HomeMy WebLinkAbout1984-0203.Angus et al.91-09-09ONTARlO EMPLOYkSDEL4 COURONNE
CROWN EMPLOYEES DEL’ONTARIO
GRIEVANCE CQMMISSION DE
SElTLEl MENT REGLEMENT
BOARD DES GRIEFS
203/84
IN TRE RATTER OF AN ARBITRATION
Under
THE CROBN EMPLOYEES COLLECTIVE BARGAINING ACT
Before
TRB GRIEVANCE SETTLEMENT BOARD
OPSEU (Angus et al)
Grievor
- and -
The Crown in Right of Ontario
(Ministry of Correctional Services)
Employer
BEFORE: E. Slone Vice-Chairperson
M. Lyons Member
C. Linton Member
FOR THE
GRIEVOR
J. Miko
Job Evaluation Officer
Ontario Public Service Employees Union
FOR THE
EMPMYER
J. Ravenscroft
Grievance Officer
Grievance Administration & Negotiations
Ministry of Correctional Services
REARING May 24, 1991
2
AWARD
This award is further to that issued by this panel following a hearing September
22, 1989. In that award, we reviewed the lengthy history of the proceedings and ordered
the employer to compensate the grievers retroactively for the additional wages attaching
to the new classification created for them. We also ordered the employer to pay
interest.
The sole issue before us is whether that interest ought to be compound interest.
That issue is not a simple one, not (as far as we know) having been squarely
addressed as amatter of principle by this or any other board of arbitration.
The History of the Case
In order to set the context, I will quote from the earlier award:
There arc 1CCl gievors, all of whom at tbc time of their grievances in late 1983 were
classified as Probation Off&r 2’s and sought a higher ckusitication. Their grievances have
been partly resolved in lengthy and protracted proceedings which we till desaibe more fully
below. In a nutshell, the Employer was ordered to create, and did aeatc, a new
dassification for the Probation Officer series. The salary level was resolved through interest
arbitration, and these grievers amongst all other PO’s achieved a pay increase cffecfive from
1981. What they now seek is further retroactivity to November l3, 1983, together with an
award of interest on the outstanding retroaaive payment.
Ibe Brandt Award
Betweea August 29, 1984 and October 21, 1985, a panel of this Board chaired by Gregory
Brandt, with union nominee Susan Kaufman and management nominee Donald Middleton,
heard some l3 days of evidence. On the 10th of October 1986, the Board issued a very
lengthy award consisting of 91 pages written by the Chairperson, a short dissent written by
Mr. Middleton, and a short partial dissent written by Ms. Kaufman. To summarize what
went on before that panel and what it decided, we can do no better than quote from its
award:
at p.2:
‘This award deals with 6 classification grievances. They are 6 among a group of 100
classification grievances all of which involve grievers who are currently classified as
Probation Officer 2 (P02) and who seek classification as Probation Officer 3
(P03). Prior to the com&enceme.nt of hearings the parties came to an agreement
whereby the Union would proceed with the 6 grievances the awards in which would
form the basis upon which the parties would attempt to negotiate a settlement of
the remaining grievances. In the event that settlement could not be achieved the
Board would remain seized of jurisdiction to hear and dispose of the outstanding
grievances.
The parties also purported to reach some agreement as to the application of the
evidence led in respect of these grievances to tiy further proceedings that may be
necessary before this Board in relation to the other grievances. Counsel for the
Union informed the Board on the first day of hearing that the parties were .in
agreement that ‘all of the evidence for the first 6 grievances would continue to
apply to the next cases but that the order of the Board would be final only with
respect to the 6 grievances put before the Board’. Counsel for the Employer did
not directly take issue with that statement. He stated that all are individual
grievances and that the parties were looking for individual decisions. s
at p.85:
‘Thus, we have arrived at the situation where we fin&
1. That the PO2 standard is inappropriate to describe the actual job duties
of all the grievers at the time of the grievance; and
2. that those duties do not bring the grievers either on a standards ox a
usage approach within the PO3 classification; and
3. that this is not an appropriate case for using the ‘best tit’ approach in
such a way as to bring the grievers *thin the PO3 classitication.
As the Divisional Court has stated inBern, and&z&g (supra) we are not
permitted to dismiss the grievances and simply ‘contim? the grievers in their
existing classification. A breach of the Collective Agreement has been established
to OUT satisfaction and the grievers are entitled to a remedy. They are entitled
either to be placed in some other existing and appropriate classiication or to be re-
ck&tied in a newly created dassiiication.
We were not informed as to any other existing classification that might be
appropriate. Consequently, we have no basis for placing the grievers in a
classitication other than the one claimed. Nor do we read m or canninp. as
stating that the Board itself could create the classification into which the grievers
1
4
should bc placed. Indeed that would appear to fly directly in the fact of Section
18(l) of (the Crow Emalovces Collective Barr&nine Act] under which we derive
our jurisdiction.
Consequently, what we are left with is an order directing the Employer to classify
the gricvors properly having regard to their duties. We so order.’
at p.91:
‘In summary, all of the grievances are allowed and it is hercby declared that the
Employci c1as.s~ the gricvors properly.’
