GSB# 0148/95

UNION# 95C469

IN THE MATTER OF AN ARBITRATION

Under

THE CROWN EMPLOYEES COLLECTIVE BARGAINING ACT

Before

THE GRIEVANCE SETTLEMENT BOARD

BETWEEN

Ontario Public Service Employees Union (Levere)

Grievor

• and -

The Crown in Right of Ontario (Ministry of Transportation)

Employer

BEFORE

Richard Brown

Vice-Chair

FOR THE UNION

Robin Gordon Grievance Officer Ontario Public Service Employees Union

FOR THE EMPLOYER

Kelly Burke Senior Counsel Management Board Secretariat

HEARING

March 2, 2003.

DECISION

Doug Levere was employed by the Ministry of Transportation in Ottawa as a corridor management officer from late 1987 until early 1989. He and a number of other employees grieved the classification of that position. On July 17, 1989, while the classification grievance was pending, Mr. Levere was promoted to the then higher paying job of utility technician also in Ottawa. A decision of the Grievance Settlement Board, dated January 5, 1990, held the position of corridor management officer was improperly classified. The ensuing reclassification resulted in that job being paid at a higher level than Mr. Levere’s new position of utility technician. Effective February 1, 1994, utility technician was in turn reclassified to the same pay level as corridor management officer.

As a result of the reclassification of the position of corridor management officer, Mr. Levere received a retroactive wage increase for the period commencing January 23, 1989 and ending when he left that job approximately six months later. In this grievance, dated April 18, 1994, he contends he should have continued to be paid according to the new pay scale for corridor management officer until the point in time when his rate of pay as a utility technician caught up with the rate he would have received if he had remained as a corridor management officer.

I

The general principles to be applied in awarding compensation for breach of a collective agreement are succinctly summarized in Brown and Beatty, Canadian Labour Arbitration, at 2:1410:

Thus, the basic purpose of an award of damages is to put the aggrieved party in the same position he or she would have been in had there been no breach of the collective agreement. This general principle is subject to three basic qualifying factors. In the first place, the loss must not be too remote, that is, it must be “reasonably foreseeable.” Secondly, the aggrieved party must act reasonably to mitigate his loss. Finally, the loss must be certain and not speculative.

The only issue in this case is one of foreseeability or remoteness. The breach of contract is the improper classification of the job of corridor management officer. The employer concedes the grievor would not have changed jobs if his old job had been properly classified from the outset. If he had remained as a corridor management officer, he would have been paid according to the new higher scale for that job after July 17, 1989. Compensation in the amount of the difference between what he earned as a utility technician and what he would have earned as a corridor management officer would put him in the position he would have occupied but for the breach. However, the employer contends such compensation should be denied because the loss suffered by the grievor is too remote a consequence of the breach of contract.

Four decisions of this board dealing with remoteness or foreseeability were cited by counsel. The union relies upon two decisions awarding compensation: OPSEU (Meeks) and Ministry of Natural Resources, File No. 1429/88, decision dated February 20, 1991 (Sloan); and OPSEU (Grinius) and Ministry of Citizenship, File No. 1495/95, decision dated July 24, 1995 (Fisher).

In Meeks, the employer cancelled the grievor’s vacation in violation of the collective agreement. Having planned to harvest a hay crop on his farm while on vacation, he sought compensation for losses suffered as a result of the harvest being delayed. On the subject of remoteness, Vice-Chair Sloan wrote:

The basic test for remoteness of damages was articulated in the case of Hadley v. Baxendale (1854) 9 Exch. 341 (H.L.). The test is two pronged:

1. Where no special circumstances are communicated: Would a reasonable person foresee at the time of entering into the contract that loss of the type occasioned might occur upon a breach?

2. Where special circumstances are communicated: Would a reasonable person, having knowledge of the special circumstances existing at the time of the contract, foresee the type of loss suffered?

While Hadley is obviously still good law, and some of the general statements made therein are quite helpful, one should not lose sight of the fact that the case itself involved a commercial contract to do one thing: deliver a broken mill shaft for repair. The analogy to an employee in the Ontario Public Service governed by a collective agreement negotiated by others on his behalf is questionable. It is not fair to suggest the Union and the Employer representatives negotiating a collective agreement had to have specifically contemplated this type of occurrence. Nor in the context of the ongoing, broad employee-employer relationship must the analysis be confined to the time of entering into the agreement. In our view, it is proper to look to the knowledge possessed by local representatives of the Employer … at or before the time of breach--i.e. when the grievor’s vacation was denied. (pages 14 and 15)

Noting local managers knew “vacations were used … to augment his [i.e. the grievor’s] livelihood by working on the farm” (page 15), Vice-Chair Sloan awarded compensation for loss, with the management nominee on the panel dissenting.

