Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 132 FSCO A04-001504

BETWEEN:

DANIEL COLE Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

Before: David Leitch Heard: By telephone conference call on February 13, 2007. Written submissions were received on March 13, March 29 and April 27, 2007. Appearances: David Levy for Mr. Cole Ian D. Kirby for Allstate Insurance Company of Canada

By decision dated November 23, 2005, I determined that “Mr. Cole’s REC should be based on the gross annual income he could earn from full-time employment of the type he currently has” and that, accordingly, his “overtime earnings are not relevant in the calculation of his REC.” The parties retained the right to request a resumption of the hearing in the event they could still not agree on how to calculate the exact amount of Mr. Cole’s REC. A hearing resumption was requested and took place by telephone conference call on February 13, 2007, after which I wrote to the parties setting out the undisputed facts and the remaining issue as follows:

Katherine Calder’s letter dated February 16, 2006 was entered into evidence as Exhibit 7. [Ms. Calder was the Human Resources Manager of Mr. Cole’s employer. Her letter should have been entered as Exhibit 10, not 7.] It indicated that Mr. Cole’s gross annual income in March 2001 was $46,707.50. That amount was calculated by multiplying 43.75 hours per week times the normal hourly rate of $20.18, for a subtotal of $45,909.50, and then adding in the afternoon and midnight shift premiums which, over a year, amounted to $379 and $419, respectively.

However, through Mr. Levy’s further communication with the employer, it was confirmed that while Mr. Cole was paid the normal rate for the 40 hours per week he actually worked, he was paid time and a half the normal rate for an additional 3¾ hours per week which he did not actually work but for which he was compensated in recognition of his shorter, and more frequent, breaks of twelve minutes per hour worked.

Since I decided that Mr. Cole’s overtime earnings are not relevant in the calculation of his REC, the remaining question of law is this: does the compensation Mr. Cole received for the 3¾ hours per week he did not actually work, and for which he was compensated at time and a half the normal hourly rate of $20.18, constitute overtime earnings?¹

The treatment of shift premiums was not identified as a disputed issue in this letter. Moreover, immediately following the telephone conference on February 13, 2007, Mr. Kirby informed both me and Mr. Levy that he understood Mr. Levy to concede that shift premiums were to be included in the calculation of Mr. Cole’s REC.² Nevertheless, both counsel also made submissions with respect to shift premiums, even though Mr. Levy’s were only implicit and Mr. Kirby’s, brief. I will, therefore, also decide whether the shift premiums are to be included in the calculation of Mr. Cole’s REC.

Both the compensation Mr. Cole received for the 3¾ hours per week he did not actually work and the compensation he received for working afternoon and midnight shifts were earnings from his full-time employment and must, therefore, be included in the calculation of his REC.

Arguments

For the Applicant, Mr. Levy submitted that his REC is not properly determined by simply calculating his actual post-accident income at the time of the assessment. It is rather determined by reference to the amount the Applicant could earn from working full-time at the type of employment that satisfied the criteria set out in section 30(2), that is, the type of employment he already had at Meritor. He quoted my observation at pages 18 and 19:

The drafters of the LECB provisions may well have thought, as I do, that no employer would have any difficulty answering the following question: what is the gross annual income you pay, or paid at the time of the assessment, for this type of full-time employment, exclusive of overtime? There was no indication that Ms. Katherine Calder, the Human Resources Manager at Meritor, would have had any problem answering that question. She testified that Mr. Cole’s “base job, excluding overtime” involved working 40 hours a week, five shifts a week, with hourly rates varying slightly according to the shift worked in a three-shifts-a-day schedule.

Mr. Levy then submitted:

That specific question was put to Ms. Calder and her uncontradicted answer was that the base job, excluding overtime, amounts to 40 hours per week at $20.18 per hour (in 2001). It is submitted that this constitutes full-time pay for this position, and to include any additional amounts (no matter the source of income) is inconsistent with the decision to exclude overtime hours from the calculation of the REC.