“Following the Brandt award, the Employer undertook a complete revision of the class
standards for the series, and came up with a new dassiticati& that applied not only to the
gricvors but also to all Probation Officers in the Minisuy. Because the parties could not
agree on the appropriate level of compensation for the new cla.ssiIieation, the issue was
referred to arbitration before an interest board chaired by Maureen Saltman. In February
1989, the award was released with dissents From both the union nominee Larry Robins and
the employer nom&c Ian Cowan. To illustrate the situation before that board we can do
no better than to quote from chat award:
at p.2:
‘In December 1983. some 1tM grievances were fdcd by Probation Officers claiming
that they were improperly &w&d as PO 2’s and requesting rcdassiIieation as PO
3%. The grievances came before a panel of the Grievance Settlement Board
chaired by Vice-Chairman Gregory Brandt. At the outset of the hearings, it was
agreed that the Union would proceed with six of the grievances; that the Board
would issue an award on the six gricvanecs; and that the panics would attempt to
negotiate a settlement with respect to the other 94 gricvanccs based on the Board’s
award. In tbc event that a scnlement could not be reacbcd, the Board retained
jurisdiction to deal with the outstanding grievances. On October 19, 1986, the
Board issued its award on the. six grievanecs: see wetal., G.S.B. 203/84. The
Board concluded (1) that the PO 2 class standard did not adequately reflect the
nature of the work performed by the grievers; and (2) that the work was also not
covered under the PO 3 standard’
at p.4-5
‘By way of remedy, the Board directed the Employer to classify t4e employees
properly having regard to their duties...
‘In August 1987, the Employer created a new class standard for the PO class series.
The revised standard was approved by the Civil Service Commission on July 29.
1987 and agreed to by the Union in or around January 198&X..
‘Notwithstanding agreement on the content of the class standard, the parties could
not agree on a salary range for the revised standard Accordingly, they referred
their salary dispute for determination under Article 5.8 of the Collective
Agreement, which reads as follows:
5.8 when a new dassitication is to be created or an existing classitication is to
be rcvisc~ at the request of either party the parties shall meet within thirty
(30) days to negotiate the salary range for the new or revised classification,
provided that should no agreement be reached between the parties, then
the Employer will set the salary raagc for the new or revised cla&ieation
subject to the right of the parties to have. t4e rate determined by
arbitration.
at p.14:
‘Taking into account all the factors set out herein, an increase of 6% in the salary
ranges for bot4 PO 1 and PO 2 levels is, therefore, awarded. By agreement of the
parties, this increase will be effective from July 29, 1987, which is the date of the
submission, as well as the approval, of the revised class standard to the Civil Service
Commission. Although the Union requested additional retroactivity for those
cniployces whose grievances were consolidated under them case, in our view
this matter is properly within the jurisdiction of the Grievance Settlement Board to
which those gricvanecs were referred. However, in light of the length of time that
has passed since the filing of those grievances, we would urge the parties to attempt
to settle the issue of retroactivity bchvecn themselves. Should they be unable to do
so, however, the matter would have to be determined by the Grievance Settlement
Board.’
Following the advice of Ms. Saltman, the Union has brought on for hearing the 100 original
gr;CVanCCS.
We now turn our attention to the question of whether or not all 100 gricvors should receive
additional retroactive payment with interest on the amounts owing..
The argument for retroactivity is simple. The gricvors established that they were wrongly
&s&tied, and had there been a suitable &ssi&.xtion in which to place them, there would
have been no reason to depart from the usual practice of making the rcelassifieation
retroactive to 20 days before the filing of the pricvance. Why, it is argued, should the
gricvors be penalized bccausc there was no appropriate classiiieation? It is the Employer’s
rcsponsibiity to create &ssifications, and it should not profit from its failure to create a
proper classification. Where the Board issues an order to reclassify, this ought not to be a
second-&w remedy. That would fly in the face of the Divisional Court’s judgment inBerly
(unreported, March 13, 1986) wherein the broad rcmediaJ jurisdiction of this Board was
remarked upon.
Counsel for the Employer offered no real argument as to why the gricvors should not have
their complete remedies. He alerted us to the fact that this would cost the Employer a lot
of money, but that is surely not a valid consideration. The Employer has had the benefit of
the work that the gricvors did while wrongly dassificd and thus underpaid. All we. would be
doing is make the Employer pay a fair wage for the work it received.
The equities overwhchniiy favour the gricvors. We do not find it necessary to recite the
many authorities that have established the principles of retroactivity and interest. Those
cases all support the grievers. None of them support the Employer.
6
Accordingly, we allow alI of the 100 grievances to the extent that they arc before us, and
declare that all gricvon shall enjoy the rate of pay established by the Saltmao award
rctroadivc to Novcmbcr 13, 1983, which is 20 days before the earliest of the grievances. In
addition, all gievors shall bc entitled to interest on the retroactive payments in accordance
with the well-established formula set fonh ina GSB 537/82 (JoWe). Since this may
involve some complicated mathematics, WC will leave it to the panics at first instance to
attempt to work out the proper amounts. However, and so there is oo doubt in the minds
of the parties, we will remain seized to bc addressed fiuther on any issues relating to the
implementatioa of this award.’
The Positions of the Parties
The Employer argued as a preliminary matter that this panel is -Q&&J,
having exhausted our jurisdiction on the last occasion. It is said that we ordered the
parties to apply the a formula, which they have done. That formula makes no
provision for compound interest, and the Employer says we would be allowing the union
to argue for a hurther substantive remedy.
The Union, on the other hand, says that there is a problem with respect to the
implementation of our last award, which we expressly reserved jurisdiction to assist with.
The m formula did not include compounding, the Union says, because the period
under consideration in m was for less than a year, during which time one would not
expect any compounding to take place. In the context of a lengthy period, it is suggested
that the jurisprudence of this Board supports annual compounding as the appropriate
method of calculating interest. More will be said about that jurisprudence liter.
The Employer 1 s response to the merits of compounding is essentially this: there
is scant jurisprudence on the subject. Moreover, the approach in the courts is not to
permit compound interest in all but the most egregious cases of the wrongful detention
of money; in cases involving civil debts, simple interest is. the legislated norm. Why, it is
queried, ought labour tribunals to be more generous in their approach?
