[1983] OLRB Rep. September 1536
1934-82-U Canadian Union of Public Employees, C.L.C., Ontario Hydro Employees' Union, Local 1000, Complainant, v. Ontario Hydro, Respondent.
BEFORE: R. O. MacDowell, Vice-Chairman, and Board Members J. A. Ronson and W. F.
Rutherford.
APPEARANCES: C. M. Mitchell for the complainant; Janice Baker and J. Knight for the respondent.
DECISION OF THE R. O. MacDOWELL, VICE-CHAIRMAN AND BOARD MEMBER W. F. RUTHERFORD; September 13, 1983
This is a complaint under section 89 of the Labour Relations Act alleging that there has been a breach of sections 64, 66, 70 and 79 of the Act. The complaint arises from the discharge of Diane Hachey ("the grievor") on or about December 22, 1982. Because the basis for this proceeding is a little unusual, it may be useful to deal with this matter at the outset.
The grievor is one of a number of clerical employees working in the construction field forces of Hydro's Generation Projects Division and in the Lines and Stations Construction Department of the Transmission Systems Division. For some years these employees were represented by the Office and Professional Employees' International Union ("OPEIU"). The most recent collective agreement between Ontario Hydro and the OPEIU ran from April 1, 1980 to March 31, 1982. However, on March 11, 1982, an application was brought to terminate the OPEIU's bargaining rights and on June 21, 1982, there was a decision of the Board to that effect. Almost immediately, on June 24, 1982, the Canadian Union of Public Employees, Local 1000 (which represents most of Ontario Hydro's operations employees) applied for certification as bargaining agent for the employees formerly represented by the OPEIU. An interim certificate was issued by the Board on July 29, 1982, and notice to bargain was given on that date. The effect of this sequence of events was to trigger the "statutory freeze" provisions of the Act which read as follows:
79.-(l) Where notice has been given under section 14 or section 53 and no collective agreement is in operation, no employer shall, except with the consent of the trade union, alter the rates of wages or any other term or condition of employment or any right, privilege or duty, of the employer, the trade union or the employees, and no trade union shall, except with the consent of the employer, alter any term or condition of employment or any right, privilege or duty of the employer, the trade union or the employees,
(a) until the Minister has appointed a conciliation officer or a mediator
under this Act, and,
(i) seven days have elapsed after the Minister has released to the parties the report of a conciliation board or mediator, or
(ii) fourteen days have elapsed after the Minister has released to the parties a notice that he does not consider it advisable to appoint a conciliation board, as the case may be; or
(b) until the right of the trade union to represent the employees has been terminated,
whichever occurs first.
(2) Where a trade union has applied for certification and notice thereof from the Board has been received by the employer, the employer shall not, except with the consent of the trade union, alter the rates of wages or any other term or condition of employment or any right, privilege or duty of the employer or the employees until,
(a) the trade union has given notice under section 14, in which case subsection (1) applies; or
(b) the application for certification by the trade union is dismissed or terminated by the Board or withdrawn by the trade union.
(3) Where notice has been given under section 53 and no collective agreement is in operation, any different between the parties as to whether or not subsection (1) of this section was complied with may be referred to arbitration by either of the parties as if the collective agreement was still in operation and section 44 applies with necessary modifications thereto.
- The effect of section 79 is to preserve the framework of the employer-employee relationship, in its entirety, until the freeze is ended in accordance with the terms of the statute. That framework can be determined by reference to the terms and conditions of employment and employee rights set out in the expired collective agreement, together with such other rights~ privileges, or duties extrinsic to the agreement which can be reasonably demonstrated to be an accepted part of the employer-employee relationship. For example, in Scarborough Centenary Hospital, [1978] OLRB Rep. July 679, the Board was satisfied that free parking was an employee privilege which could not be withdrawn during the currency of the statutory freeze even though free parking was not a term of the expired collective agreement. In the instant case, the terms of the relationship between Ontario Hydro and the grievor — still frozen at the time of her discharge — can be gleaned from the following provisions of the collective agreement and from excerpts from the employer's written policies respecting the employees' working conditions:
Article 6
GRIEVANCE PROCEDURE
6.8 Any allegation that an employee with less than six (6) months' service has been demoted, suspended, discharged or otherwise disciplined without just cause shall be a fit matter for the grievance procedure only.
