United Steelworkers of America v. Pembroke Civic Hospital, 1995 CanLII 10035

[1995] OLRB Rep. December 1467

0777-95-U United Steelworkers of America, Applicant v. Pembroke Civic Hospi­tal, Responding Party

BEFORE: Kevin Whitaker, Vice-Chair, and Board Members J. A. Ronson and Pauline R. Seville.

APPEARANCES: D. Doorey for the applicant; C. Piette for the responding party.

DECISION OF THE BOARD; December 19, 1995

1. This is an application under section 96 of the Labour Relations Act (the "Act"), alleging that the respondent has breached the provisions of section 86(1) (formerly 81(1)). The applicant alleges that, following the receipt of notice to bargain, the respondent changed the terms and con­ditions of employment contrary to the statutory provisions.

2. At the hearing, the parties agreed to proceed on the basis of an agreed statement of fact. On a review of the facts and submissions made at the hearing, this application is allowed. What follows is our reasons.

The Facts

3. The applicant was certified as bargaining agent for employees of the respondent on October 24, 1994. On November 14, 1994, the applicant provided the respondent with written notice to bargain.

4. Erik Hawthorne was at all relevant times employed by the respondent and a member of the applicant's bargaining unit. After having been given a series of notices of layoff that were res­cinded prior to their effective dates, Mr. Hawthorne was laid off on February 28, 1995. The appli­cant does not challenge the lay off.

5. Prior to the layoff, on February 7, 1995, Mr. Hawthorne stopped working due to an injury. He applied for and was granted short term sickness benefits for a five week period begin­ning on February 7, 1995 and ending on his last day of employment. He had also been in receipt of the same benefits for an earlier period of sickness from January 13 to 28, 1995. Between January 28 and February 7, 1995, he had returned to work. Mr. Hawthorne had applied for and been denied benefits under the Workers' Compensation Act for the periods of absence referred to in this paragraph. The denial of benefits was on the basis that he had not suffered a work related injury.

6. The short term sickness benefits paid to Mr. Hawthorne by the respondent were made pursuant to the Hospitals of Ontario Disability Income Plan (HOODIP). This plan is self funded and operated by hospitals in Ontario. It provides for short term benefits to be paid directly by an employer, and for long term benefits to be paid out of a pool funded jointly by all of the employer hospitals participating in the plan.

7. Other than the facts in Mr. Hawthorne's case, we have no evidence before us as to how the respondent has interpreted and administered the HOODIP plan in the past. What was agreed to however by the respondent was that a pamphlet prepared by the Ontario Hospital Association (OHA) and provided to employees, was the employer's representation to employees as to their entitlement to benefits under HOODIP.

8. Following Mr. Hawthorne's last day of employment on February 28, 1995, the respon­dent discontinued the short term benefits that had been payable to him under HOODIP. The respondent claims that this action was consistent with the terms of the policy as described in the pamphlet provided to employees. The respondent also asserts that whether or not that action was consistent with the policy, it was a reasonable interpretation of the policy made in good faith. The applicant does not question the good faith of the respondent in terminating benefits. It argues how­ever, that the respondent's actions in this regard are contrary to the HOODIP policy and because of that, amount to a breach of section 86(1) of the Act.

Analysis

9. It is undisputed that the provisions of section 86(1) were in effect at all relevant times. The parties also agreed that the "reasonable expectations" approach to determining whether there has been a breach of the "freeze" provisions of the Act is appropriate. The applicant relied on the Board's decision in Trim Trends Canada Limited [1987] OLRB Rep. April 623 for a formulation of the question to be posed in determining whether there has been a breach of what is now section 86(1). The respondent agreed that this characterization was correct. At paragraph 16 in Trim Trends, the Board poses the following question:

What would the reasonable expectations of the employees in the bargaining unit have been at the time the freeze took effect...

10. The applicant's argument was that the discontinuation of short term benefits to Mr. Hawthorne was inconsistent with the HOODIP policy described in the brochure. The applicant asserts that an employee is entitled under the plan to the continuation of benefits where the employment relationship ends if the benefits vested prior to the termination of employment. Given the agreement by the respondent that the pamphlet represented to employees what they could expect, the discontinuation of benefits was contrary to the reasonable expectations of the employ­ees and therefore a breach of section 86(1).

11. The respondent argued that the discontinuation of benefits was consistent with the pol­icy as described in the pamphlet. Its interpretation is that when the employment relationship ceases, all entitlement under the plan expires. Alternatively, if it was not, the respondent argued that the decision was a reasonable interpretation of the policy as described in the pamphlet and was made in good faith. In those circumstances it was argued, it could not amount to a breach of section 86(1).

12. The first issue to determine is the dispute of fact as to whether the policy as described in the pamphlet contemplates the termination of benefits on the cessation of employment. The respondent asserts that the provision in the pamphlet entitled "Termination of Coverage" states that "coverage under this Plan will terminate when you (1) cease employment". It is upon this ref­erence that the respondent relies to prove that benefits cease with employment. The applicant dis­tinguishes between the "Duration of Benefits" and "Termination of Coverage" provisions in the

pamphlet. On the applicant's analysis, the term "coverage" applies to determine when a person is eligible to receive benefits, while the term "benefits" applies to the monies received under the plan.

13. It is agreed that both the "Duration of Benefits" and the "Termination of Coverage" provisions apply equally to short term benefits and long term benefits.

