P/0020/99

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE ACT

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

Group Managers, Ministry of Finance

Grievor

• and -

The Crown in Right of Ontario (Ministry of Finance)

Employer

BEFORE

John A. Willes

Vice-Chair

FOR THE GRIEVOR

C. Michael Mitchell Counsel Sack, Goldblatt, Mitchell Barristers and Solicitors

FOR THE EMPLOYER

Liane Brossard Counsel, Legal Services Branch Management Board Secretariat

FOR THE UNION

Timothy Hadwen Counsel

HEARING

October 26, 1999, November 29, 1999, December 22, 1999, January 21, 2000, January 26, 2000, February 16-17, 2000, May 23-24, 2000, May 31, 2000 and June 1, 2000,

Decision

The grievance of the Group Managers, Ministry of Finance, arose out of a decision by the Employer to reorganize the duties of the AM20 Group Managers and create a number of new AM21 positions. The reorganization was a response to a salary compression problem that resulted from a new salary structure for senior bargaining unit auditors (TA5) under a collective agreement concluded in March of 1999. The AM20 Group Managers, some 18 in number, expressed their concerns about the reorganization of their duties by way of a grievance to the Deputy Minister, Ministry of Finance, dated June 4, 1999, which reads in part as follows:

"Dr. Bryne B. Purchase Deputy Minister Ministry of Finance 7th Floor, Frost Building South 7 Queen's Park Crescent Toronto, ON M7A 1Y7

Dear Dr. Purchase,

Thank you for your response to our letter dated May 5, 1999.

Your letter dated June 1, 1999 stated that the current strategy to address the recent salary compression and conversion issues is fair and reasonable. We do not believe this is an equitable or fair way to address the reorganization currently underway. In addition to the concerns outlined in our previous letter to you dated May 5, 1999, we would like to draw your attention to the following:

1. The duties for the proposed new AM21s are essentially the same as those performed by the current AM20s. Furthermore, there are only 9 new AM21 positions for over twenty existing AM20 positions.

2. Duties and responsibilities for the AM20s are changed drastically to accommodate the reclassification of the FO series of auditors to the TA series - the TA5s will no longer report to the AM20s. This is tantamount to a demotion or constructive dismissal.

3. Virtually all of the existing AM20 Group managers were "promoted" from the FO5 senior auditor positions. When promoted from these positions, it was our understanding that we would be responsible for all large audits with senior auditors reporting to us. The proposed reorganization has the new TA5s sitting in the hierarchy above the AM20s.

4. There are precedents whereby other Ministries in the OPS avoided similar problems of salary inversion by maintaining the same reporting structure through upgrading all managers.

5. Some of the current permanent AM20 Group Managers are not even eligible to apply to the AM21 positions because of the 40 km limitation.

Due to time constraints and to protect our interests under Part V, Section 34 of the Public Service Act, we would like you to treat the above five points as a grievance filed by us under the said Act.

Thank-you.

Group Managers (see signatures attached)."

The grievance was denied by the Deputy Minister, and the AM20 Group Managers applied for a formal hearing of their grievance by the Public Service Grievance Board under s.36(1) of Regulation 977 of the Public Service Act, R.S.O. 1990, c.P-47. The grievance reads, in part:

"Dear Mr. Stickland,

We are the Group Managers of the Corporations Tax Section working in several offices of the Tax Revenue Division in the Ministry of Finance. We had filed a grievance with the Deputy Minister on June 4, 1999 under Section 34, Part V of Regulation 977 of the Public Service Act. Following a meeting with the Deputy Minister's designee on July 7, 1999, we have received a reply on August 16 1999 from the Deputy Minister to our grievance.

As our grievance has been denied by the Deputy Minister, we would like to apply for a hearing of our grievance by the Public Service Grievance Board, as stipulated under Section 36, Part V of Regulation 977 of the Public Service Act.

We are enclosing a copy of our grievance that was submitted to the Deputy Minister.

We look forward to the scheduling of a hearing for our grievance.