A GUIDE TO
WORKING CONDITIONS
The following has been compiled from the Management Guide, Field Instructions — Design and Construction, and other appropriate documents to service as a basis for administration of working conditions which apply to Continuing Construction Office Employees of the Construction Field Forces represented by the OPEIU. These working conditions will apply to all such employees, except as identified where a qualifying period of 6 months' employment is required.
SAFETY SHOES AND EYE PROTECTION
I SAFETY SHOES
On types of work where foot injuries are likely to occur, the wearing of safety shoes (with steel toe inserts) is to be encouraged. Employees who purchase such safety shoes or boots will be reimbursed 50% or one-half of the cost up to a maximum reimbursement of $40.00 (effective April 1, 1981 — $50.00) per pair.
A limit of two pairs of safety shoes or boots per person will be subsidized in a twelve-month period. It will be necessary for the appropriate Managers or supervisors to arrange payment procedures and to control authorization of the subsidy.
The subsidy should be made available only to employees who are exposed to foot injuries during the course of their work and for footwear appropriate for the job concerned. Employees upon surrender of a receipt for the purchase of a pair of safety shoes from a regular supplier of such shoes will be reimbursed in accordance with the aforementioned procedure.
CORRECTIVE DISCIPLINE
It is expected that all employees recognize the value of the necessity for self-discipline, but, in its absence, those held responsible for employee behaviour must undertake corrective disciplinary measures.
Employees who violate rules or recognized conditions of employment (regular attendance, reporting on time, obeying instructions, observance of safety rules, proper use of equipment and materials, etc.) must expect disciplinary penalties.
Although employees will normally respond to verbal or written warnings, the degree of violation will dictate the action which a supervisor should take to achieve the purpose of corrective discipline. Supervisory staff, in deciding what action to take, and to ensure reasonably consistent and uniform practice should apply one of the disciplinary penalties in the undemoted list for each infraction, taking all matters into consideration, including any previous disciplinary action, if relevant:
Verbal warning from the immediate supervisor.
Written warning from the immediate supervisor.
Written warning from the supervisor next above with a copy to Union Steward or Chief Steward.
Suspension with loss of pay up to a maximum of three days. Suspension to be confirmed in writing with a copy to Union Steward or Chief Steward.
Termination of employment.
In each instance of written warning, notice of suspension or termination, two copies must be forwarded to Head Office, attention the appropriate Senior Personnel Officer.
Where possible, suspension with loss of pay should be applied to midweek days.
Ontario Hydro does not dispute that, save perhaps in the case of employees with less than six months' service, a regular employee cannot be discharged without just cause. The union argues that implicit in the requirement of just cause and confirmed by both the arbitral jurisprudence and the employer's policy statement is the notion of "progressive" or "corrective" discipline. [See generally Brown & Beatty Canadian Labour Arbitration 1977 Canada Law Book Toronto at p.381 and section 44(9) of the Act].
In accordance with the employer's established policy set out above, employees who are exposed to foot injuries during the course of their work are entitled to a subsidy on two pairs of safety boots in any twelve-month period. The grievor was discharged when she applied for the subsidy for two pairs of boots which she purchased for her husband and her son. The circumstances preceding that termination are not substantially in dispute.
The grievor is a clerk in the costing department and in the course of her work is occasionally required to wear safety boots. Such boots are supplied by an outside company whose truck visits the site from time to time. In November, 1982, the grievor decided that she needed new boots and went to the truck for the purpose of buying them. The grievor did not see any that she liked, but knowing that she was entitled to two pairs of subsidized boots per year, she purchased one pair each for her husband and her son. An invoice in the sum of $124.01 was then sent to the payroll department, which would arrange for payment of one half of the amount by Ontario Hydro and the deduction of the other half from the grievor's paycheque. Because the amount was higher than usual, the grievor went to the payroll department to arrange for the deduction to be made over two pay periods. The invoice bears the complainant's name, clock number and signature, and clearly indicates that she purchased two pairs of boots. No effort was made to conceal it. On the contrary, the grievor had to make special arrangements for payment with the payroll department. Her immediate supervisor (a "lead hand" in the bargaining unit) was also aware of the purchase.
