Ontario Milk Transport Association v Dairy Farmers of Ontario, 2000 ONAFRAAT 16

Agriculture, Food and Rural Affairs Appeal Tribunal 1 Stone Road West

Tribunal d’appel de l’agriculture, de l’alimentation et des affaires rurales 1 Stone Road West

Guelph, (Ontario) N1G 4Y2 Tel: (519) 826-3433, Fax: (519) 826-4232 Email: AFRAAT@ontario.ca

Guelph (Ontario) N1G 4Y2 Tél.: (519) 826-3433, Téléc.: (519) 826-4232 Email: AFRAAT@ontario.ca

Ontario Milk Transport Association v Dairy Farmers of Ontario

Ontario Milk Transport Association v DFO 2000 ONAFRAAT 16

Ministry of Agriculture, Food and Rural Affairs Act

July 17, 2000

DATE OF DECISION:

August 3, 2000

2000-16

2000 ONAFRAAT 16

Ontario Milk Transport Association v Dairy Farmers of Ontario

IN THE MATTER OF THE FARM PRODUCTS MARKETING ACT AND SECTION 16 OF THE MINISTRY OF AGRICULTURE AND FOOD ACT.

An Appeal to the Agriculture, Food and Rural Affairs Appeal Tribunal by the Ontario Milk Transport Association (OMTA) from the February 7, 2000 decision of the Dairy Farmers of Ontario (DFO) denying the request of the OMTA for a 3% increase in the labour component of the 2000 rate formula.

Before:

Denis O’Connor, Vice-Chair; Bill Sears, Vice- Chair; Jack Young, Vice-Chair; Ralph Huckle, Member.

Appearances:

John Wishart, General Manager, the OMTA.

David Brisbin, Counsel to the Appellant, the OMTA.

John Core, Chair of the Board of Directors of the DFO.

Dave Nolan, Manager of Transportation for the DFO.

Geoff Spurr, Counsel to the respondent, the DFO.

DECISION OF THE TRIBUNAL

This appeal was heard in Guelph, Ontario on Monday July 17, 2000. The OMTA appealed to the Agriculture, Food and Rural Affairs Appeal Tribunal (the Tribunal) from the February 7, 2000 decision of the DFO denying the OMTA’s request for a 3% increase in the labour component of the 2000 rate formula.

The Background

The OMTA is an association of milk transporters appointed as agents by the DFO to transport milk on behalf of the DFO from assigned producer premises to designated milk processing plants. The Association was formed in 1967 and is the result of the amalgamation of several milk transport associations, the earliest of which, was formed in 1926.

The OMTA is incorporated under the laws of the Province of Ontario as a non-profit organization. It is administered by a Board of Directors representing milk transporters from across Ontario. The 73 member milk transporters convey all of Ontario’s annual 2.5 billion-litre milk production from farms to processing plants.

The DFO compensates its transport agents through the application of the Transport Rate Formula, which recognizes a transporter’s expenses in the following areas:

Fixed Costs
Labour
Variable Operating Costs
Overhead Administration and Management

The labour component of the formula reimburses a transporter for the following cost elements:

Wages
Fringe Benefits
Group Benefit Insurance Plan
Pension Plan

Each year costs associated with each section of the Transport Rate Formula are reviewed, negotiated and generally agreed to by the DFO and the OMTA. The components making up the various sections of the formula are generally not changed from year to year although there is continuous discussion taking place between the two organizations concerning various matters associated with the formula and its elements.

This appeal is only concerned with the amount of the labour component for the 2000 formula. Any agreed changes in the labour component come into effect on January 1, 2000. The wage allowance is unique in that it is based on each individual transporter’s wage rate. Periodically, the DFO selects a date (preceding approximately 6 months to the current date) and determines by means of a survey the actual wage rate for each transporter as of that date. This rate of pay establishes a transporter’s base labour rate. The most recent base labour date was June 1, 1999. This date was selected in December 1999. Following a survey of all transporters, a new base labour rate was established for each transporter effective January 1, 2000. At the DFO’s discretion, a new base labour date will be identified in the future and the process will be repeated. Base labour updates have occurred in 1974, 1977, 1982, 1985, 1989, 1991, 1996 and 2000.

During the negotiations for the 2000 formula the OMTA asked for a 3% increase in the labour component of the rate formula. The DFO decided on a 2% increase. This is the decision that is now appealed to the Tribunal.

The Issue

Did the DFO treat the OMTA fairly when it decided to grant a 2% increase in the labour component of the Transport Rate Formula for 2000?