Yours truly,

North York R.T.O.: Oshawa Head Office: Mississauga R.T.O.:

Elmo Benedict Bill Arblaster Kevin Brooks

Raymond Choi Cynthia Duncan Mark Longden

William Hogarth David Duhig

Dennis Mah Azeez Hooseinny London R.T.O.:

Rick Montle Martin Kenney Rudy Persaud

Ian Tso Steve Koss

Ron Young John Ascott Ottawa R.T.O.:

Keith Kawall"

The grievance came on for hearing before the Public Service Grievance Board on October 26, 1999, and initial procedural requests and objections resulted in interim decisions dated December 13, 1999, and January 13, 2000 concerning the production of documents. At the hearings related to these interim decisions, Counsel for O.P.S.E.U. appeared and made submissions concerning the disclosure of documents related to collective agreement negotiations between O.P.S.E.U. and the Employer. Counsel for the parties, however, agreed that O.P.S.E.U. related documentation need not be produced at the hearing, and no O.P.S.E.U. negotiation documents were submitted as exhibits.

Counsel for the Employer at the outset of the hearing raised a preliminary objection to the jurisdiction of this Board to hear the grievance on the basis that the complaint was essentially a classification matter, and under s.31(4) of Regulation 977 this Board had no authority to hear the case.

Counsel for the Grievors submitted that the grievance was not a classification grievance, but rather, a complaint concerning working conditions and bad faith on the part of the Employer, and this could only be determined after the evidence was heard.

Following the opening statements on the jurisdiction of this Board, the matter was left to be addressed in final argument, and a decision on jurisdiction was to be made after the evidence and argument was heard. Counsel then proceeded with their evidence and argument on the issues.

Counsel for the Grievors called Mr. Raymond Choi, a Group Manager, AM20, as his first witness. Mr. Choi testified that he was appointed to an AM20 position in June of 1986, and has been employed as an AM20 since that time. He described the audit system and the role of AM20 Group Managers in the supervision of F04 and F05 field auditors (now called TA4 and TA5). FO5 field auditors were senior auditors, and FO4's were less experienced, and lower classified auditors. His evidence was that Group Manager AM20 was essentially a technical job, since the managers' role was to supervise professionals and provide technical advice. He stated that FO5 auditors normally did field audits of the more complex corporations and FO4 auditors were assigned to less complex audits. His evidence was that FO4 auditors did not report to FO5 auditors, but each reported to the Group Manager. He also testified that on special tasks or where there were time limits, a team of FO4 and FO5 auditors would perform the audit, but usually only one field auditor would perform an audit.

Mr. Choi could see no justification for the creation of the AM21 Manager position if the purpose was to do more team audits, as all that needed to be done in his opinion was ask the AM20's to do more team audits. He stated that he could see no difference between the new AM21 position and what AM20's had been doing in the past.

Under cross examination, Mr. Choi stated that he was not certain as to the number of team audits that were conducted, but felt that the percentage was small, perhaps 3-5% of the audits. He also stated that he believed his career path was now blocked, as the AM21's were responsible for the larger more complex audits, and he would be denied this experience as an AM20.

Counsel for the Grievors also called Mr. Elmo Benedict, a Group Manager, AM20, to testify. Mr. Benedict testified that he had moved from a FO5 position to an AM20 position. He stated that as a FO5 auditor he enjoyed doing the large, complex audits, and when he moved to the AM20 position, he supervised FO5 auditors doing this type of audit. His evidence was that he was not permitted to supervise large audits or FO5 auditors once the AM21 position was created, and was now only permitted to supervise the audits of smaller companies. He stated that he was advised that the only way he could be involved with large company audits was to return to the bargaining unit as a FO5 auditor. His evidence was that the new career path now seemed to require auditors to move from an AM20 management position to a bargaining unit FO5 position to gain large corporation audit experience, then apply for the AM21 position in order to supervise the large corporation audits.

On cross examination, Mr. Benedict admitted that Senior Management had made no promises to him that as an AM20 he would always be able to supervise the audits of large corporations.