Mrs. Hachey testified that at the time she purchased the two pairs of boots and "put in" for the subsidy, she did not know that she was doing anything wrong. We cannot fully accept that contention. It must have been obvious to her, had she turned her mind to it, that the purpose of the subsidy was to partially defray the expense of safety equipment which employees might require by reason of the nature of their work. It is not a gratuitous benefit conferred upon the employee's family or friends. On the other hand, we are also satisfied that Mrs. Hachey simply did not give the matter much thought or appreciate that her conduct might be regarded as a serious breach of her employment obligations. She certainly did not anticipate her employer's response, nor is her conduct consistent with that of an individual knowingly and willfully engaged in a scheme to defraud her employer. On the contrary, it appears that she had some vague notion of a presumptive right to two pairs of subsidized boots per year and decided to take advantage of that subsidy for her relatives when she could not do so directly for herself. There was nothing calculated or conspiratorial about her conduct, however thoughtless, ill-advised, or foolish it may have been.
The grievor's conduct came to the attention of management as part of a routine check of the invoices submitted for payment. Apparently, what caught the employer's eye was the fact that the grievor had purchased two pairs of boots at once. Garry Sullivan, one of Hydro's cost accountants, explained that there is no clerical or accounting check on the payment of the subsidy other than to ensure that employees do not claim more than two payments per year. Sullivan testified that if employees put in for payment in respect of a third pair of boots, they are required to pay for the boots themselves. Likewise, if a claim is made by an individual who is not entitled to the subsidy at all (i.e., because his job does not require safety boots) the claim is rejected. In neither case is the claim treated as fraud or attempted fraud. Further, so long as the employees never claim a subsidy on more than two pairs of boots per year, there is no check to ensure that the boots purchased are solely for the employee's personal use. In the circumstances, it is not surprising that employees, like the grievor, might look upon the payment of a subsidy on two pairs of boots per year as a kind of presumptive right.
When the grievor's purchase came to his attention, Sullivan called the grievor to his office to discuss the matter. The grievor told Sullivan that she needed boots in her work but she readily admitted that, in this case, she had purchased boots for her son and her husband. When asked if she realized that it was wrong and that this was not the intent of the subsidy, the grievor acknowledged that she did.
Subsequently, Sullivan discussed the matter with George Battye, the project acountant at Pickering. Sullivan, Battye and Jim Ella, a personnel officer for Hydro's contruction employees, met the grievor the following day. They were of the view that the grievor's conduct was equivalent to theft or fraud and warranted summary discharge.
The meeting was brief but tense. Throughout the meeting the grievor was white-faced and shaken. She again admitted the circumstances in which the boots were purchased, admitted that she now knew that it was wrong, and offered to pay for them. She was distraught and told the employer representative that she had never been involved in anything like this before. In her eight years of service with the employer, she had never done anything which would warrant discipline, let alone discharge. Battye advised her, however, that he considered her conduct the equivalent of theft or fraud and that, as a result, she had only two choices: she could sign a letter of resignation which had been prepared prior to the meeting and was immediately presented to her for signature, or she would be discharged immediately "for cause" in accordance with the terms of the (expired) collective agreement. Battye told her that if she took the latter alternative and refused to sign the letter of resignation, her case would be referred to the employer's legal department which would consider pressing criminal charges against her. The grievor was frightened. She signed the letter of resignation which the employer representatives had presented to her. She then went back to her desk, packed, and left the premises.
Later that day the grievor discussed her situation with her trade union representative who undertook to see what he could do. The following morning she delivered a letter to Jim Ella framed as follows:
I wish to retract my resignation of December 22, 1982, since I was coerced to sign it and was not made aware of my rights as an employee.
On December 24, 1982, Ella made the following reply:
We are in receipt of your letter of December 23, 1982 in which you indicated your wish to retract your resignation of December 22, 1982.
We regret that we are not prepared to accept your retraction and consider your employment with Ontario Hydro terminated effective noon December 22, 1982.
