Ontario Labour Relations Board
[1983] OLRB Rep. September 1547
0410-83-M The United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry of the United States and Canada on its own behalf and on behalf of Local Union 527, Applicant, v. The Electrical Power Systems Construction Association and Ontario Hydro, Respondent
BEFORE: M. G. Mitchnick, Vice-Chairman, and Board Members F. W. Murray and B. L. Armstrong.
APPEARANCES: Alex Ahee and Jack Porter for the applicant; W J. Hayter, I. A. Starasts and T D. McKee for the respondent.
DECISION OF THE BOARD; September 13, 1983
This is the referral of a grievance to arbitration by the Board pursuant to the provisions of section 124 of the Labour Relations Act. It involves the discharge on March 7, 1983 of Mr. John Forbes, a pipefitter at the Bruce Generating Station construction site, and the issue is whether the respondent, Ontario Hydro, had "just cause" for the discharge.
It is not disputed that Mr. Forbes was in receipt of an overpayment on room and board allowance for the period September 1981 to December 1982. The amount of that overpayment was $4,578.00. The evidence of the respondent's Personnel Manager, Mr. McKee, is that Mr. Forbes was terminated solely for refusing to repay the money that he owed. While counsel for the respondent did not abandon the position that Mr. Forbes was less than innocent in the matter of his overpayment, neither was it a position that he strenuously pressed.
Mr. Forbes had begun his most recent period of employment with Hydro in July of 1981, and at the time was still maintaining his wife and child in the family home in D'Escousse, Nova Scotia. He was accordingly entitled to and received room and board allowance under the pertinent provisions of his collective agreement. The relevant portion of the collective agreement is found in Article 28.2, and reads:
(i) When an employee's regular residence is more than 97 radius kilo-metres from the Project, he shall be paid a subsistence allowance of $26.00 per day for each day worked or reported for.
"Regular residence" is then defined as follows:
An employee's "regular residence" is the place where he maintains a permanent self-contained domestic establishment (a dwelling house, apartment or similar place of residence where a person generally sleeps and eats) in which he resides~ and for which he can show proof of financial commitment.
For the purpose of his employment at Bruce, Mr. Forbes had rented premises in the Town of Ripley, Ontario, which is within the 97-kilometre zone of the Project. The parties have always interpreted the collective agreement to mean that as long as an employee like Mr. Forbes maintains a residence for his family outside the 97-kilometre zone, he is entitled to the room and board allowance. The very provision of a room and board allowance contemplates that the employee himself will take up temporary residence within the 97-kilometre zone for .the purpose of his employment. If his family subsequently joins him at the premises located within the prescribed zone, however, the employee's continued entitlement, according to the practice developed by Hydro, depends on whether the family's cohabitation is "temporary" or is "permanent". There appears to have been no precise definition developed as to what is "temporary", but reference of the company's witnesses appeared to be to a period of one or two months. In any event, Hydro continues the employee's full room and board allowance if, in the opinion of Hydro, the cohabitation of the family at the new premises is only "temporary”. If the family has moved up "permanently" on the other hand, the entitlement to room and board ceases, and the employee becomes entitled only to a "travel allowance" provided for in Article 28.1 of the collective agreement. What causes confusion is that, while Hydro makes this accommodation under the collective agreement with respect to purely "temporary" changes in the residence of an employee's family, the Ministry of National Revenue, for the purposes of taxability of the allowance under the Income Tax Act, does not. In other words, an employee living away from home for the purpose of pursuing his employment at the Hydro job site receives a tax-free room and board allowance under the collective agreement. If his family subsequently joins him for a "temporary" period, he continues to receive the room and board allowance from Hydro, but from that point forward on a taxable basis. If the move of the family is "permanent", however, he loses the room and board allowance altogether (and receives instead a taxable travel allowance under the collective agreement).
