my dissent. The basis for much of my thinking was that when the grievor left Sudbury to Iive in British Columbia, she gave up any idea that she would ever return to her previous employment in Sudbury, !et alone ever being examined by a physician in Cntaric. There was no way that a job involving light duties, for example, could ever be tailored for her. It is true, as the Supplementary Decision (S.D.) states, that she was examined by doctors in british Columbia, but with great reluctance on her part and with a lack of cooperation in the examinations with the doctors and the Clinic chosen by the employer. She also chose not to follow the advice of the doctors as to the remedial exercises, etc. (pages 15 - 16 of the dissent). Consequently, having found in my dissent that the grievor should have received no disabilit,y nension, I am simply unable to agree that interest should be paid on monies which I believe she was not entitled to receive in the first place. Having stated my opposition to any interest being awarded, I would like now to raise one or two points arising from the S.D. that I think should be taken into consideration. On page 2 of the S.D., it is stated that the Board has ' . ..discretion as to whether to award interest." This, I presume, also refers to the amount that may be awarded and how to calculate this amount. Now, considering that the Board in the award -2- of May 1995 stated on page 23 that "while the matter is not free from doubt, the Board finds, on balance, that the grievor has established a prima facie case of total disability as of January 31, 1982." Under these circumstances, it seems to me that the Board should be examining very carefully any position that it takes in regard to the payment of interest, so as not to further the employer's costs. Thus, considering all the circumstances surrounding the case, I would not have awarded interest on top of the principal amount. If, however, my argument is not acceptable to the majority, I would like to take issue with the position set out in the award (pages 3 - 4) that interest should be applied to the gross rather than to the net amount of the payment. This would amount to a reduction in the payment of over $30,000.00. In Rhodes §66/90; Re Canada Post Corporation (p. 8), the following assertion is made: "Interest is a compensatory and 'make whole' remedy. It is not a punitive remedy..." Picking up on this assertion, let us look at this case. The gross amount awarded includes income tart due to Revenue Canada which would have been deducted at source if the grievor had been receiving her monthly pension from january 31, 1982 to May 17, 1995. But at no time would she have had the use of this deduction. The S.D., however, states that interest is to be pdid on the gross amount which means that the employer is forced to pay interest on the monies that the grievor would never have received. This, in my mind, is punitive. The basic idea in the paying of interest is, as stated above, to -3- make the grievor whole. But in this case, the grievor is not only being made whole, but is irieffect receiving a windfall -- money she would never have had under any circumstances and,which is now being taken from the public purse. It is argued by some authorities that since the emplover did not remitthe tax money to Revenue Canada, it had the use of this money on rhich it could receive interest. This interest, so the argument goes, should now be paid to the grievor even though the qrievor herself would never have had the ability to receive interest since she never had the money in her own hands. But is this really what haooens to the interest supposedly garnered by the employer, in this case the government of Ontario? It is at best speculative as to how much interest, if any, the griever's employer would have been able to generate on the income tax deducted when one considers how the government funds these payments. Basically, the government raises the money from various forms of taxation or by borrowing. Considering the huge sums that the government deals with, it is inconceivable that it would have saved the money the grievor was to remit to Revenue Canada and put it out to in-terest at eleven percent. It would likely have saved the expenditure of the money and then used it for funding other expenses oti it might not have had to raise the money by borrowing. Forced to pay interest on funds which ma.y or may not gather interest is punitive. One of the reasons for the belief that the grievor should receive interest on the gross amount rather than the net lies in the fact that . -4- this is the practice oenerally follower' in Ontario courts. However, there are differences between courts and arbitrations. In the courts, there are only two types of cases in an emolovment context where the plaintiff is entitled to damages: wrongful dismissal and breach of contract. In both cases, the position taken by the courts is that the amount owing is known and due at the time of the breach or dismissal. Thus, if this amount is withheld for a period of time, then it attracts interest and when the case is finally settled, the plaintiff receives this amount plus accrued interest. However, the employer in such situations loses the right to pay by installment. In an arbitration case such as ours, one major difference is that the grievor is receiving a disability pension. Pensions are usuallv paid in a monthly installment and so, the present value is not known at the breach of the Collective Agreement, since it is not known how lonq the installments will continue. In addition, statutory deductions, e.g. income tax, are to be made each month and, as mentioned earlier, these deductions are never in the hands of the grievor. In the court cases, this problem does not arise since the lump sum is known. In tile court cases, the interest makes the plaintiff whole; in the arbitration cases, the present value is not known as the pension continues to be paid in installments minus deductions. Interest calculated on both is, in my opinion, punitive. Thus, if the majority agrees that interest is to be paid on the -5- pre-award amount, I submit that it should be paid on only the net amount for the reasons set out above.