The Functus Officio Argument
Ironically, this was the major issue argued before us in September 1989. At that
time we considered the jurisprudence and decided that we had the authority to consider
the merits before us. At p.9-10 of our earlier award, we had occasion to say the
following:
“As for the other sk we arc. of the view that there was an implicit reservation of
jurisdiction. Even though the Brandt panel awarded the remedy of reclassitieation, it is
obvious from reading the long award that it did not turn its mind to the issues of
retroactivity or interest, both of which would have been logical issues to address. It simply
never got that far. In such a case, it would be harsh and unduly rigid to suggest that a
board cmmot be approached to complete what it has started. It would obviously be
different bad that board considered the issues and rejected them. The doctrine offunctus
&& means that you only get one kick at the can.
“It is perfectly consistent with Mr. Prichard’s statements in- to tind such an implicit
reservation of jurisdiction in this case. The question of jurisdiction surely does not depend
entirely upon whether the arbitrator has remembered to add the magic words ‘and if the
parties have any difticulty in the implementation of this award we. will remain seized etc. ’ ,
or words to that effect. The use of those words might be the best cvidcnec of a retention of
jurisdiction, and might represent good practice, but it would not’ be the only possible basis
to conclude that jurisdiction was retained. For that matter, the use of an express reservation
might even be ineffective in a case where the board had truly dealt with cvcry~hing before it.
“Accordingly, we find that the issues of retroactivity and interest for the original six grievers
remain outstanding, and this panel has the jurisdiction to consider the appropriateness of
such further relief.”
8
In my view, again we are faced with a situation of finishing what we started. In
! ordering the parties to apply the m formula, this Vice-Chairperson (for one) was
acting on an assumption that that case contained a complete code for calculating interest
and assumed also that the parties would have no difficulty in agreeing on the principles
to be applied. I was wrong to a certain extent, as clearly k only deals with a short-
term interest factor and never addresses the issue of compounding. Again, we are faced
with an issue that has not yet been argued. The Union is entitled to raise it. The fact
that there has been a lengthy history only makes it more compelling, in my view, that the
matter be fully dealt with and that what I hope is the last piece of the puzzle is
considered on its merits and not ruled out on what may appear to some as a technicality.
The Right to Interest
At one time, the debate in the arbitral jurisprudence was whether or not boards
or arbitrators could award interest at all, as a component of the compensation being
awarded. That debate may now safely be regarded as settled, with the answer
I resoundingly in the affirmative.
In Ontario, many regard as seminal the statements of the Labour Relations Board
in Hallowel House L imited (1980) OLRB Rep. Jan 35. The Board at para 28 said the
I following:
r- 9’
“An employee who has been deprived of employment contrary to The Labour Relations Act
suffers not only a loss of wages, but also a loss of the opporhmity to use the money and
have interest aecroe on it. As this loss of interest is directly attributable to the employer’s
violation of the Act, it is appropriate that in its effort to make the employee whole, the
Board direct the payment of interest on the wage loss.
Other cases in the arbitral jurisprudence quickly followed, and considered the
relevant principles further. In Re Mohawk Colleee of Auulied Arts and Technoloev and
Ontario.Public Service Emnlovees’ Union (1982) 5 L.A.C. (3d) 237 (H.D. Brown; Ont.)
the arbitrator considered whether the awarding of interest is punitive or compensatory in
nature. At p.247 he writes:
“In appropriate situations I am persuaded that interest on the amount of compensation
awarded can be given so as to folly compensate the employee who was wrongfnUy dismissed
and to provide a full remedy for the breach of the agreement. The allowance for interest in
those circumstances arises as a matter of assessment of compensation and not as a penalty
against th%mployer, but as offsetting monetary consideration for the lack of use of the
money which the employee would have obtained had it not been for his dismissal. I
therefore award, in the circumstances of this case, that ioterest at the prime rate as at the
date of the grievance shall be calculated and paid on the total amount of compensation
awarded herein with the same calculation of interest as in the Hallowe House case, supra,
which provided that the compensation award was divided in half, the appropriate annual
interest rate applied wch is prorated for the period covered by the compensation award.”
Other cases began to consider the inevitable analogy to the remedies awarded by
the courts (about which more will be said later). In Re Beckett Elevator Co. Ltd. and
International Union of Elevator Constructors. Local 50 and National Elevator and
Escalator Association. Intervenor (1983) 11 L.A.C. (3d) 289 (O.L.R.B.), the Board writes
at p.300-1:
“...[Iln an unreported award involving Toronto Western Hosoital and CUPE. Local 1744,
arbitrator G.W. Dunn, referred to s.38 of the Ontario Judicature Act, which allows interest
10
in court actions. His language is reminiscent of that used by Scatoa JA. in-
Transmissios supra:
‘Although ~38 has no application to arbitration boards constituted under a
wUcctive agreement, its passage nevertheless reflects public concern that
consideration should be given to the award of interest in the assessment of
damages. When a person discharged or suspended is denied recourse to the courts,
the remedies available before a board of arbitration should not be patently less
equitable.’
Beckett argues that an award of interest would involve the imposition of an unauthorized
‘penalty’. A similar submission prompted the follokg response from the Ontario Public
Scnicc Grievance Settlement Board:
‘Escntidly, the rationale is me of compensation: an employee who has been
deprived of funds because of an unjust discharge or suspension is deprived of the
opportunity to use those funds. He may even be forced to borrow fun4 which in
these days of high interest rates is an expensive undertaking. In order to ensure
that the employee is compensated because of his deprivation of funds. and is put in
the position in which he would have been had he not been denied remueration, he
must be given interest oo the funds 0%. Such an award is not to be regarded as
punishment of the employer, but as compensation to the griever.’
(See& unreported decision dated February 11, 1982.) .
It Gil be seen, therefore, that . . . there is a developing arbitral consensus in Ontario that a
wmpensa~i’on award can include an interest component. If an aggrieved party has been out
ofhis money for a period, there should be a compensatory interest payment for the time for
which the sum has been outstand&-g.’