Next, Mr. Levy quoted my observations at page 18:

... section 30 does not require that the determination of the income attributable to that employment be made by exclusive reference to the income that could be earned by working for the particular employer where the insured person happens to have found that type of employment by the time of the assessment. The incomes that could be earned from that type of employment by working for other employers in the area might also be relevant, assuming those employers were accessible to the insured person. However, some of those employers might offer no overtime, others might offer voluntary overtime and still others might make overtime mandatory in certain circumstances. None of the employers might be able to reliably predict the number of overtime hours to be offered or required on a go-forward basis. In my opinion, section 30(1) should not be interpreted to mandate an enquiry into this array of possibilities and unknowables. It should be interpreted to require only an enquiry into the full-time income that could be earned from the otherwise appropriate type of employment that “exists in the area in which the person lives and is accessible to the person.”

Mr. Levy then submitted:

… his regular job was not even guaranteed …[h]e was subject to lay-off … Similar jobs with other employers might ... not pay anything similar to the additional hours at issue here, and might even pay Mr. Cole a lower hourly rate. The analysis at issue must be done as if it were still 2001 without knowing what the next six years would hold for Mr. Cole. Over the past six years, ...the extra three and three quarter hours could have been reduced or eliminated, and a myriad of other possibilities could have resulted... In the absence of any specific information, and in light of Arbitrator Leitch’s conclusion that “section 30(1) should not be interpreted to mandate an enquiry into this array of possibilities and unknowables”, it is submitted that ... 40 hours per week at the rate of $20.18 per hour ... ought to be the basis of the calculation of the REC.

Finally, referring to two court decisions I had drawn to the parties’ attention, discussed further below, Mr. Levy maintained that both decisions accepted that the word “overtime” meant hours that fell “outside ‘normal’ working hours”. He then argued:

Likewise herein, it is submitted that the hours in question are in addition to the “normal working hours” as defined by Ms. Calder’s evidence at the hearing and therefore should be considered overtime, not to be included in the calculation of the REC.

If I were to accept Mr. Levy’s submissions, Mr. Cole’s REC would be determined using a gross annual income calculated as follows: 40 hours per week times $20.18 per hour = $807.20 per week times 52 weeks per year = $41,974.40 per annum. This calculation would obviously exclude the payments Mr. Cole received in respect of the 3¾ hours per week he did not actually work. However, it would also exclude the afternoon and midnight shift premiums he received even though, as mentioned, Mr. Levy made no explicit submissions to that effect.

For Allstate, Mr. Kirby had a slightly different, but equally accurate, way of defining the first issue, namely: “whether or not the 5.625 hours of additional pay [i.e., 3.75 hours paid at an hourly rate of time and a half] that Mr. Cole receives for working his 40-hour work week is to be included in his residual earning capacity or, alternatively, treated as ‘overtime’ pursuant to your decision.”

Mr. Kirby’s submission on this issue focussed on the provisions of the collective agreement that governed Mr. Cole’s “Hours of Work & Overtime” at Meritor.³ Mr. Kirby wrote:

In the case of the Applicant and other [sic] performing the job of line operator, by virtue of the collective agreement …, merely by working 8 hours with 12 minute breaks each hour, the Applicant receives the equivalent of 45.625 hours of pay per week. This is to be distinguished from situations in which the Applicant (or others working as a line operator) choose to work more than 8 hours in a continuous 24-hour period or on Saturday or Sunday, in which case they would, in accordance with the collective agreement, be eligible for “overtime”.

In the result, the Insurer submits that on the facts specific to this case, the Applicant’s receipt of 45.625 hours of pay for 40 hours of work does not constitute overtime.

Mr. Kirby also noted that section 22 of the Employment Standards Act only requires an employee to be paid “overtime” where he or she works more than 44 hours per week or some other prescribed threshold. He maintained that in Mr. Cole’s case, the relevant threshold was defined by the collective agreement and that Mr. Cole would not pass that threshold by “working his usual 8-hour shift with 12-minute breaks each hour”. With respect to the second issue, Mr. Kirby simply observed that Mr. Cole’s shift premiums should also be included in the REC calculation.

If I were to accept Mr. Kirby’s submissions, Mr. Cole’s REC would be determined using a gross annual income calculated as follows: 40 hours per week times $20.18 per hour = $807.20 per week times 52 weeks per year = $41,974.40 per annum, plus 3¾ hours per week times $20.18 per hour times 1.5 = $113.51 per week times 52 weeks per year = $5,902.52 per annum, plus the two shift premiums of $379 and $419 per annum, all of which totals $48,674.92 per annum. This calculation would include both what Mr. Kirby called the “5.625 hours of additional pay” Mr. Cole received in respect of the 3¾ hours per week he did not actually work and the premiums he received for working afternoon and midnight shifts.