- At the hearing before this Board, counsel for the employer indicated that it was not intending to rely on the resignation; rather, it was content to argue the case on the basis that it was a "discharge" and that the employer had "just cause". This was the allegation contained in the grievor's section 89 complaint dated January 14, 1983. At paragraph four of that complaint it is alleged that:
On or about December 22, 1982 the grievor was dealt with by Jim Ella, Assistant Personnel Officer, Gary Sullivan, Supervisor, and George Battey [sic], Project Accountant, of the respondent contrary to the provisions of sections 64, 66, 70, and 79 of the Labour Relations Act in that they did on their own behalf or on behalf of the respondent discharge the grievor without just cause and, more particularly, contrary to the corrective discipline procedures pre-established by the respondent employer.
At the hearing the complaint was narrowed to an alleged breach of section 79 of the Act. The Board also heard the evidence of Eefje MacLean and Teresa McGhee, two employees in the same clerical bargaining unit as the grievor who work at the Bruce Generating Station Project. Ms. MacLean has worked for the company for twelve years. Like the grievor, she is entitled to the safety boot subsidy. In December, 1979, she and a number of other employees approached the safety supply truck to buy safety shoes. Ms. MacLean said that she understood she was entitled to two pair of boots per year and, having not exhausted this limit, purchased a pair of safety boots for her son and put in for the subsidy. So did Teresa McGhee. She has also worked for Hydro for several years.
Both employees testified that their actions were common-place and that the December, 1979 incident involved several other employees. As in the grievor's case, the employer discovered what had happened and told the employees that it was an abuse of the subsidy system to claim payment for boots purchased for someone else. Unlike the grievor's case, however, no one was disciplined or discharged. There was no formal disciplinary action at all. The employees were given the option of returning the boots or paying the full price. Ms. MacLean kept the boots she had purchased and Ms. McGhee returned hers. Mr. Battye testified that at the time he decided to discharge the grievor he had no knowledge of how problems like the grievor's had been dealt with in the past, nor did he give any consideration to the grievor's eight years' service, or the fact that she had never been disciplined before. In Battye's mind, her conduct was equivalent to theft, and on a construction site theft warrants immediate discharge. He did not consider the application of the employer's corrective discipline policy.
The Board also had before it the following memo produced by the union, and put before the Board on the consent of counsel. It is directed to read as follows:
On November 25, 1982 you submitted an expense report to me asking for $50.00 towards a pair of safety boots as per Collective Agreement part A Item 44.0(5)iii.
On December 1, 1982 you were asked to explain the details concerning the expense. You indicated that you had indeed purchased safety (hiking) boots as described. You said you had asked the vendor to order these for you and they did so. However, a routine Management follow-up indicates the vendor does not stock nor have [sic] access to items such as "steel toed hiking boots", particularly at a cost of $175.00. Also the Store Clerk has informed us of your request to alter the receipt for your actual purchase. You later admitted that you indeed purchased hockey skates.
Using this receipt to claim a safety shoe subsidy is a direct attempt to obtain funds under false pretences. Ontario Hydro does not contribute towards the purchase of items other than safety shoes or boots. Worse than that, you deliberately made a false statement on your expense report.
Severe disciplinary action is warranted. However, this is your first offense, and your conduct at work is good except for this one incident. Therefore, the only action at this time will be a disciplinary suspension of 4 days without pay. These days will be December 7, 8, 9 and 10, 1982.
You are being given this disciplinary action in the hope that you will correct your behavior and you will improve. Defrauding or attempting to defraud your employer is a very serious offence. Any future departure from Ontario Hydro procedures or poor work performance will subject yourself to further disciplinary action up to and including termination.
J. Kaminski
Shift Operating Supervisor
Bruce N.G.S.A.
This letter was introduced on the second day of hearing (some weeks after the first) and confirms the recollection of Bill Little, a steward at the Pickering site, who testified on the first day he told the Board that he had heard of the case described in the memo and the four-day suspension. Both Little's testimony and the document are hearsay, of course, but we note that the memorandum appears on Ontario Hydro ' s printed letterhead and no effort was made by the employer to deny the validity of the document or its contents. It would appear, therefore, that in the case of the clerks, a situation virtually identical to that of the grievor resulted in no discipline at all, and in the case of another individual whose purported offense was more serious than that of the grievor, only a short suspension was issued. The respondent advanced no evidence to explain why some clerical employees caught "cheating" on the safety boot subsidy were not disciplined at all, while the grievor, guilty of the same offence, was fired.