The Evidence and the Findings

David Brisbin, Counsel to the OMTA made submissions on behalf of the OMTA. In these submissions he pointed out:

In addition to being professional truck drivers, milk truck drivers are certified bulk tank milk grader/samplers.
A bulk tank milk grader/sampler is required to reject milk that does not comply with the provisions of the regulations. Mr. Brisbin said that the milk truck driver is the first line of defence in ensuring the quality of milk and has the initial responsibility of grading the milk.
A high level of diplomacy on the part of the driver/grader is required in dealing with milk producers.
Other duties required by the regulations include determining the volume of milk, maintaining milk samples in an organized and sanitary manner, and ensuring that the milk, once loaded, is transported in as efficient and prompt a manner as possible.
The milk truck driver is responsible for ensuring that after each load the tank-truck is thoroughly cleaned and sanitized.
Milk truck drivers do not merely transport milk; they are an integral part of the overall quality assurance of milk production in Ontario.

Mr. Brisbin said that these specialized duties of milk truck drivers must be recognized in any consideration of the labour component of the rate formula. Wages represent about 40% of the rate formula.

Mr. Brisbin filed with the Tribunal, reports from the Ministry of Labour and statistics from Statistics Canada indicating:

That transportation and warehousing sectors have had particularly strong growth in the 1999 year and employment in this sector has risen.
Statistics Canada calculated the percentage increase in employment growth in the “Transportation and Warehousing” sector to have been 6.9% from May 1999 to May 2000.
Growth in the trucking industry is expected to continue with similar increases.
The Ontario Trucking Association (OTA) has reported that in 1999, truck haulage in Ontario increased more than 12% from levels in 1997. This is the sixth straight year of growth.
In a poll by the OTA, one suggestion made by respondents to the poll, to alleviate the driver shortage, was to increase rates charged to shippers – thereby creating additional revenue to be funnelled into improving driver wages.
The average truck driver wage in Ontario, as an aggregate of full-time and part-time, was $14.96 in 1999. For full-time only, the rate was $15.20. When only unionized truck drivers are considered, the average wage was $17.18.
The current DFO formula for labour costs, including the DFO proposed 2% increase for 2000, would be the equivalent of $15.08 per hour for milk truck drivers. Even with the OMTA request of a 3% increase, the 2000 base wage rate would just be in line with the industry average for 1999 ($14.78 x $1.03 = $15.22).
Overall, private sector settlements for Ontario in 1999 resulted in an average wage adjustment of 3.1%. With respect to transportation specifically, the average annual increases in base wage rates by industry for 1999 was 3.3% for all agreements.
Wage settlements in unionized environments in Ontario for the “Transport, Communications and Utilities” industry specifically recorded a 2.7% increase for the 1999 year.
The figures for December 1999 when the OMTA and the DFO would normally set the rate for the year 2000 show the average private sector increases (annual) were 3.1% with transportation increases of 2.8%.

Mr. Brisbin said that after analyzing this data it becomes obvious that the DFO proposed 2% increase would not treat its transporters equitably. Increases in the wage rate for milk truck drivers has not been in line with these industry-wide increases. Given the specialized nature of a milk truck driver and bulk tank milk grader/sampler, it is imperative that wage rates be competitive with the transportation industry as a whole. Without competitive wages the milk truck driver bulk tank milk graders will leave the industry for jobs in general trucking.

Mr. Brisbin said that the reason the DFO gave for approving the 2% increase in the labour component of the rate formula for 2000 was that the DFO employees received a 2% base increase for 2000. Mr. Brisbin argued that it is not equitable to determine wage rates for milk truck drivers by simply giving them the same rate as would be received by salaried DFO employees for several reasons, these include:

i) the unilateral nature of the wage increase determination ii) the calculation of the salary base iii) vastly different functions performed by two separate groups of employees iv) differences in benefits

Mr. Brisbin pointed out that while the DFO offers its salaried employees a performance bonus in addition to their annual increase, no such bonus is available to the transporter’s employees. The only way the milk truck drivers can increase their pay cheque is to work more hours. He asked the Tribunal to direct a 3% increase in the labour component of the rate formula in recognition of the market forces in the trucking industry and in the interest of equity.