In the case of Mr. Forbes, it was decided that his wife and child would join him in Ripley, once he got settled, and remain with him for the duration of his employment (which would, under Hydro's policy, have disentitled Mr. Forbes to further room and board allowance).Mr. Forbes testified that he had heard that an employee loses his tax-free status on room and board once his family comes to live with him, and that an employee is therefore required to notify the Hydro office when such a change in circumstance takes place. Mr. Forbes accordingly attended at the Hydro office at the site, and spoke to the personnel clerk there, Sharon Smith. According to his testimony, he advised Ms. Smith that his family had now moved up with him to Ripley, and that he wanted to change his tax-free status on room and board. He said that Ms. Smith asked him what he had done with his residence in Nova Scotia, and Mr. Forbes advised her that it was now locked up, and that the telephone had been disconnected. Ms. Smith wrote down all of the particulars from Mr. Forbes on the form which Hydro uses to advise payroll with respect to the room and board allowance. As in the form which had been made out when Mr. Forbes applied for the room and board allowance at the commencement of his employment in August, Mr. Forbes gave his permanent residence as "D'Escousse, Nova Scotia". There is a place next to that on the form to indicate the telephone number for that permanent residence, and Ms. Smith placed a stroke through the space provided (in contrast to Mr. Forbes' original application). To indicate the reason for the new form going in, Ms. Smith wrote on the form: "Wife staying up here". Ms. Smith then gave the completed form to Mr. Forbes to read over, after which Mr. Forbes signed it. Ms. Smith then wrote on the top of the form: "For T4 purposes", and took the form in to the Personnel Manager, Mr. McKee, to receive his signature. Mr. McKee took the words "For T4 purposes" at the top as indicating that the only change was with respect to taxability, and assumed that Ms. Smith had made the necessary inquiries to satisfy herself that the stay of Mr. Forbes' wife was "temporary" only. Ms. Smith then brought the completed form back to Mr. Forbes, and gave him one of the copies. Mr. Forbes testified that he then asked Ms. Smith if he could change his OHIP coverage from "single" to "family", and Ms. Smith indicated that that was done at another office. Ms. Smith's testimony is that she would have initiated that change herself. Mr. Forbes does not recall exactly what he did to arrange the change in OHIP coverage, but the company's own records demonstrate that that change was in fact put through in September, to take effect (after the usual three-month delay) in December.
Ms. Smith, for her part, processes a great number of forms similar to the one that she made out for Mr. Forbes, and did not purport to have any recollection of her conversation with Mr. Forbes in particular. It is clear that she was aware of the difference in room and board entitlement, from Hydro' s point of view, between a "temporary" move by a wife and a "permanent one, and testified that Mr. Forbes could not possibly have made it clear that the move in question was a "permanent" one, or she would not have permitted him to fill out a claim for room and board allowance. Rather, she would have explained to him that he was at that point entitled only to the travel allowance under the collective agreement, and would have filled out the appropriate form. Ms. Smith testified that it is not unusual for an employee at the project to have his wife and family come for a visit, particularly during the summer, and to come to the office to advise her of that in order to effect the appropriate income tax change. This, she testified, is what she must have believed was occurring in the present situation. In coming to that conclusion, she says she would have relied on the fact that Mr. Forbes continued to indicate his "permanent" residence as D'Escousse, Nova Scotia, along with the fact that he was still claiming room and board allowance.
In December of 1982, some fifteen months later, Hydro began a series of security investigations in a general attempt to verify the entitlement of those employees claiming room and board allowance. At the same time, Hydro "put the word out" through the stewards that employees wrongfully in receipt of the said allowance would be in a better position with Hydro if they came forward and made disclosure, rather than waiting for Hydro to discover them on its own. Mr. Forbes was one of those employees whom Hydro, through a number of inquiries, was specifically investigating. Word of these inquiries came to the attention of Mr. Forbes, and he asked his steward to make an appointment to see Mr. McKee in Personnel. The actual reason for this request, he testified, was that it occurred to him at that point that he might in fact be in a position to revert to tax-free status on his room and board allowance and wished to clarify that with his employer. The basis for this notion, he testified, was that he was at that stage allowing his brother-in-law in Nova Scotia, who had been recently burned out of his own home, to live rent free in Mr. Forbes' vacant house in D'Escousse, until such time as his brother-in-law could work out other arrangements. Mr. Forbes testified that he felt under those circumstances it might once again be said that he was maintaining a "dependent" away from his residence in Ripley, which he took to be the test for determining tax-free status under the income tax regulations.