The union argues firstly, as it did at the opening of the hearing, that the matter was initially treated by the employer as a resignation, and that Hydro cannot now reformulate its theory of the case and argue that it is a discharge for which there is just cause. The union argues that since the resignation was involuntary, it is of no force and affect and that, therefore, the grievor was not properly terminated. We did not accept this submission when it was first raised in a preliminary way, and we do not do so now.
We acknowledge that the integrity of an employer's actions may be thrown into question when it seeks to change the grounds on which it initially dealt with an employee. If an employer raises new reasons for terminating an employee in order to have its initial actions upheld, an arbitrator may well wonder whether the company would have acted in the way that it did, if it had directed its attention to these matters at the time the action was first taken. Moreover, a party ought to know the case that it has to meet prior to the hearing, and should not be prejudiced by surprise developments of which it had no previous notice. A party might not have committed the time, effort and money to pursue a legal proceeding if it had known the facts and arguments relied upon by the other side. However, in the circumstances of this case, it is our view that it would be entirely too technical to construe the grievor's situation as a simple resignation or voluntary quit — which it obviously was not. Nor was the union in any way surprised or prejudiced by the alternative way in which the employer characterized its case and chose to proceed before this Board. We note, as counsel for the employer pointed out, that from the very start of this proceeding the union itself characterized the treatment of the grievor as an "unjust discharge", and we are content to regard it in that way. We note further that it was the protection from unjust discharge and the obligation to apply progressive discipline which were part of the "frozen" terms and conditions of employment preserved by section 79 of the Act and that it is an alleged breach of those conditions which is before us for consideration.
For many years arbitrators have been dealing with cases in which various kinds of employee misconduct were said to provide "just cause" for discharge. Thus, although this Board is not sitting as a board of arbitration, we have found the arbitral approach to employee dishonesty to be a useful starting point. In that context one must recognize the substantial weight of arbitral opinion to the effect that acts of dishonesty or untrustworthiness ordinarily justify termination. Many arbitrators submit, and we agree, that trust and respect between employer and employee are the corner stones necessary to support a viable and healthy employment relationship. In the case of theft or the falsification of production records, many arbitrators have been reluctant to reverse a discharge penalty even though the monetary sums involved may be rather small. Such misconduct strikes at the very heart of the relationship. Indeed, it has been held that previous warnings or progressive discipline may be unnecessary and that discharge is appropriate even in the case of senior employees with many years of service. This arbitral concern has been succinctly stated by the board of arbitration in Re Phillips Cables Ltd. and International Union of Electrical, Radio and Machine Workers, Local 510 (1974), 1973 CanLII 2161 (MB QB), 6 L.A.C. (2nd) 35 at page 36:
In a very general sense honesty is a touch stone to viable employer-employee relationships. If employees must be constantly watched to ensure that they honesty report their comings and goings, or to ensure that valuable tools, material, and equipment are not stolen, the industrial enterprise will soon be operated on the model of a penal institution. In other words, employee good faith and honesty is one important ingredient to both industrial democracy and the fostering of a more co-operative labour relations climate.
The Board feels that these are the sentiments underlying the arbitral castigation of dishonest conduct. Arbitrators are not equating the role of a plant to that of a church. Rather, they are ensuring that the role of the plant will not evolve into a role resembling that of a penal institution...
- Phillips Cables involved the falsification of production records and employee abuse of an incentive wage payment system but, in some respects, some of the remarks of the board of arbitration are equally applicable to the claim for benefits to which one is not entitled. At page 37 the Board commented:
An incentive system depends upon the honesty and good faith of the employees who must operate it. When a few employees start to cheat, other employees will feel aggrieved. But, rather than report their fellow workers to management, they may themselves prefer to cheat. Gradually, deviant behaviour becomes the norm and, as illustrated by Cox's testimony, [presumably, that "everyone was doing it"] this norm can even evolve into a sense of right.
There is some indication that that is what has happened in this case. All of the union witnesses suggested that it was common practice for employees to "use up" their boot allowance, whether or not they personally needed new safety boots. The subsidy claim on two boots per year came to be regarded as a right, even when the boots were purchased by someone else, and, upon reflection, any reasonable employer would have recognized that this was not the intent of the subsidy. The absence of controls made this abuse relatively easy, and suggests that the employer was not unduly concerned about the possibility; however, by the same token, an employer should be entitled to assume that its employees are honest until they demonstrate otherwise, and should not have to develop elaborate procedures to catch those who cheat.