In response to questions Mr. John Wishart, General Manager, OMTA, told the Tribunal:

73 companies are members of the OMTA.
He is not sure how many drivers there are but uses a figure of about 500. There are full time and part time drivers so it is difficult to know for sure at any particular date just how many drivers these companies employ. He would guess the number of full-time drivers to be 350.
There is no set starting wage for a beginning driver.
There is a maximum hourly rate that is paid. There is a formula in place that will reduce the maximum over time to 125% of the average wage.
The average age of a driver is about 47 years.
About 99% of the drivers have group insurance. The DFO pays the cost of the group insurance plan up to certain limits.
The majority of drivers are covered through the DFO sponsored pension plan. The larger companies with more drivers would have that coverage, the small companies may not.
One route is 10 to 12 producers, one or more trips per day.
Drivers deal with the same producers on a routine basis.
Milk truck driving is not the same as short haul or long haul drivers, there is predictability in the work of the milk truck driver.
The turn over rate for milk truck driver/bulk tank graders is not known but each year about 20 new drivers attend the certification course to become bulk tank milk graders.

Mr. Core addressed the Tribunal on behalf of the DFO. He said that, having established a base labour rate for each transporter, the OMTA and the DFO attempt to negotiate an appropriate increase to the base labour rate each year. Once agreement is reached the DFO Board approved increase is provided to each transporter, but the transporter is not obligated to pass on all or any of the increase to the drivers. The transporter may choose to provide an increase different than the DFO Board approved increase. If the transporter provides a labour increase less than that given by the Board, the difference is a contribution towards the transporter's profit. If the transporter's increase is greater than that given by the Board, it is a cost to the transporter which is not immediately reimbursed by the Board but it will be recognized when the DFO next surveys the transporters to establish and set the base labour rate for each transporter. For example, if a transporter provides his drivers with a 3% increase for 2000 instead of the 2% offered by the DFO, the DFO would establish a new base labour rate for that transporter which would include the 3% at the next base labour update. Therefore, the transporter has only to absorb the additional 1% cost until the effective date of the next base labour update after which, the Board will reimburse the transporter for this cost. He said that when the Board approves a labour increase, it is merely advising transporters the amount of increase the DFO believes is warranted and is prepared to provide in the short-term. The longer-term implications are that the DFO Board will eventually reimburse any increase which the transporter believes is warranted. The Board has structured the labour allowance in this manner to encourage transporters to pass on the full increase to their drivers each year. However, it also provides a mechanism for transporters to provide a greater increase if the transporter is prepared to absorb this cost for a period of time. The total wage cost for 1999 was approximately $21,000,000.

Mr. Core said that in 1996 the DFO provided a 2% increase in payment to its salaried staff. In May 1996, the OMTA appealed to the Farm Products Appeal Tribunal (FPAT) requesting a 2% increase in the labour component of the rate formula. At that time the OMTA maintained that they should receive at least a 2% increase in order to be equitable with the DFO staff. He said the Tribunal granted the appeal to the OMTA stating in its decision that; “the Tribunal feels employees on both sides should be treated equitably”. The Tribunal went on to say;

“The Tribunal recognizes the good working relationship between the two parties and feels that it should be fostered. In the opinion of the Tribunal, continuation of the equitable treatment of all sectors already demonstrated by the Board of Directors of the DFO is necessary to foster this relationship.”

Mr. Core told the Tribunal that; based on the May 1996 decision, the DFO has, in subsequent years, provided the same labour increase to its staff and to the driver labour allowance. In November 1999, the DFO approved a 2% increase in the DFO staff wages for the period of November 1, 1999 to October 31, 2000. The 2% increase was based on the Consumer Price Index (CPI) which ranged from +1% in October, 1998 to 2.6% for September 1999.

In addition, the FPAT indicated in its decision that “employees on both sides should be treated equitably”. Since 1996 the DFO has always given the same annual increase to the driver labour allowance that it does to its staff.

Mr. Core explained that the DFO offers a Bonus Program to its employees. Any staff member has the opportunity to acquire a bonus, up to a maximum of 2% of their salary, by successfully completing a set of goals and objectives set by their supervisor. The goals and objectives must require some additional time and effort on the employee’s part beyond the employee’s regular responsibilities. In 1999 the DFO paid 1.5% in bonuses out of the possible 2%. He pointed out that this bonus must be earned yearly and is not added to the base salary.

He said that while not necessarily a Bonus Program, transporters and their drivers have the potential ability, at any time, to increase the driver’s compensation for additional effort and time on the driver’s part. In one recent example, a transporter that made two trips every day with one truck and one trip every other day with another truck removed the every other day trip and worked a longer day with the remaining vehicle. The driver’s daily wage was increased from $155.79 to $175.00 in recognition of the additional effort. Those drivers paid on an hourly basis automatically receive increases and/or decreases with fluctuations in the number of hours worked. Unlike the DFO’s Bonus Program, increases gained by drivers (due to efficiencies) on their hourly wage are permanent.