When the meeting with Mr. McKee, Mr. Forbes and his steward, Mr. Morrison, took place, Mr. Forbes explained his situation and inquired about the possibility of reverting to tax-free status on his room and board allowance, but Mr. McKee replied that Mr. Forbes was not entitled to be in receipt of room and board allowance at all. Mr. McKee indicated that the matter could possibly result in either criminal or income tax charges, and instructed Mr. Forbes to immediately fill out a new form changing his claim to that of travel allowance. Mr. Forbes did so. Mr. McKee then indicated that he was not aware at that moment what the amount of the overpayment to Mr. Forbes had been, but that Hydro would be in touch. Mr. Forbes inquired as to the possibility of some kind of time payments with respect to overpayment, and Mr. McKee responded that there would be no possibility of that. Following that meeting Mr. Forbes received a letter from Mr. McKee dated December 17, 1982, setting out the amount of Mr. Forbes' indebtedness to the company (being $4,578.00 - the difference between the room and board allowance and the travel allowance over the 15-month period), and giving Mr. Forbes until January 15th to make full restitution.
Through Mr. McKee's letter, the case of Mr. Forbes came to the attention of Mr. Mark, the Project Controller. Mr. Mark had recently been involved in collecting overpayments of room and board allowance from other employees on the site, and felt that the time allotted for repayment by Mr. McKee was too generous. He accordingly tried to reach Mr. Forbes by telephone, but learned that Mr. Forbes at that time was in the hospital for an operation. Mr. Mark was finally able to make contact with Mr. Forbes some time in the first week of January, and he indicated to Mr. Forbes that he was moving the deadline for payment up to January 10th. Mr. Forbes protested that he had done everything "above board" with respect to claiming the allowance, and didn't feel he owed the company anything. He then raised the possibility of arriving at some lesser figure in satisfaction of Hydro's claim, to recognize fault on both sides. Mr. Mark, however, indicated that there would be no negotiation on the figure owing. To show his good faith Mr. Forbes says he then went to his bank in Ripley to make arrangements for a loan in the event that it became necessary to repay the amount which Hydro claimed was owing, and on January the 12th, Mr. Forbes sent the following registered letter to Mr. Mark:
DATED JANUARY 12, 1983
ONTARIO HYDRO, DOUGLAS POINT, ONT.
ATTENTION: MR. G. MARK
This is to inform you of the steps I have taken concerning my Board Allowance claim.
No. I, I have opened a separate in trust account, in the event that I am found partially at fault.
No. 2, I have submitted all documents to a third party Mediator.
Sincerely yours,
"John M. Forbes"
The "third party mediator" to whom Mr. Forbes referred the matter was the Ontario Ombudsman.
Mr. Forbes returned to work from his convalescence on January 24th. A further meeting was held with him on that day, and he was given until January 26th to pay. On January 26th, Mr. Forbes was stopped by his foreman as he attempted to report for work. The foreman asked Mr. Forbes if he had a cheque for Hydro, and Mr. Forbes replied that he did not. The foreman then advised that he was instructed not to let Mr. Forbes report for work in that event, and he then took Mr. Forbes to the Personnel office. Mr. Mark was at the Personnel office, and indicated to Mr. Forbes that if he did not make repayment that day, he would be terminated. Mr. Forbes then produced a copy of a letter from the Ombudsman, requesting Hydro to defer taking any further action to collect the amount they said was owing by Mr. Forbes, until Mr. Forbes' complaint had been investigated. Mr. Mark conferred with head office, and it was agreed to permit Mr. Forbes to report to work without any further restraint. Hydro subsequently wrote to the Ombudsman indicating that Mr. Forbes was covered by a union agreement, and had a grievance procedure available to him, and the Ombudsman wrote to the parties indicating that he was suspending his own investigation pending Mr. Forbes' utilization of the grievance procedure. The union, however, was of the view that no argument could be made, on the basis of the collective agreement and the parties' practice, that Mr. Forbes was entitled to the room and board allowance once his family had moved up to Ripley, and accordingly had advised Mr. Forbes from the outset that any grievance would be premature until Hydro actually took some action to try to enforce repayment. No grievance was, therefore, filed, but on March 1st, Hydro received word from the Ombudsman that its investigation had been suspended. Hydro then lifted its own moratorium on enforcement procedures, and called Mr. Forbes into the Personnel office at the end of his shift on Friday, March 4th. Mr. Forbes was asked whether he was prepared to repay the amount that Hydro felt was owing, and Mr. Forbes indicated that he was not. Mr. Forbes was then advised that Hydro had no alternative but to terminate him. The steward who was present then pointed out that Mr. Forbes was entitled to two hours' notice under the collective agreement, and Mr. Forbes was accordingly permitted to work the following Monday. He was then terminated. In accordance with the company's policy with respect to employees who leave their employment while still owing the company money, Mr. Forbes' file was marked "Not For Rehire". (Hydro also pursues such employees through the civil courts and, where appropriate, the criminal courts.)