Counsel for the Employer called Mr. Roy Lawrie, the Assistant Deputy Minister, Tax Revenue Division, to testify as to the reasons why his staff was reorganized to establish the new position of AM21. His evidence was that after 1995 it was necessary to hire more field auditors (FO5, FO4, FO3) to ensure that corporate compliance levels remained high, notwithstanding tax reductions introduced by the government. He testified that the Federal Government was also hiring auditors at the time, and offered substantially higher wages for positions equivalent to the FO5 and FO4 positions in Ontario. His evidence was that new salary levels were negotiated for the FO5 and FO4 positions by their union, and this resulted in salary compression between FO5 and AM20 positions, with top rate FO5 salaries exceeding those of the AM20. Mr. Lawrie's evidence was that he attempted to correct the situation by reorganizing the work of the FO5 and AM20 by the creation of the AM21 position. This new position would supervise FO5 auditors, leaving the AM20 with only FO4 auditors to supervise. Work would also be reorganized whereby the AM20 would supervise only small corporations audits. The larger corporations would be audited by FO5 or F05/FO4 teams under the supervision of an AM21. His evidence was that this arrangement would only require a limited number of new AM21 positions, and would lessen the 'ripple effect' of the wage increases that were given to FO5 auditors. He also stated that under the change a FO5 would be a team leader and supervisor FO4 auditors on team audits.

At the end of Mr. Lawrie's evidence and cross examination, Counsel for both parties advised the Board that Mr. Lawrie had erred in his understanding of the AM21 position with respect to the FO4 and FO5 (now TA4 and TA5) positions. Counsel advised that AM21's were responsible for TA4's assigned to them, and the TA4's reported directly to the AM21. It was also agreed that TA4's and TA5's report to an AM21 if on a team, and that TA4's do not report to TA5's. TA5's simply 'lead' on a team audit.

With respect to argument, Counsel for the Grievors submitted that the reorganization of the work and the creation of the AM21 position was the decision of Mr. Lawrie alone, and the decision, and its effect on the AM20 Managers constituted bad faith on the part of the Employer. He submitted that the bad faith on the part of the Employer was a working conditions matter that fell within the jurisdiction of the Public Service Grievance Board. He suggested that the test for jurisdiction of this Board should be based upon a finding that the Employer acted in bad faith, acted in breach of a directive or guideline under the Public Service Act, or acted in an arbitrary or inequitable manner with respect to the employees. In his view, the Employer's creation of the AM21 position was not a legitimate exercise of management authority, as no need or vacancy existed. He stated that the work of the AM21 position was being done by the AM20, and management recognized this fact by paying all AM20's the AM21 salary rate from January 1, 1999 to October 19, 1999.

Counsel for the Grievors noted that Mr. Lawrie's evidence was that the payment of AM20 managers at the AM21 rate for close to 10 months was not 'acting' pay, but done out of 'fairness'. Counsel for the Grievors submitted that this was a clear admission that the AM20's were doing the work of an AM21, and the jobs were the same, since nothing changed until the point in time when the AM20's were no longer permitted to supervise TA5 auditors. He submitted that the AM21 job competitions required the AM20 managers to compete for a job that they had been doing for years in their job description as AM20 managers. He stated that the new position and the reorganization of the work was done for the sole purpose of saving money, and not for any efficiency of operation.

Counsel for the Grievors submitted that the actions of the Employer were arbitrary, inequitable, and done in bad faith. It was his position that these actions of the Employer constituted a violation of the Grievor's working conditions, and consequently fell within the jurisdiction of this Board. In support of his position, Counsel for the Grievors cited:

Kanga v. The Crown in Right of Ontario (Ministry of Health) 1986, PSGB, (P/0003/85) (Simmons, Emrick, Jackson); Tighe v. The Crown in Right of Ontario (Ministry of the Solicitor General & Correctional Services) 1985, PSGB, (P/0008/95, P/0009/95); Re air Canada and Canadian Air Line Employees' Assoc. (1975), 8 L.A.C. (2d) p. 239 (Brandt); Re R. J. Simpson Manufacturing Co. (Canada) Ltd. and United Automobile Workers, Local 1738 (1976), 1976 CanLII 2195 (ON LA), 11 L.A.C. (2d) 145 (Hinnegan); Re Hershey Canada Inc. and Retail, Wholesale & Department Store Union, U.S.W.A., Local 461 (1995), 1995 CanLII 18439 (ON LA), 51 L.A.C. (4th) 299 (Kates); OPSEU (A. Fitzgerald) v. The Crown in Right of Ontario (Ministry of Correctional Services) (1988), GSB (269/88) (Picher, Hennessy, Montrose); OPSEU v. The Crown in Right of Ontario (Ministry of Community & Social Services) (1990), GSB, (2188/87) (Kirkwood, Klym, Clark); OPSEU (Cottrell) v. The Crown in Right of Ontario (Ministry of Community & Social Services) (1988), GSB, (2188/87), (Wilson, Thomson, O'Toole); Re TRW Canada Ltd., Thompson Products division and Thompson Products Employees' Association (1992), 31 L.A.C. (4th) p. 203 (Rose); Re Maplewood Nursing Home Ltd., Tilsonburg (Maple Manor) and London & District Service Workers' Union, Local 220) (1989), 9 L.A.C. (4th) p. 115 (Hunter); Re United Steelworkers, Local 2766 & Canadian Mead-Morrison division of United Steel Corp. Ltd. (1956) 7 L.A.C. p. 175 (Fuller, Park, Dillon); Re Northumberland Co-operative Ltd. and United Food & Commercial Workers, Local 1288P (1994), 42 L.A.C. (4th) p. 69 (Collier); Farber v. Royal Trust Co., 1997 CanLII 387 (SCC), [1997] 1 S.C.R. 846, (S.C.C.), Lamer, C.J., La Forest, L'Heureux-Dube, Sopinka and Gonthier JJ.); Cox v. Royal Trust Corp. of Canada, [1989] O.J. No. 675 (S.C.O.), (Brooke, Krever, Carthy JJ.A.); Pathak v. Jannock Steel Fabricating Co., [1999], A.J. No. 19 (Alberta C.A.) (Hetherington, Berger and Sulatycky JJ.A.); Johnston v. Household Financial Corp., [1997] O.J. No. 2358 (Ont. C.J.), Macdonald J.); Ally v. Institute of Chartered Accountants of Ontario, [1992] O.J. No. 940 (Ont. C.J.) (Conant); Re St. Paul's Hospital and Registered Nurses' Association of British Columbia (1980), 28 (L.A.C.) (2d) p. 51 (Vickers, Leibik, Waldron); Re Metropolitan Stores (M.T.S.) Ltd. and Retail, Wholesale and Department Store Union, Local 1065 (1979), 22 L.A.C. (2d) p. 186 (Yeoman, Watson, Petrie).