The Grievance Settlement Board shortly thereafter issued what is still considered
the leading case on the subject of computing interest, the case of w GSB 537/82 (E.
Joliffe), which this panel cited in our earlier award as the formula to be applied. At p.14
the Board writes:
‘As stated in&&!, the proper method of computing compensation has been
authoritatively dis&ed by the Ontario L&our Relations Board in its Practice Note
Number L3, &ted September 8, 1980, and in certain cases. In particular, the O.L.R.B. dealt
with the matter of interest, which has been claimed by the griever in this case, and referred
to its decision in Hallowel House Limited (1980) OLRB Rep. Jan 35, where the following
example was used:
11
‘The Board determines that an employee has been wrongfully discharged. The
Board’s award marks four months from the time of discharge. Over that four
month p&d the total loss of wages, taking into account mitigation, is established
to be $3,OG0. The prime rate published in the Bank of Canada Review during the
month the complaint was filed is 12 per cent. The interest would be calculated by
dividing $3,C00 in half and applying the 12 per cent annual interest rate adjusted to
a four-month period, that is, 12 per cent multiplied by 4/l2ths. The resulting
interest then is $1,5W multiplied by 12 percent multiplied by 4/12ths or $60.
The issue of interest was also discussed by this Board in Knudson 348/&l, the panel being
chaired by Professor J.W. Samuels. After reference to several other cases, it was said at
pages6and7:
‘I accept the formula suggested by Ms. Lennon for the calculation of interest owing
on lost wages. It is a derivative of the Hallowe House formula:
Take the total amount owing;
t : Divide it by 2, in order to retlect the fact that, at the outset only one Wage
payment was delinquent, and so on to the date of reinstatement, when all
the wage payments were owing;
c. Apply the appropriate annual interest rate pro-rated over the period over
which the monies were owing to the date of reinstatement;
d. Then, take the total amount owing at the tie of reinstatement, and apply
the appropriate annual interest rate pro-rated over the period from the
date of reinstatement to the date of payment. For this last calculation, do
not divide by 2, because you are not dealing with an increasing liability but .
a fmed one;
CC= The appropriate annual interest rate is the prime rate established by the
Bank of Canada at the time the grievance is tiled. (I might say that some
moditication is needed here if the period of calculation is a long one and
the interest rates have fluctuated dramatically, as they have in recent
times.)’
In&g&l& the Board then went on to compute both pre-award interest and post-award
interest in accordance with the formula explained in HaUowel House and Knudson. We
think that formula is now well established and must prevail unless judicially overturned.
The logic of the formula simply is that the griever is not ‘made whole’ unless compensated
for a lengthy delay in receiving money found to have been due to her. That principle is
recognized by the courts and there is no reascm the same standard should not be recognized
at arbitration.”
And at p.18:
“In calculating interest, the Board resorts to the method used in- supra.
The total principal amount due as of September l5,1983, has been found to be %20,7l2.92.
The average prime rate for the 11 months of November, 1982 to September 1983, was 11.5
per cent (Exbibit 8). Interest for the 11-month period from October 16, 1982, to September
L5,1983, must be divided by two, so that the calculation is:
12
20.71292 X IJJ X U
100 12
2 = $1,091.74
A different approach must bc used in calculating interest from the date of reinstatement.
Since the principal and interest as of September L5, 1983, was 621,804.66 owing OD that date,
interest aczning subsequently is not divisible by two. Assuming that compensation is paid
in full on September 15, 1984, post-reinstatement interest should bc computed - in
recognition of a rising bank rate in recent months - for one year at 12 per cent. The result
is:
EVC4.66 X Y = S&61655
10
It is clear that them award and the formula set out. therein do not provide for
compound interest. However, it has been correctly pointed out that the period under
consideration in m was for less than one year, which is too short a time for the
subject of compounding to have been an issue.
In at least two fairly recent GAB. cases compound interest has been awarded. In
Canning .558/&l (Samuels) (released October 11, 1988), the following is the portion of
the award dealing with the subject of interest:
The second matter about which the parties have some disagreement is the meaning of our
award of interest. WC said [i the earlier award]:
‘There should bc interest on each and every sum at 10% compounded annually,
from the date on which the sum was to have been paid to the date on which it is
finally paid.’
. ..Thus. to the end of the frst year, there is simple interest for the numbcr of days between
the due date of the sum and the end of the year. Then, at the end of each of the next full
years, the total is compounded again. Finally, the total is compounded to the date of
pajlneot.”
r 13
Later, in Camnbell 1257/88, a decision released November 1, 1989, a panel also
chaired by Mr. Samuels writes, at p.6:
“If the grievers had been properly dassificd from that time, they would have received
additional monies in each pay eheque. They would have had the use of these monies during
the period from the payment of each sum up to now. Money has a time value, called
‘interest’.
In order to put the grievers in the Enaneial position they would have been in had they been
properly classikied since November 1987, they must be given interest on each sum owing
from the time it ought to have been paid up to the date it is paid. In order to simplify the
calculation of interest in this case, we order that the rate to be used is 10% per annum
compounded annually. This is a reasonable average rate for the period since November
1987.”
The difficulty with these two awards is that, with all due respect to that panel, the
award of compound interest is made on no explicit prior authority and without any
discussion of the factors which may have influenced the panel to order compounding.
This absence 07 reasoning tends to weaken the precedential value of the cases. As will
be explored further, the desire to make grievors khole does not in itself mandate
compounding, although it may reflect an underlying belief (which must be regarded as
questionable) that simple interest is a partial remedy only.
In the’ private sector, the only case which has been brought to our attention which
awards compound interest (also without comment) is Re Brantwood Nursing Homes
Limited and Ontario Nurses’ Association, Dec.3, 1983 (Hinnegan, Ont.)