The union in this grievance challenges the employer's right to use an individual's employment as a lever to collect outstanding debts. It argues that the employer's recourse is to the courts. Alternatively, the union argues that an employer is not entitled to recover money paid under mistake of law, as it alleges has occurred here. The union initially at the hearing also took the position that the company's interpretation of the collective agreement respecting room and board allowance was wrong, but did not pursue that argument at the end. Had the union been of that view earlier, it is clear that the time to have grieved would have been in December of 1982 when Mr. Forbes was told his circumstances no longer warranted the room and board allowance, and he was cut back from that allowance to the lesser travel allowance. The chief steward, Steve Morrison, acknowledged in his testimony that he told Mr. Forbes that the union could not grieve for him until the company took some action to collect the money owing, because there was no doubt on the facts that the company was correct in concluding that Mr. Forbes was not entitled to the allowance. Mr. Forbes has now returned to employment in his home province, and testified that he has no wish to be reinstated with Hydro. Counsel advised the Board that Mr. Forbes' claim is for the full wages that he missed during his first six weeks of unemployment, together with the difference in earnings between Nova Scotia and Hydro beyond that. Mr. Forbes also wishes to have the "Not For Re-hire" notation removed from his file. Counsel made some further reference to a claim for relocation costs and wasted rent in Ripley, but the theory of these damages was not developed, and in view of the lengthy period that Mr. Forbes did work before being terminated, is not obvious to the Board.
Counsel for Hydro argued that the law is clear that employers are entitled to recover monies which are acknowledged to have been paid in error, and that an employer need not confine itself to the often costly and lengthy method of collecting such overpayments through the Courts. He argues that an employer is entitled to use its prima facie right to discipline in such cases, on the basis that the employee is refusing without colour of right to turn over property which belongs to the company. He argues that this present case should be treated no differently than if the property being wrongfully withheld was, for example, a company car. Counsel for the trade union conceded that there appears generally to have been no change in the law since the days of Heinz Limited, 1967 CanLII 1039 (ON LA), 18 L.A.C. 362, and Canadian Admiral Ltd., 1967 CanLII 1049 (ON LA), 19 L.A.C. 1, and those cases confirm the right of the employer to recover overpayments to employees. The only qualification counsel could point to was an obiter statement of Professor Rayner in Air Canada, 1978 CanLII 3429 (CA LA), 21 L.A.C. (2d) 101, to the effect that these older cases may not apply when the money has been paid out under mistake of law (as opposed to mistake of fact). Counsel for the union further conceded that an employer would have the right to use its powers of discipline to attempt to recover, for example, a company car improperly being withheld by an employee. The difference, he argues, is that with money, the employee likely will have already disposed of it in his everyday living, having been led to believe that the money is his, and that an element of detrimental reliance therefore precludes the employer from saying, in effect, "Pay up or be fired".
The Board agrees with counsel for the union that, where the employee himself has acted innocently, an element of detrimental reliance may separate the case of an overpayment from, for example, the simple case of a company car. On the other hand, the Board on the law submitted also would agree with the submission of counsel for Hydro that an employer is entitled to use its general powers of discipline as a means to attempt to recover property of the company, money included, at least where, as counsel himself qualified it, no steps are being taken on the employee's behalf to determine whether in fact an overpayment has been made.
In the present case, the union felt no basis existed for filing a grievance to challenge the company's interpretation of the room and board provisions of the collective agreement, and that was the appropriate method for doing so had a dispute existed (ref. General Motors v. Brunet, 1976 CanLII 196 (SCC), [1977] 2 S.C.R. 537). The Board finds, therefore, that Hydro was within its management rights to consider the use of discipline as a means to recover the amount of money it had overpaid Mr. Forbes on room and board allowance. All discipline is subject, however, to the test of "just cause" under the collective agreement, so that the question of basic fairness never ceases to be an element. What is "fair" will depend, as always, on the circumstances of each case, but an innocent employee is in general terms entitled to a reasonable period of time to discharge his liability to the company, following the discovery of the error. The principle of a "reasonable opportunity" would appear to at least take into account the size and length of the overpayment, and the extent to which the employee may, however innocently, have been responsible for the error.
