The applicant union filed a grievance under section 124 of the Labour Relations Act seeking to enforce a collective agreement clause imposing a 1% per day compounded penalty on late benefit contributions.
The respondent employer paid the principal amount of $137,507.50 after the first day of hearing, leaving a penalty claim of $35,361.85 for 23 days of delay.
The Board held that the clause was penal and unconscionable, as the effective annual interest rate exceeded 3000% and was disproportionate to any actual damages suffered by the benefit funds.
The Board declined to enforce the penalty clause and instead awarded interest on the late payment at the chartered banks' prime rate.