The Approach in the Courts
In my respectful view, Boards and arbitrators ought to be very mindful of what is
being done in the civil courts of the land. For one thing, the courts have been in the
business of compensating litigants for hundreds of years, and have developed a fine sense
of what is required to make a claimant ‘whole’. Furthermore, the courts apply specific
legislation in this area, and their decisions reflect (or ought to) the prevailing social
attitudes in these matters. In Ontario, a court awarding interest on a money judgment is
bound by Sections 137 and 138 of the Courts of Justice Act, which read (in part):
Section 137
(137).-(l) In this section and in sections l38 and 139, Ed
(a) ‘bank rate” means the bank rate established by the Bank of Canada as the
minimum rate at wbicb the Bank of Canada makes short-term advances to the chartered
banks:
(c) ‘postjudgment interest rate’ means the bank rate at the end of the first day of
the last month of the quarter preceding the quarter in which the date of the order falls,
rounded to the next higher whole number where the bank rate includes a frauion, plus 1
per cent;
(d) ‘prejudgment interest rate’ means the bank rate at the end of the fust day of
the last month of the quarter preceding the quarter in which the profeeding was
commenced, rounded to the nearest tenth of a pcrccntage point;
Scctioa 138
138.-(l) A person who is entitled to an order for the payment of money is entitled
to claim and have included in the order an award of interest thereon at the prejudgment
interest rate, calculated from the date the cause. of action arose to the date of the order.
Ercepfion for non-pecuniary loss on personal in&y
(la) Despite subs&on (l), the rate of interest on damages for non-pecuniary 1055
in an action for personal injury shall be the discount rate determined by the Rules of Civil
Procedure.
15
Special damages
(2) If the order includes an amount for past pecuniary loss, the interest calculated
under subsection (1) shall be calculated on the total past pecuniary loss at the end of each
six-month period and at the date of the order.
7; Interest shall not be awarded under subsection (l),
a on exemplary or punitive damages;
i(
on interest accruing under this section;
on an award of costs ,h the action;
on that part of the order that represents pecuniary loss arising after the
date of the order and that is identified by a finding of the court;
(W with respect to the amount of any advance payment that has been made
towards settlement of the claim, for the period after the advance payment
has been made;
iz
where the order is made on consent, except by consent of the debtor; or
where interest is payable by a right other than under this section.
Application 4
(4) Where a proceeding is commenced before this section comes into force, this
section does not apply and section 36 of the Judicature Act, being chapter 223 of the
Revised Statutes of Ontario, 1980, continues to apply, notwithstaading section 187.
It should also be observed that the Act also gives judges wide discretion under =
s.140 to vary the rates:
Discretions of coun
140.-(l) The court may, where it considers it just to do so, in respect of the whole or tiy part of
the amount on which interest is payable under section 138 or 139,
(a) disallow interest under either section;
(b) allow interest at a rate higher or lower than that provided in either section;
(c) allow interest for a period other than that provided in either section.
(2) For the purposes of subsection (l), the court shall take into account,
(a) changes in market interest rates;
@) the circlJmstances of the case;
(c) the fact that an advance payment was made;
(d) the circumstances of medical disclosure by the plaintiff;
(e) the amount da&d and the amount recmcred in the proceeding;
(t) the conduct of any party that tended to shorten or to lengthen umece~~arily the duration of the
proceeding; and
(g) any other relevant consideration.
As is clear, subsection 138(3)(b) specifically precludes ‘interest on interest’, which
.
16
is another term for compound interest. While the specific reasoning of the legislature is
not apparent, there can be no denying the intention to exclude compounding in most
cases.
This section (actually its predecessor under the Judicarure) has been
considered by the Ontario Court of Appeal in the recent case of Claibome Indud v.
&iottal Bank of Qn.a& (1989) 69 O.R. (2d) 65 (CA.). At p.107, Carthy J.A. considers
whether and in what cases the courts can override the prohibition and award compound
0
interest:
‘Section l38 of the Courts of Justice AU. 1984, S.O. 19%. cll, provides that ~36 of the
Judicature A& R-5.0. 1980, ~223, continues to apply to proceedings commenced before.
s.138 came into effect. Subsection X(5) of the latter Act reads: L
36(S) Interest under this section shall not be awarded,
ii
o* exemplary or punitive damages;
on inr.9‘31 accruing under this section;
I$
on an award of costs in the action;
on that part of the judgment that represents pecuniary loss arising after the
date of the judgment and that is identified by a finding of the court;
(e) except on consent of the judgment debtor, where the judgment is given on
consent; or
where interest is payable by a right other than under this section.
(Emphas? added)
Cm compound interest be awarded in the present circumstances?
In &.& v. Cole et al. (1983) 40 O.R. (2d) 97 (CA.), this court held that ‘a right other than
under thk section’ included the general jurisdiction of the court to award compound interest
where there is a wrongful detention of money which ought to have been paid. This is on
the theory that it is reasonable to assume that the wrongdoer made the most beneficial use
of the money and is accountable for the profits. A reasonable use of money implies compounding interest at some appropriate interval. Thus, the court in these instances has a
general jurisdiction to award compound interest and is not limited by s.%(5)@) of the
Judicature AQ.
I wiII now apply this principle to each of the categories of recovery in the order in which
they appear above.
17
The court in Claibome then went on to award compound interest on the portion
of the damages which represented ‘stolen funds’, moneys that were taken from the
plaintiff in a quasi-criminal conspiracy to which the defendant bank was a party, but gave
simple interest only on the portions of money which were more properly characterized as
‘damages’ otherwise suffered by the plaintiff, both of the ‘general’ and ‘special’ types.
This special jurisdiction to award compound interest is also recognized in the U.K.