In reply, Mr. Levy countered Mr. Kirby’s collective agreement argument by pointing to another provision of that same agreement which defined “the regular scheduled work week” as “five eight-hour days, Monday through Friday, inclusive”.⁴ He submitted that, “by implication”, this meant “all work outside the ‘regular schedule work week’ constitutes overtime”. (My emphasis). Mr. Levy also noted that the collective agreement said nothing about paying workers additional amounts for taking hourly breaks of 12 minutes; it stipulated a different break schedule.⁵ As a result, he urged me to conclude that the collective agreement should not be read “in an overly strict manner” and that “caution must be exercised in interpreting this document”.

Analysis and Conclusion

Mr. Levy’s arguments are not supported by the facts, by the ordinary meaning of the word “overtime” or by my previous reasons for excluding overtime earnings.

Dealing first with the facts, neither Ms. Calder’s testimony at the hearing nor her letter of February 16, 2006 indicated that Mr. Cole’s “base job, excluding overtime, amounts to 40 hours per week at $20.18 per hour.” To quote my previous decision, Ms. Calder’s testimony at the hearing/ was that “Mr. Cole’s ‘base job, excluding overtime’ involved working 40 hours a week, five shifts a week, with hourly rates varying slightly according to the shift worked in a three-shifts-a-week schedule.” She had also written a letter to Mr. Levy dated October 14, 2005 in which she stated that “Mr. Coles [sic] is paid for 43.75 hours on a weekly basis. Overtime is on a volunteer basis and is not guaranteed.”⁶ However, Ms. Calder had not provided any specific evidence about Mr. Cole’s annual gross income in 2001 from full-time employment, exclusive of overtime. When asked to do so, Ms. Calder gave inaccurate information, though not the information Mr. Levy attributed to her in his submission. Her letter of February 16, 2006 stated that Mr. Cole’s gross annual income in March 2001 was $46,707.50 per annum, calculated as follows: “43.75 hours paid per week” times $20.18 per hour times = $882.87 times 52 weeks per year = $45,909.50, plus the two shift premiums of $379 and $419 per annum. We eventually learned, through Mr. Levy’s own communication with the employer, that the correct facts were these: by working full-time, that is, five eight-hour shifts per week on one of three different shifts, Mr. Cole earned a gross annual income of $48,674.92, calculated in the manner described in Mr. Kirby’s submission.

Mr. Levy nevertheless maintained that the compensation Mr. Cole received for the 3¾ hours per week he did not actually work constituted overtime earnings because they fell “outside ‘normal’ working hours.” This argument ignored the ordinary meaning of the word “overtime” as he himself used it in his reply submission, as Ms. Calder used it in her letter of October 14, 2005, as Meritor’s collective agreement used it, as the Employment Standards Act uses it and as the two court decisions I brought to the parties’ attention explained it.

In the first of those cases, Ontario Professional Fire Fighters Association et al. v. Ontario Municipal Employees Retirement Board (2006), 2006 CanLII 21313 (ON SCDC), 81 O.R. (3d) 729 (Div. Ct.) at page 744, paragraphs 64 and 65, Justice Matlow (in dissent but not on this point) observed:

“Overtime” is defined in the Dictionary of Canadian Law, 3rd ed., as “hours of work in excess of standard hours of work”. It is defined in the Concise Oxford Dictionary, 10th ed., as “time worked in addition to one's normal working hours”.

To these definitions, which I adopt, I would further add the element that, to qualify as “overtime” pay, the additional work must ordinarily be done in response to the employer's request, usually made when the amount of work that the employer seeks to have performed exceeds the available supply of work that would be provided if employees were to work only their normal hours. (My emphasis)

I acknowledge that additional payments for shorter, more frequent breaks was not reflected in Meritor’s collective agreement but I accept Mr. Kirby’s submission that this agreement used the word “overtime” to describe “situations in which the Applicant (or others working as a line operator) choose to work more than 8 hours in a continuous 24-hour period or on Saturday or Sunday.” As Justice Swinton confirmed in the second case, Hamilton (City) v. Ontario Nurses Assn., Local 50 [2006] O.J. No. 4851 (Div. Ct.), this is generally how the word is used in collective agreements:

The arbitrator interpreted Article 4.2(a) in a manner consistent with his award under the previous agreement, where he found that full-time nurses were entitled to overtime for hours worked outside of the standard or normal working hours. His conclusion is consistent with other arbitration cases which have concluded that the language of a collective agreement requires overtime or a premium for hours worked outside normal or regular hours (see Donald J.M. Brown, Q.C. and David M. Beatty, Canadian Labour Arbitration, 3rd ed. (Aurora: Canada Law Book, August, 2005), p. 5-73). (My emphasis)

In other words, the word “overtime” ordinarily refers to hours actually worked beyond the standard, regular or normal hours of work. The words “overtime earnings” have a corresponding meaning. There was, no doubt, some economic logic behind Meritor’s decision to pay premium rates to Mr. Cole and others for hours they did not work. But that could not turn the resulting payments, even if made at premium rates, into “overtime earnings” because the workers did not have to work more than their standard, regular or normal hours to earn them. Nor did the workers have to work more than their standard, regular or normal hours to earn shift premiums. If anything, these payments were more like regular salary supplements or bonuses paid for regular hours of work. However they are described, I am persuaded that these payments constituted earnings from full-time employment, not overtime earnings.

Finally, Mr. Levy’s submissions were not supported by my reasons for excluding overtime earnings from the calculation of Mr. Cole’s REC.

First, my decision did not say that Mr. Cole’s actual earnings at Meritor were not relevant in determining his REC. I said the opposite at page 16:

If, by the time of the REC assessment, the insured person has returned to work and if, as in this case, it is found or agreed that the employment satisfies the criteria set out in section 30(2), there is no reason why the parties should not be permitted to consider income-related information about that employment.

However, I accept the submission that the only relevant income-related information will be the net weekly income that the insured person could earn from working at that type of employment on a full-time basis.

It is true that I also stated at pages 19 and 20 of my decision that:

… it is not clear that either party is obliged to accept a REC based only on the full-time income that could be earned from this type of employment by working for Mr. Cole’s current employer or for any other single employer. Mr. Cole may live in an area where more than one accessible employer offers the type of employment agreed to be appropriate, but at different rates of remuneration. If that is the situation, the parties might still disagree about the income attributable to that type of employment due to the different rates of remuneration paid by different employers. (Emphasis in the original)

Nonetheless, I was told on February 13, 2007 that neither party wanted to pursue this issue. As a result, I heard no evidence to support Mr. Levy’s contention that “similar jobs with other employers might not pay anything similar to the additional hours at issue here.” The only evidence I heard about the gross annual income Mr. Cole could earn from full-time employment of the type that he had at Meritor was the evidence establishing the amount he actually earned at Meritor. Mr. Cole’s REC can, therefore, only be based on that evidence.

Second, I reject Mr. Levy’s argument that Mr. Cole’s REC should not include the payments he received for hours not worked because those “hours could have been reduced or eliminated, and a myriad of other possibilities could have resulted...”, including job loss, lay-offs or changes in rates of remuneration. It is true that I found that Mr. Cole’s overtime earnings were too insecure and unstable to be reconciled with the structure and purpose of LECBs but I did not say that LECBs were intended to protect him from any and all other economic variables. On the contrary, at page 17 of my decision, I repeated Arbitrator McMahon’s observation: “Once a determination is made concerning the amount of the insured person’s LECB, the amount is locked in until the time of a mandatory review…”, three years and eight years after benefits were first paid. Only on those occasions would Mr. Cole be entitled to show, pursuant to section 30(2) para. 2, that the earnings used to determine his original entitlement were based on a type of employment that no longer existed in the area in which he lived or were no longer paid at the same rate. As I further stated at page 17 of my decision: “LECBs can only provide ‘security and stability’ if the REC is based on a secure and stable source of income, or at least as secure and stable as possible.” (My emphasis)

EXPENSES:

If the parties cannot resolve the issue of hearing expenses, they will follow the procedure set out in the Dispute Resolution Practice Code (Fourth Edition Updated –October 2003).

June 27, 2007

David Leitch Arbitrator

Date

Financial Services Commission of Ontario Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 132 FSCO A04–001504

BETWEEN:

DANIEL COLE Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Both the compensation Mr. Cole received for the 3¾ hours per week he did not actually work and the compensation he received for working afternoon and midnight shifts were earnings from his full-time employment at Meritor in 2001 and must, therefore, be included in the calculation of his REC.