If the employer in this case had a clearly established and consistent practice of dealing harshly with persons who claim benefits to which they may not be entitled, there would be a strong argument for concluding that a discharge was within the realm of reasonable employer responses and that, accordingly, the grievor's discharge was not "unjust". But that is simply not the case. Although the evidence is not as complete as it might be, it stands un-contradicted, and demonstrates that conduct similar to that of the grievor' s was not punished at all, and what appears to be a more serious situation resulted in a short suspension. Moreover, Jim Ella testified that there were examples of employees improperly claiming "board allowance", and as in the case of the boot subsidy claim by Teresa McGhee and Eefye MacLean, the employees involved were simply required to pay the money back. Employees putting in a claim for a benefit to which they were not entitled were not disciplined and certainly were not discharged. Against that background, the grievor's discharge appears inconsistent, disproportionate, and patently unfair. While arbitrators have given an employer a fairly wide latitude in responding to employee dishonesty, they have also generally been sensitive to the basic principle that similar cases must be treated in a like fashion. This merely reflects a universal precept of fairness and justice, for whatever interpretive difficulties surround the application of the concept of just cause to particularly cases, it is manifestly unjust for one employee to be fired while another is only admonished for essentially the same conduct. And in assessing the reasonableness of the sanction actually imposed, arbitrators have regarded the penalties imposed by the employer in similar circumstances in the past as tending to reveal the actual concern that management has for such behaviour. Here, apart from the grievor's case, there does not seem to have been substantial concern in like cases in the past.
These general considerations are reinforced by certain of the other circumstances established by the evidence. The grievor has eight years of satisfactory service and no previous disciplinary record at all. The incident in November, 1982 is an isolated event in an otherwise unblemished career. The grievor did not try to conceal her actions, immediately admitted that she knew she had acted improperly, and offered to make restitution — an offer which, we repeat, was all that was required of McGhee and MacLean in a similar situation. The circumstances here simply do not demonstrate that the grievor has shown herself to be so untrustworthy that the employer can never again rely on her or that, in all the circumstances, this solitary transgression provides "just cause" for discharge. In our view, the employer should have considered and applied its own established policy of progressive discipline set out above. We do not think that the case of a long-term clerical employee such as the grievor can be compared to that of a construction worker who steals tools or material from a construction site. While we do not doubt that Mr. Battye and his colleagues were acting in good faith and were not intentionally discriminating against the grievor, nevertheless, the result of their deliberations is clearly unfair. We find, therefore, that the grievor has been unjustly discharged, that the employer has not applied its policy of progressive discipline as it should have done, and that, consequently, there has been a breach of section 79 of the Labour Relations Act.
Section 89(4) of the Labour Relations Act gives the Board a broad authority to rectify the effects of a breach of the Act. In this case, it is our view that the appropriate remedy requires not only that the Board declare that the grievor has been unjustly discharged, but also a direction that she be reinstated in employment and compensated for the wages and benefits lost by reason of that unjust discharge. However, in our view, the amount of compensation cannot and should not completely indemnify her for her losses. In the first place, while a discharge was manifestly unjust in the grievor's case, a three-day suspension in accordance with the established policy concerning corrective discipline would not have been an inappropriate response. The grievor' s compensation entitlement should not include an amount in respect of this period of time. In addition, on February 7, 1983, this proceeding was adjourned sine die on the agreement of the parties and the express understanding that the respondent employer would not be responsible for any additional liability that might arise as a result of the postponement of the hearing. Accordingly, the complainant should receive no compensation for the period between February 7, 1983, when the matter was adjourned, and April 11, 1983, when it came on for a hearing once again. With these qualifications then, the Board directs that:
a) the grievor be reinstated forthwith to her former position; and
b) the grievor be fully compensated for all wages and benefits lost by reason of her unjust discharge other than those mentioned above. Such compensation shall bear interest calculated in the manner set out in practice note 19.
- The decision of Board Member J. A. Ronson will follow.