Counsel for the Employer argued that the case was a classification matter. She stated that this was so because the remedy, regardless of how it was framed, would be promotion to the AM21 position for the Grievors. Counsel admitted that some job duties were taken from the Grievors by the reorganization, but submitted that regardless of how the change affected the job duties, it was a classification matter. She also argued that organizational change for the purpose of saving money was a legitimate management function, and denied that the career paths of the AM20 managers were affected. Her position was that promotional opportunities continued to exist, as AM20 managers could apply for SMG1 positions and many others. In the alternative, Counsel for the Employer submitted that the Employer did not breach the terms of employment of the Grievors, and argued that under the Ministry guidelines it was entitled to change the work of the employees. In her view, an allegation of bad faith would fail if no discrimination existed, if all relevant facts had been considered by the decision maker, and the matter was a legitimate exercise of administrative discretionary power. Counsel submitted that if this test was applied to the issues in this case, an allegation of bad faith would be rejected, as Mr. Lawrie had considered all of the facts, and did not act in an arbitrary or capricious way in arriving at his decision to reorganize the work. In support of her position, Counsel for the Employer cited: O.P.S.E.U. (Palmer et al) and The Crown in Right of Ontario (Ministry of Revenue) G.S.B. 2017/86 (1991); S. Kranyak and The Crown in Right of Ontario(Min. of Skills and Development) P.S.G.B. P/0003/91 (1992); O.P.S.E.U. (Aitken et al.) and The Crown in Right of Ontario (Ministry of Health) G.S.B. 678/87 (1993); Ontario Public Service Employees Union v. the Queen in Right of Ontario et al. (1992) 1982 CanLII 1836 (ON HCJ), 40 O.R. (2d) 142; Ontario Public Service Employees Union v. The Crown in Right of Ontario (Ministry of Community and Social Services) S.C.O. 607/85 (unreported); O.P.S.E.U. (S. Rosamond) and The Crown in Right of Ontario (Ministry of Citizenship, Culture and Recreation) G.S.B. 2086/96 (1998); H. Herbrand and The Crown in Right of Ontario (Ministry of Transportation) P.S.G.B. P/0014/94 (1996); Marrison et al. and The Crown in Right of Ontario (Ministry of Correctional Services) P.S.G.B. P/0004/88 (1988); L. Hollister and The Crown in Right of Ontario (Ministry of Finance) P/0002/93 (1995); R. D. Smalley and The Crown in Right of Ontario (Ministry of Correctional Services) P.S.G.B. P/0013/85 (1986); A. McConnell et al. and The Crown in Right of Ontario (Ministry of Transportation) P.S.G.B. P/005/93 (1998); O.P.S.E.U. (Shaw) and The Crown in Right of Ontario (Ministry of Community and Social Services) S.G.B.410/88; O.P.S.E.U. (Giannon) and The Crown in Right of Ontario (Management Board Secretariat) G.S.B. 570/96 (1997);

J. Handlarski and The Crown in Right of Ontario (Ministry of Finance) P.S.G.B. P/0027/92; O.P.S.E.U. (Garrison) and The Crown in Right of Ontario (Ministry of Transportation) G.S.B. 1229/94 (1995); G. Bertolo, E. Tighe and The Crown in Right of Ontario (Ministry of the Solicitor General & Correctional Services) PSGB P/0008/95; M. Amirault and The Crown in Right of Ontario (Ministry of the Solicitor General & Correctional Services) PSGB P/0028/94; Lesiuk v. British Columbia Forest Productions Ltd. (1986) 1986 CanLII 818 (BC CA), 33 D.L.R. (4th) 1; Reber v. Lloyds Bank International Canada (1985) 1985 CanLII 153 (BC CA), 18 D.L.R. (4th) 122; Longman v. Federal Business Development Bank (1982) 1982 CanLII 543 (BC SC), 131 D.L.R. (3d) 533; OPSEU (Selzer) and The Crown in Right of Ontario (Ministry of Health) GSB 1928/89; OPSEU (Bousquet) and The Crown in Right of Ontario (Ministry of Natural Resources) GSB 543/90; OPSEU (Shaw) and The Crown in Right of Ontario (Ministry of Community and Social Services) GSB 410/88; OPSEU (Mistry) and The Crown in Right of Ontario (Ontario Human Rights Commission) GSB 0569/96.

x x x x x x x x x x x x x x x x x x x

The primary issue before this Board concerns the juisdiction of this tribunal to deal with a case that concerns the establishment of a new position to do a part of the work of a lower classification position. Until just prior to the filing of the grievances in this case, the AM20 Group Managers had supervised both FO4 and FO5 bargaining unit auditors, presumably without difficulty. The negotiated salary increases for FO4 and FO5 auditors in the 1999 collective agreement between the government and O.P.S.E.U., however, created a salary compression situation where the salary schedule for FO5 (now TA5) auditors overlapped and exceeded the salary scale for AM20 Group Managers.

According to the evidence, the Assistant Deputy Minister responsible for the AM20 Group Managers reorganized the work of the (now) TA4 and TA5 auditors and the AM20 Group Managers through the creation of a new position of AM21, a managerial classification that would supervise larger audits, leaving the AM20 managers with the smaller audits that would be performed by TA4 auditors. The purpose of these changes was essentially to avoid raising the salary scales of all of the AM20 Group Managers.