14. The applicant argued that where rights vest under a contract or collective agreement, they survive the life of the term of the contract unless there is specific language to the contrary. It relied on the decisions of the Supreme Court of Canada in Dayco (Canada) Ltd. v. C.A.W.-Canada (1993) 1993 CanLII 144 (SCC), 102 D.L.R. (4th) 609 dealing with this issue in the context of a collective agreement and in Vorvis v. Insurance Corporation of British Columbia (1989)1989 CanLII 93 (SCC), 58 D.L.R. (4th) 193 where the context was a private contract of employment. Again, the respondent didn't suggest that these principles were not correct. It argued that the specific language of the pamphlet governed and that it clearly extinguished entitlement for ongoing benefits upon the expiry of the employ­ment relationship.

15. The factual issue put squarely before us was whether the language of the pamphlet described sick benefits as being terminated on the severance of the employment relationship. Our answer to that question is that it does not.

16. The pamphlet which describes the benefits is brief, spanning only two pages. Like most benefit plans, there is a description of who is entitled to make a claim, what the benefit amounts are and under what circumstances will they be paid and/or discontinued. In our view, the section entitled "Duration of Benefits", describes those circumstances under which the receipt of benefits will be discontinued. For short term benefits, they will be payable for up to a period of 15 weeks. For long term benefits, there a a number of types of events which will terminate the receipt of ben­efits, including when you cease to become disabled or turn 65 years of age. The section entitled "Termination of Coverage" applies in our view to how and where a person would have the cover­age of the plan, thereby entitling them to claim benefits. It makes sense that someone who was not employed by the respondent would not be entitled to claim benefits. Not surprisingly, the coverage for this reason terminates with the employment relationship.

17. The respondent argued however that even if benefits have vested, the provisions under the heading "Termination of Coverage" mean that benefits stop being payable when the employ­ment relationship ends. If this were the case, an employer under this plan would always be able to avoid the payment of benefits by terminating an employee who might otherwise qualify. Given the nature of long term disability coverage, it would mean that virtually every long term claim could be avoided by terminating an employee who would otherwise not be employable. On this point we would refer to Illness and Disability in the Workplace Canada Law Book (updated May 1995) where the authors state at page 5-17, paragraph 5:3400:

Similarly, employees who are currently in receipt of disability benefits should not otherwise be rendered ineligible simply because of a termination of employment.

18. This is not to say that the terminology in the pamphlet is perfectly consistent and unam­biguous. The term "benefit" is used interchangeably in some places with the notion of "coverage". It would appear however that where the term "benefit" is used in the singular, it refers to cover­age. Where it is used in the plural as in "benefits", it means the actual monies paid out to a claim­ant. In other words, the "benefit" is the coverage, and "benefits" are the monies paid out to a claimant who qualifies for a period of time under the plan.

19. This leaves the respondent's last argument which is that even if they are wrong on their interpretation of the pamphlet, there has been no breach of the "freeze" provisions because the decision was reasonable and made in the absence of bad faith.

20. A review of the jurisprudence does not support the respondent's argument on this point. We have some difficulty in any event with the idea that the reasonable expectations of employees in this case in reading a pamphlet would be different from the employer's. Perhaps a number of interpretations of the pamphlet might be reasonable, but in the circumstances of this case, we do not see the employer's reading of the scheme of benefits as a reasonable one. Simi­larly, whether there was bad faith or not is in our opinion irrelevant to the analysis. In this case, no bad faith is alleged, however, the statute refers only to the prohibition not to change working con­ditions.

21. For these reasons, we dismiss the respondents suggestion that an act that would other­wise be contrary to section 86(1) is somehow saved by virtue of the fact that the respondent viewed its own conduct as reasonable and that it was done in good faith. We certainly have sympathy for employers who in trying to do the right thing fall short, but that is not in the scheme of section 86(1) a defence to this application. We would also note the respondent's agreement with the princi­ples governing the application of section 86(1) as set out in Trim Trends and noted above.

22. Having found that the pamphlet describing benefits does not contemplate the termina­tion of benefits with the cessation of the employment relationship, the last question is whether this was the reasonable expectation of employees. We have no evidence before us of what the employ­er's practice was in the administration of short term benefits prior to this claim except for their admission that the pamphlet was the representation made to employees about the provision of sickness benefits. We conclude on this evidence that employees would reasonably expect on a reading of the pamphlet to continue to receive benefits that have vested past the termination of employment in the circumstances of Mr. Hawthorne. Despite the wording in the pamphlet, if the respondent had called evidence to prove that its practice known to employees was according to its reading of the pamphlet, we would find that this would likely determine a reasonable employee's expectations. In the absence of this evidence, we find that there has been a breach of section 86(1).

23. On the issue of remedy, the parties agreed at the outset that any remedy would be bind­ing only on the respondent and would not deal with the provision of long term benefits, thereby possibly affecting other parties. Accordingly, we order as follows:

24. That the respondent has breached the provisions of section 86(1) of the Act;

25. That the respondent is obliged to reinstate, effective February 28, 1995, the short term sickness benefits payable to Mr. Hawthorne, consistent with the Board's determination of the provisions of that benefit reflected in this decision;

26. That the respondent pay to Mr. Hawthorne, interest on any benefits payable but withheld to the date of payment;

27. That the panel remain seized to deal with any matter arising out of this order or its implementation.