The grievor in Grinius was reinstated by this board, with a thirty-day suspension, some years after being discharged. The back wages received by him upon reinstatement were taxed at a much higher rate than would have been applied to the same amount of income spread over more than one year. Concluding the extra tax liability was a reasonably foreseeable consequence of the grievor’s improper dismissal, Vice-Chair Fisher wrote:

Although it is certainly unusual for there to be a four year gap between the date of discharge and the date of reinstatement, it is quite reasonably foreseeable … to expect that the date of discharge and the date of reinstatement would span two calendar years, thus two tax periods. …

The issue of reasonable foreseeability (or remoteness of damages as it is sometimes called) relates not to the quantum of damages but to the head or type of damages. Therefore, if it is reasonably foreseeable at the time of the improper discharge that the grievor, if reinstated with back pay at a later time in another tax year, would suffer damages due to the increased tax burden, then it matters not whether the actual delay is four years instead of two… (page 11)

The employer relies upon two decisions denying compensation: OPSEU (Sysiuk) and Ministry of Natural Resources, File No, 195/89, decision dated August 7, 1990 (Keller); and OPSEU (Tilden) and Ministry of Municipal Affairs and Housing, File No. 2109/95, decision dated January 17, 2000 (Dissanayake).

In Sysiuk, the employer’s violation of the collective agreement deprived the grievor of almost eight month’s of work in 1989. His entitlement to wages for this period was acknowledged by management in 1990. The receipt of such money in 1990, rather than 1989, apparently gave rise to a claim for compensation to offset an increased tax liability for 1990. Vice-Chair Keller described the issue as follows:

His [i.e. the grievor’s] maximum allowable pension contribution in 1990 was reduced because of the events of the previous year and he therefore will pay a greater amount of income tax. He seeks compensation for the additional taxes paid resulting from his inability to contribute the maximum RRSP amount. (pages 1 and 2)

This cryptic passage appears to be based upon the tacit premise that the maximum RRSP contribution, which may be sheltered from tax in any particular year, is determined by the contributor’s income in the previous year. For this reason, shifting some of the grievor’s income from 1989 to 1990 reduced the maximum contribution he could make for 1990. He was required to pay more tax for that year than would have been owing if his maximum contribution had not been reduced and he had decided to contribute the maximum permitted. Contending this tax loss was too remote to be recoverable, the employer cited two decisions of the Ontario High Court dealing with wrongfully dismissed employees, who had withdrawn funds from their RRSPs to cover living employees, and denying them compensation for losses resulting from such withdrawals. With these decisions in mind and speaking for a unanimous panel, Mr. Keller concluded the tax loss suffered by the grievor “is entirely too remote to be considered part of what has been customarily understood to be a make-whole award” (page 3).

The grievor in Tilden sought compensation for losses allegedly incurred while laid off in contravention of the collective agreement. Vice-Chair Dissanayake described the alleged losses as follows:

In order to find the required family income, the grievor withdrew some funds from his RRSP. In addition, he sold some stocks in his investment portfolio. The union states it will prove that as a result of withdrawing the RRSP funds, there was a permanent reduction in the grievor’s RRSP account and further that he suffered adverse tax consequences. He similarly claims that by selling his stocks at the time he did, the grievor suffered losses. (paragraph 14)

After reviewing a series of decisions dealing with analogous issues, including Sysiuk, Mr. Dissanayake wrote:

I agree with the previous decisions that losses resulting from personal decisions with regard to a RRSP or stocks are too remote and are not recoverable. As this Board held in Sysiuk, the “make whole” principal of remedy does not make such losses recoverable. (paragraph 32)

II

The instant case is distinguishable from the two cited by union counsel where the loss at issue flowed directly from a breach of contract without any intervening action on the part of the aggrieved employee. The grievor in Meeks did nothing after his vacation was improperly cancelled to cause the delay in harvesting his crop. Nor did the grievor in Grinius do anything after being wrongfully fired to increase his tax liability. In both of these cases, compensation was awarded for a loss resulting exclusively from the employer’s breach of contract. In contrast, Mr. Levere’s loss of income was caused by the combination of the employer’s erroneous classification of one job and the grievor’s subsequent conduct in applying for another.

Mr. Levere’s contributing role in bringing about his loss of income makes this case analogous to the two cited by counsel for the employer. In Sysiuk, the grievor’s tax loss arose from the conjunction of the employer’s wrongful withholding of work, which lowered his RRSP contribution limit, and his ongoing desire to make the maximum permissible RRSP contribution. The tax and investment losses in Tilden were caused by management laying off the grievor, in contravention of the agreement, combined with his subsequent RRSP withdrawals and stock transactions.

Following the approach taken in Sysiuk and Tilden, I conclude Mr. Levere is not entitled to compensation because his loss is too remote a consequence of the employer’s breach of contract. The outcome would be no different if the duties of his old job were substantially similar to the duties of his new job, as alleged by the union.

Dated at Toronto this 13th day of March 2003.