In McGrePor on Damages, 15th Ed., at para.605, the authors write:
“One important factor common to all these areas of litigation, however, is that awards have
always been of simple, not compound, interest. Indeed, section 35A of the 1981 Act
specilically so enacts, but the practice at common law and in Admiralty has also been to
give simpt’e interest. Only the courts of equity, as Walksteiner v. Moir fN0.a has
illustrated, will award compound interest, but this appears to be limited to ensuring that a
person in a fiduciary position does not make a profit from his own wrongdoing. Such an
accounting is not damages.”
Summary of the Applicable Principles from the Jurisprudence
To summarize the basic principles found in the case law:
1. The awarding of interest is a fairly recent development in the arbitral field.
While the particular formulae necessary to calculate interest on a wage stream are fairly
well developed, there has been little or no consideration of when - if at all - it is
appropriate to award compound interest. The few cases that have awarded compound
I interest have done so without comment.
2. The courts only award compound interest in cases where money is wrongfully
detained, and where it would be inequitable to allow the wrongdoer - usually by virtue of
his fiduciary position - to have the benefit of the wrongfully detained money. The
rationale is based on a theory of accountability, measured by what the wrongdoer earned
(or is imputed to have earned) rather than what the aggrieved party lost.
3. Mere debts, or damages, do not attract compound interest in the courts. The
mere fact that someone owes money to another does not elevate that money to the
status of money ‘wrongfully detained’. These debts attract simple interest, which is
considered to be the appropriate method for restoring the parties to the position that
they would have been in had the wrong not occurred; i.e. to make the claimant ‘whole’.
Making a Claimant Whole’
This concept has begun to take on the status of a sacred incantation, to be uttered
fervently by hopeful grievers and claimants. But what does it mean? In my view, it is
another way of saying that a wronged party seeks to be put back into the position ‘as if
the wrong had not occurred. By definition that exercise is an approximation, since no
one can turn back the clock and change the course of history. Whether such an
approximation undershoots or overshoots the mark is not always easy to tell. It all
v . . .
19
depends on the assumptions one makes about what would have happened if the wrong
had not occurred.
To use the most simple and apt example of a payment that ought to have been
made, the position today of the party who was entitled to receive the money could take
on an infinite variety of forms had he or she actually received the money: It might have
changed the entire course of the person’s life; it might have been quickly blown on
frivolities of no lasting benefit; it might have been astutely invested and grown to a
fortune; it might have sat in a bank account earning nominal interest. By simply adding
interest, whether simple or compound, courts or arbitrators are making a very middle-of-
the-road assumption, based not on the actual investment proclivities of the individual but
rather on an a@icial but socially acceptable standard bf reasonably prudent investment
practice. It assumes that the claimant would have invested the money in a vehicle
earning a particular legislated rate of interest.
It is interesting to note that this theory of ‘making whole’ totally disregards the
effects of taxation. In fact, by ignoring the reality of income tax the awarding of pre-
judgment or pre-award interest at prime rates may produce a significant over-
compensation.’
‘This only occurs when money is owing that is taxable in nature. Because the money is not actually taxed
in the year it ought to have been received, it attracts interest on the before-tax amount which is much higher
than the amount of interest that could have been earned on the after-tax amount. The effect is much like an
RRSP. The longer the tax on the principal portion is deferred, the more interest is earned (courtesy of Revenue
Canada). Consider the following example of a taxpayer in a 40% marginal tax bra&et, who is entitled to receive
$l,ooO. Assume a 10% interest rate, not compounded. If the money is received after 3 years, the amount
,
20
Making the litigant ‘whole’ is far from an exact science. It is no more than a
compromise. Whether or not it is a fair one depends much on individual points of view.
Fairness, like beauty, is sometimes only to be found in the eye of the beholder.
The Applicable Rate of Interest
Not to be lost in the debate between ‘simple’ and ‘compound’ interest is the
question of rates. There has not been a clear consensus in the arbitral jurisprudence.
The rate of interest most frequently resorted to is the published ‘Bank of Canada rate’.
Other cases utilize ‘prime’, or someone’s averaging or approximation of prime. Some
arbitrators may be thinking of chartered banks’ prime rate, which is not the same thing
as the Bank of Canada rate but will typically be a between one-half and one full
percentage point higher. It ought to be observed that the Courts of Justice Act now
utilizes two separate rates of interest - this is a recent innovation, having been introduced
less than two years ago - the ‘prejudgment rate’ and the ‘postjudgment rate’. The former
is the rate which is analogous to what is at issue here, and is the Bank of Canada rate
rounded to the nearest tenth of a percentage point. The latter is a premium rate
(between one and two points higher) which applies to unpaid judgments. Probably this
factor ought not to concern us too much here, collection not presenting the same
received would he SlJOO, which after the payment of 40% in tax on the total would leave a net fund of $780.
Had the money actually been received in year 1, after tax the griever would have had 5600 to invest. After one
year of 10% interest, that amount would have grown to s660, but the interest of $60 would be taxable; after tax,
the fund would only be $636. Following the same process year after year, after year 2 the fund would stand at
5674.16, and after year 3 the fund would be b7L5.93. So it cm be seen that the effects of compounding in the
latter case do not even come dose to achieving the same benefit as the tax deferral in the former example.
21
problems against the Employer as against run-of-the-mill judgment debtors. However,
the fact that the legislature has noti provided a higher rate for post-judgment interest
provides an interesting insight into the way that the legislature has sought to redress
unpaid debts. The interest accruing on a judgment is still simple interest; rather than
providing compounding, the legislature has simply applied a premium rate of interest.
It should also be observed that even in the case of a civil judgment, there is one
instance of compounding, since the total amount owing at the date of judgment
(including the prejudgment interest) will bear post-judgment interest.