The Board in the present case finds no responsibility whatever on the part of Mr. Forbes for the error which produced this overpayment. It was not unreasonable for Mr. Forbes to believe that room and board allowance continued, given the less than simple definition of "residence", the difference in tests between the collective-agreement treatment and the income-tax treatment, the retention of Mr. Forbes' home in Nova Scotia, and Hydro's own practice of maintaining the allowance when an employee's family moves in with him on a "temporary" basis. And, of equal importance, Mr. Forbes is one employee who did exactly what Hydro requires in the event of a change in circumstance. He attended, on his own initiative, at the Personnel office and advised Ms. Smith that his wife and son had now moved in with him in Ripley. It is true that Mr. Forbes indicated his house in Nova Scotia as still being his permanent address. But it is also clearly true on the evidence that Mr. Forbes had only planned to be away from that address for as long as the job at Hydro lasted, and that it was D'Escousse, Nova Scotia, that he continued to call "home". The Board therefore finds that Mr. Forbes' reference to D'Escousse as his "permanent" address was not clearly inaccurate, and was done in complete good faith. He did disclose the fact that the house was presently locked up, and, as the entry on the Form confirms, that his telephone had been disconnected. Had Mr. Forbes been trying to deliberately leave the company with the impression that his family was up on a short-term visit only, he surely would not have asked at the same time that his OHIP coverage be changed to "family". The company's own records show that the change notice issued at Mr. Forbes' request in September did not take effect until three months hence (December). This confirms to the Board that the same 3-month delay in OHIP coverage applies to Hydro as to the rest of the province's residents, and Hydro's Personnel office presumably would be aware of that.
We find that the Personnel office in fact, through Mr. Forbes, had ample indication of Mr. Forbes' full change in circumstance. If Mr. Forbes, a rank-and-file employee, was under a mistaken impression as to what entitlement flowed from his new facts, Hydro had every opportunity, through Ms. Smith, to make whatever additional inquiries it felt were necessary, based on its own definition of "temporary", and to set the matter straight. We find that Mr. Forbes neither withheld information from the company, nor misstated the facts of his current situation, other than his own mistaken conclusion that he continued to be entitled to room and board allowance, but on a taxable basis. Ms. Smith, on the other hand, clearly knew the distinction between "temporary" and "permanent" in the company's own view, and had every opportunity to make the inquiries necessary to ascertain the facts precisely. Her failure to do so resulted in a pure mistake of fact and not, as counsel for the union contends, a mistake of law.
In summary, then, the respondent was entitled to claim its money back, and to ultimately enforce that claim, if it chose to do so, through its regular powers of discipline and discharge. But it had to give Mr. Forbes a reasonable opportunity to make up the loss. Having regard to the relative extent of the claim (being sizeable), the lengthy period of time over which Hydro had caused the liability to build up (from September 1981 to December 1982), and the total lack of blame which the Board has found can be attributed to Mr. Forbes for the error, we find that Hydro did not act reasonably in the opportunity it gave to Mr. Forbes to make redress. Even granted that Hydro did, as it points out, relax the deadline from time to time, so long as Mr. Forbes appeared to be making efforts to cooperate, and that the intervention of the Ombudsman resulted in a further voluntary postponement of the deadline, the Board finds it unreasonable for Hydro, on March 7, 1983, to have demanded immediate payment of the full 4,578 dollars owing. In the circumstances, Hydro was not entitled to treat Mr. Forbes as just another case of abuse, nor to allow its understandable concern over the mobility of its construction work force to take precedence. It may be that Hydro ought to have given more serious consideration to Mr. Forbes' early inquiries about some form of repayment plan by installments, and that a mutually satisfactory time-payment plan could have been arrived at which did not run afoul of the Employment Standards Act (see Employment Standards Act, 1974, R.S.O. 1980, c.137. s.8, and s. 14 of the General Regulations thereunder).
In any event, for the reasons given, the Board finds that Hydro did not have just cause to terminate Mr. Forbes when it did on March 7, 1983. The grievance is therefore allowed. Mr. Forbes does not seek reinstatement, but is entitled to have the "Not For Re-hire" designation removed from his file as soon as he has completed repayment of his debt to Hydro. Mr. Forbes is also entitled to the damages he claims for any loss in earnings from March 7, 1983, to the date of this decision, as a result of his wrongful termination. The calculation of damages payable, however, should properly take into account the debt owing from Mr. Forbes to the employer, which resulted in the present termination.
The Board shall remain seized should a dispute arise on the calculation of damages.