Mr. Core told the Tribunal that the DFO does not believe that respective Benefit Plans are part of the OMTA’s appeal and therefore does not see the need to elaborate on the details of the DFO’s plan. The DFO has structured its benefits in a manner that enables the organization to be competitive with other companies with respect to attracting employees with the necessary skills.

Mr. Core said that the OMTA has told the DFO that they were no longer satisfied with the existing negotiation procedure. The DFO was asked by the OMTA to consider arbitration. In response to this request the DFO has, in conjunction with the OMTA, established working committees to study this proposal.

Mr. Core summed up the DFO position by stating that the DFO believes that the decision to grant a 2000 labour rate allowance increase of 2% is both fair and equitable for the following reasons:

Transporters can provide their drivers with whatever increase they believe is appropriate and the DFO Board will, effective with the next base labour update, reimburse the transporter for any additional cost.
Transporters can, and do, receive immediate labour increases throughout the year as a result of efficiencies within the transporter’s operation.
Historically the DFO Board has provided wage increases, which on average closely reflect the increase in the CPI.
The increase provided to the driver’s labour allowance is equitable with respect to the increase provided to the DFO staff salaries.

In response to questions Mr. Core told the Tribunal that:

The belief within the DFO is the labor increase provided is passed on to the drivers.
For the staff of the DFO the salary range is established based on a point system. This was done with the assistance of an outside consultant.
There is flexibility in the range to deal with special circumstances for particular employees. The DFO had two information technology staff leave and when these positions were advertised it was discovered that the range was too low in the market so the pay rate had to be increased to attract suitable candidates.
If an employee is dissatisfied with the rate of pay or increase, the employee deals with the DFO General Manager who is expected to solve these types of problems.
The DFO has approximately 109 to 111 employees.
Since 1996 the only change Mr. Core could recall in the duties of the drivers has been to change from manual records to using hand held computers to record the data that has to be collected by the driver. This change is viewed by the DFO as reducing the on-farm time for the driver.

Mr. Dave Nolan, Transportation Manager for the DFO, told the Tribunal that he has worked in that area of the DFO for the past 25 years. There are currently 84 dairies served by the DFO. Typically, a transporter is given an area to pick up the milk from and then the plant that the milk is to be delivered to is allocated using computer software, so the delivery point may change from time to time. He said that once a driver takes the milk-grading course and is certified, that driver is re-certified by the DFO every three years. This involves a staff person riding in the truck with the driver to observe the pick up and ensure that this work is being done correctly. He thinks there are about 25 owner/operators of milk transport companies at the present time.

The Tribunal examined the evidence filed and submissions made. The parties agreed that the issue of the difference of the benefit packages provided by the OMTA and the DFO was not an issue at this hearing, therefore the Tribunal considered this evidence as information only and not a determining factor.

In considering the evidence the Tribunal is aware that for issues relating to farm products marketing, the decision of the Tribunal has to consider the then current market situation, the outside influences that are expected to affect that market and consider these factors in its decision making process. These decisions should be interpreted as being effective only as long as the market remains stable. Once there is a significant change in circumstances, that decision may not longer be appropriate. As it applies to this case, the Tribunal was told that there is considerable growth in the transportation industry. This provides milk truck driver/graders with alternative employment possibilities and puts pressure on transporters to increase wages to retain staff. Just as the DFO had to revisit its salary grid before it could attract replacement Information Technology staff, the transporters would have to review salaries and offer wages relative to current pay scale in the industry in order to retain or attract staff.

The argument that the DFO provided for deciding that the OMTA should have a 2% increase was that, 2% had been provided to its own staff. That was the judgement call of the Board of Directors of the DFO based on their understanding of how the 1996 Tribunal decision should affect future years. The explanation that the DFO provided for the increase to its own staff is that it was based on the CPI.

The OMTA provided data on the current salary awards negotiated in the transportation industry as well as the CPI. These awards support a 3% increase in wages. This evidence was not refuted by the DFO.

The Tribunal is convinced by the evidence that, taking into consideration the current market factors, the appeal of the OMTA should be granted and the DFO should provide a 3% increase in the labor component of the rate formula for the year 2000.

Once again the Tribunal was impressed by the good working relationship between the two parties and the spirit of cooperation and openness displayed at the hearing. The Tribunal appreciates the candor with which the evidence was presented.

Decision and Reasons

After careful consideration of the evidence presented and submissions made, the Tribunal decided to grant the appeal of the OMTA and direct the DFO to provide a 3% increase in the wage component of the Transport Rate Formula for 2000.

The reason for this decision is the Tribunal was convinced by the evidence that a reasonable increase in the labor component of the rate formula for 2000 is 3%.

Dated at Guelph, Ontario this 3^rd day of August, 2000.