Principles to be Applied
It is my view that some greater harmonization with the approach applicable in the
courts ought to take place. Arbitrators are not strictly bound by the same rules as apply
to judges, but the argument is frequently made - with force - that arbitrators ought to be
at least as equitable as the courts. Why should not the corollary apply as well? There is
not, to quote Lord Den&g in another context, “one law for the courts and another for
the arbitrators”. Why arbitrators should be any more generous than the courts (and the
legislature) does not make any immediate sense. The benefits of arbitration over
litigation have traditionally been seen as procedural, not substantive. Arbitration was
designed to be more inexpensive, more informal and more expeditious. One might add
to that list that arbitrators have the opportunity to be more flexible and creative, on
22
occasion, in fashioning appropriate remedies. However, that does not give arbitrators a
licence to apply routinely a scale of compensation that includes a premium over that
applicable to all other litigants in society. Employers might quite justly complain that
the arbitration process does not serve their legitimate interests, and confidence in the
process would be eroded.
It is therefore our view that the following principles are supported by the
authorities and ought as a matter of good sense to be observed by this Board in
awarding and calculating interest in arbitral awards:
1. Pre-award interest on compensation due to a grievor ought in most cases to be
simple interest, calculated to the date of the award.
2. Where the compensation represents the value of a stream of money, which
would have been received in regular increments, the formula set out in w - whereby
a factor of one-half is applied to the interest calculation - is applicable.2
3. The rate of pre-award interest ought in most cases to be the same rate as is
provided in The Courts of Justice Act, namely the Bank of Canada rate in effect at the
end of the first day of the last month of the quarter preceding the quarter in which the
%o me sqgcstion is made in the cases that this formula is an approximation of the correct result, chosen
for purposes of simplicity. In fact, t!x. formula in most case.3 will be quite predx, rccognidng that the intercsr payments on the mounting total of the income stream, form an arithmetic progression, the total of which i5 wily
calculable and is conealy represented in the equation utilized in the cases.
23
grievance was filed, rounded to the nearest tenth of a percentage point.3
4. Interest accruing on an amount already awarded ought ordinarily to attract a
higher rate of interest, which is represented by the ‘postjudgment’ interest rate defined in
the Courts of Justice Act.
5. The Board - no less than the courts - retains a broad discretion to vary the
applicable rate or duration of the interest component, depending on changes in market
rates, the circumstances of the case and/or the conduct of the parties. This discretion is
yet another instance of the broad remedial authority commented upon in w and
other cases. It would unnecessarily rigid@ that discretion, however, to attempt an
etiaustive list_of considerations that might. be relevant to the exercise of such discretion.
6. Simple interest ought to be the norm, with compound interest reserved for the
most egregious cases of money being unlawfully withheld by the Employer. While the
Board is not currently bound by statute or case law to follow the strict ‘money wrongfully
detained’ test, the spirit of that test ought to be respected and compounding only ordered
where it is right to take a very dim view of the Employer’s actions in withholding moneys
%his would be entirely consistent though not identical to the approach of the Ontario Labour Relations
Board. In Hallow1 House Limited (1980) OLRB Rep. Jan 35 at para 34, the board set out its policy:
“Regarding the rate of interest to be applied, the Board, consistent with the general approach
taken in section 38(3)(a) of The Judicature Act, has determined that the annual interest rate
should be the prime rate as determined and published by the Bank of Canada in the Bank of
Cuwdu Review for the month in which the complaint was fded with the Board.”
It should be noted that the current provisions of the Courts of Justice Act are different from those contained
in the former Judicature Act. It makes sense to be guided by the current legislation.
24
properly due to a grievor or group of grievors.
While we fully appreciate that earlier awards of this Board have strong
precedential value and ought rarely to be overruled or circumvented, we respectfully
decline to follow the earlier cases of this Board allowing compound interest (Canning
and Campbell). It is our view that they are not necessarily wrongly decided; but they
must be regarded as anomalies which may have been quite correct and were undoubtedly
fair on their facts, but which do not assist subsequent panels in terms of establishing any
principles of general application.
Applying those Principles to the Instant Case
It is our view that, notwithstanding the lengthy and troubled history of this case,
there is no reason to depart from the usual rule of simple interest in accordance with the
Jor&s formula. As for the appropriate interest rate, the parties appear to have agreed
upon an approach of using a weighted annual average of the bank rates over the
applicable period. We find no fault with that approach. Had we been asked to
recommend an approach, that is likely the one we would have suggested.
The ‘standard’ calculation performed by the parties and found in Exhibit ‘B
(which we will append to this award) is accordingly correct up to the point where it
shows the amount payable as $10.661.49, and we so award.
25
It bears mentioning that the rates shown on Exhibit ‘B’ as ‘post’, which are not
subjected to the one-half factor, are still properly pre-award interest. All interest is pre-
award interest until an award is issued that clearly establishes the quantum of the
liability which the Employer is to pay.
Hopefully, this will be the last time the parties will need to seek the assistance of
the Board, but if we have neglected to deal with any matter (which we doubt), or if the
parties have difficulty implementing this award, we retain jurisdiction to render
Dated at Toronto this 9th day of September, 1991.