These changes instituted by the Assistant Deputy Minister had a serious effect on the Grievors. They would no longer be involved with the larger audits, nor would they be in a supervisory position with respect to TA5 auditors. The formerly clear career path of auditors was altered significantly, and an unworkable career path was created in its place. As one witness described it, a TA4 would progress to management as an AM20, then be obliged to move back to a bargaining unit TA5 position (an unlikely possibility, given the collective agreement) then, when experience was gained with large corporate audits, move up to an AM21 position in management. As he described the new situation, he would be obliged to go back to the bargaining unit to work with people he had supervised. He also noted that he had never heard of a situation where a manager had to go back to the bargaining unit in order to be promoted.

In practical terms, under the new organization, no TA4 would see an AM20 management position as a particularly attractive career move. In future, a TA4 would likely by-pass the AM20 management promotion, move to TA5, and then to the AM21 position. In effect, the change may largely isolate the AM20 and render it a position with limited career opportunities, particularly if an AM20 wished to remain in the Tax Revenue Division.

The unrefuted evidence of Mr. Choi was that the jobs had not changed. His unrefuted evidence was also that the arbitrary dollar division between large and small audits was unrealistic, because the proper criteria should be complexity rather than size, as some large dollar audits were relatively simple to perform, while some smaller audits were exceedingly complex.

From the evidence, the changes instituted would appear to make very little practical sense in an organizational setting, and have clearly had a serious effect on employee morale. It is difficult to find any business efficiency justification for the change, and given the evidence, this Board is prepared to accept the submission that the decision was made for the sole purpose of avoiding the increased cost of raising the salaries of AM20 Group Managers.

These issues raise a number of questions with respect to this Board's jurisdiction: Does a bad business decision constitute bad faith? Or does the lack of a full understanding by a decision maker of how work is performed make the decision one of bad faith? Additionally, under what circumstances should the Public Service Grievance Board assume jurisdiction in a working conditions situation that is essentially a classification matter with respect to remedy?

On the question of whether this Board may assume jurisdiction on a working conditions or employment issue that is essentially a classification matter, the Grievors must establish that the Employer acted in bad faith, or in an arbitrary or discriminatory manner.

From the evidence, the Assistant Deputy Minister did not fully understand the relationship between TA4 and TA5 auditors on team audits, nor did he realize that AM21 managers were responsible for TA4's assigned to their audits. Nor was he in his evidence able to establish a clear operational reason for the changes he made in the reorganization of the work and its supervision. His efforts were apparently motivated by a desire to avoid a ripple effect in salary increases, and his decision was made on what would appear to be a less than clear understanding of how the work was performed. However, in spite of the flaws and errors in his decision making, there is no clear evidence to suggest that he made his decision in a malicious or arbitrary manner.

While all of the evidence raises questions about the appropriateness of the decision, it does not, in the opinion of this Board constitute evidence of bad faith on the part of the Assistant Deputy Minister. The situation created by his decision requires correction, but that is a matter for the Employer to address.

In Bertolo/Tighe and The Crown in Right of Ontario P.S.G.B. P/0009/95 the Public Service Grievance Board concluded that 'working conditions and terms of employment' should be given a broad and liberal interpretation, but noted that: "absent evidence of bad faith, discrimination or arbitrariness, there must be evidence of some breach of the Public Service Act, the Regulations, a Management Policy Directive or past practice, or some evidence that the Grievors had been treated inequitably before a Board can find that the grievances should be allowed."

The Employer clearly has the right to make job changes, provided that the change are made in good faith, and meet the standards set down in this test. In the present case, there is a great deal of evidence that would point to a poor administrative decision, but there is no clear evidence of discrimination, arbitrariness, bad faith or a breach of the Public Service Act or the Regulations. On this basis then, this Board must accordingly decline jurisdiction to hear the matter, and the grievances are therefore dismissed.

Dated at Toronto, this 2^nd day of October, 2000.