Eric K Slone, ViceChairperson
"I Dissent" (dissent attached)
M. Lyons, Member
4QlJtAJh
C. Linton, Member
APPENDIX: EXHIBIT ‘B’
ANGUS AWARD '
GSB 203/84
STANDARD CALCULATION (DIVIDING BY 2)
U/11/83 TO 01/01/84 7.0wks x $36.18/wk= $ 253.26
I
01/01/84 TO 01/01/85 52.2wks x $37.99/wk= $1983.08
OJ/Ol/85 to 01/01/86 52.2wks x $39.42/wk= $2057.72
01/01/86 to 01/01/87 52.2wks x $41.09/wk= $2144.90
01/01/87 to 29/07/87 29.8wks x $42.78/wk= $1274.84
TOTAL RETROACTIVE SALARY = $7713.80
INTEREST (PRE)
1983 $ 253.26 @ 11.00% - 2 = $ 1.74
1984 $1983.08 @ 12.06% - 2 = $119.58
1985 $2057.72 @ 10.58% - 2 = $108.86
1986 $2144.90 @ 10.52% - 2 = $112.82
1987 $1274.84 @ 9.29% - 2 = $ 34.54
TOTAL INTEREST = $377.54
TOTAL SALARY AND INTEREST = $8091.34
INTEREST (POST) L
1987 $8091.34 @ 9.85%= $ 332.08
1988 $8091.34 @ 10.83%= S 876.29
1989 $8091.34 @ 13.33%= $1078.58
1990 $8091.34 @ 14.00%= $ 283.20
TOTAL INTEREST = $2570.15
TOTAL PAYABLE:
S 10,661.49
G.S.B. 20.3184 ANGIJS et al (OPSEIJ 6 MCS)
DISSENT
I have read the decision of cha majority in this matter agd,
wi.th respact, I must dissent, IFour~factors lcdme To this
decision; three relating to the issue of compounding of
interest and one relating to the specizics of this cast.
13 In Ilallowel House I.i,mit.ed (1980) OLlZtB. ReP. Jan. 35, tbs
Board, at pura. 28, said,
II . ..it is appropriate t.hat .in its effort
to make the employee who.lo, the Hoard
direct the payment of intcrcst on the
wage loss.” EEmphasis added)
111 Mohawk College of Applied Arts and ‘J:echnolog,r. and Ontario
Public Serv,ice Emplo~yees’ Union (1982) 5 LAC (~3dj 237
(H. D. Rsown; Dnt.), the Arbitrator, at. page 241, writes,
I’. .‘.intcrcst on the amount of compensation
= awarded can be given so as to.fulIy
compensate the empl~oyee.” ‘(Emphasis added)
In two recent C.S.B. awards, Vice Chair Samucls dec.i,ded that
in order to ,be made .whole, to be fuily compensated, the
Crievors should receive compound interest on their compensation.
In Can* 5SS/S4 (Samuels) he states, --
“l’herr shou1.d bc interest on cac.h and
every sum at 10% compounded annually.,”
and in Campbell 1257/88 :sanuels’) at pb he wri.tes,
“In order to put the Grievers in the :
financial positio,n they w.ou,ld have heen
in had they been properly classified since
November 1987, they must he given interest
on each sum owing from the time it ought
to have been paid up to tho date it is
paid. . ..wc order,‘that the rate to he
used is 10% per annum compounded annually.”
. . . 2
- 2 -
Dissent: 203/84 Angus eat al
xi page 24 of this nunrd, Vice Ch;rir Slunr, for the majorit;//,
in reference to the Canning and Campbell awards of Vice Chair
Ssml~els, states,
“Tt is our view that they are not
necessarily wronfily dacided.”
Given thrs admission (with which 1 agree), I bclicvc that the
principles stated in Bluke et al, G.S.B. 1276/87 (Shimc) must
be applied. That is, s 1. II c. e there ii r B no “exceptions1 circum-
stances” in this matter, the decisiofi of \‘ice Chair Samu~ls
to award compound interest in the Canning and :;ampbe?l ca5es
u”ght to have been applied in this matter.
2; Khen the (iovernment of Ontario (the Employer in this matter!
cithcr invests or borrows money, the interest i9volveLi is =
compound int crest. Since the Employcr had USC of what was,
in cffcct, the (;ri..vors’ money for D number of years, it is
only fair that the tiricvors receive comTo:Ind interest for the
USC of their funds. That is, what they would have recelvei i.f
they had voluntarily invcstcd their Funds in Covcrnmcnt of
Onta~rio bonds.
5) As h:is be.en noted in several sw;.rds, employees rudxy are
generally very sophlszicated In the usr: ot’ their funds. They
are frequently both borrovcrs and investors. An employ-cc who
has funds withheld is dcniad an opportunity to invest the
money (at compound interest) or may be forced to borrow money
(xgain at compounJ interest). ‘Therefore, it seems anly fair
that when an employer is compensated for funds improperly
withheld, the compcnsacion oughr to Lncludo compound intcrcst.
. . . 3
Uissont:
203/84 Angus et al
(N.B* Vice.Chair Slone’s Income ‘Tax example (note 1, p 19.20)
is very interesting but I don’t hai.icvc very helpful. There
are just too many possihlc individual circumstances for us’to
know for sure what the effects of Income Tax would bc,.Accord~i.ngly,
Income Tax should not be a factor :in deciding thjs mattcr.~)
4) At page 23 of this award, Vice CI1n:i.r Slonc stares his bclicf
t113t, *
1, . . . compounding onl,y ordered where it is
right to tnkc a very d’:im view of the Employer’s
actions in wirhhclding moneys properly due,
to a Gsicvor or group of (;rievors,”
I realize that there- is a great. de;rl of money inovlved In this
case - between $1 milliou (simple interest) and 81.~2 mi.l.lion
(compound interest); however, since the Sal-tmnn panel issued
its award (if not before), it seems to mc that the Empl~oyor !~ss
put numerrous obst:acl~es in the way of t’he Grievors receiving their
compensation. Since mos.t ?f the delay’in this matter is tl:e
result of the Employer’s actions, the ma:iority ought tbo have
followed their own principle and awarded compound interest
based on the specific circumstances of this ens?.
For any of the above reasons, I would have awarded compound
interest in this c;:sc.
Dated at Toronto this 2nd day of August, 1YYl.
hacl Lyons : Membc