P-2005-3706, P-2005-3707, P-2005-3708, P-2005-3709, P-2005-3710, P-2005-3711, P-2005-3712, P-2005-3819

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE ACT

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

Timothy J. Pedder, Marilyn Amirault O’Neill, Jane MacEachern, Linda Mewett, Annabelle Mezzera, Marlane Robertson, Marianne Muller, and Todd Smith, et. al.

Grievors

• and -

The Crown in Right of Ontario (Ministry of Community Safety and Correctional Services)

Employer

BEFORE

Kathleen G. O’Neil

Vice-Chair

FOR THE GRIEVORS

Todd Smith, Marilyn Amirault O’Neill, Marianne Muller, Marc Lacoursiere

FOR THE EMPLOYER

Sean Kearney Senior Counsel Ministry of Government Services

HEARING

September 13, 2006.

Decision

This decision deals with eight nearly identical grievances, filed by 24 Operational Managers, in the form of seven individual grievances from managers at Vanier Centre for Women, and one grievance signed by each of a group of seventeen managers from Maplehurst Correctional Centre. The grievors claim that they were promised 2% more as their pay for performance award for 2004-2005 than they received.

Jurisdiction

The grievors’ position is that this dispute is within the jurisdiction of the Board, despite section 31(4) of Regulation 977, pursuant to The Public Service Act which removes claims in respect of the compensation provided or denied an employee as a result of an evaluation of performance from the Board’s purview. The grievors maintain they are not contesting the employer’s method of evaluation or decision to award a 5% rating for pay for performance, but only that they did not receive the 5% promised after the evaluation process. The employer takes the contrary view.

Although the effect of the grievors’ request, were it to be successful, might be a recalculation of the grievors’ pay for performance award, the Board is satisfied that it has jurisdiction to determine the dispute, despite the limitations on the Board’s jurisdiction in regards to pay for performance. This is because the submissions made at the hearing disclosed that what the grievors were actually claiming was that a 2% increase to their salary range on April 1, 2004 and 2005 should have been implemented as an increase to their individual rates of pay, prior to the application of their pay for performance awards. This is, in the end, more a general question as to the application of the grievors’ terms and conditions of employment in respect of their basic salary rate than an issue in respect of pay for performance.

The factual background to the dispute

In late 2005, when the events leading to this dispute occurred, the grievors were all at the maximum of the salary range for their classification, OCR16. A number of changes to their compensation package had been announced in 2005, and were implemented starting with the final pay of the year on December 29, 2005. One of the changes was announced as “an increase of 2%” to their salary ranges, retroactive to each of April 1, 2004 and April 1, 2005. From the evidence and submissions before the Board, it is clear that the source of this dispute is the fact that the grievors understood this information to mean that their individual rates of pay would be increased by 2%, as they fell within the salary ranges affected, prior to the receipt of their pay for performance awards. Thus, they expected their percentage merit awards to be applied to a base salary rate that had been increased by 2%.

By contrast, in announcing a 2% increase to the salary ranges, the employer’s evidence indicates it intended and implemented only an increase, or extension, to the range, providing a 2% higher potential maximum salary, rather than a 2% increase to individual salary rates. As part of an overall shift to what was described as purely performance-based compensation for managers, there were no general, automatic, “across-the-board” increases intended or approved for managers. All progression within a salary range was to be as a result of individual performance as reflected in an annual pay for performance award. The percentage amount of the award flowed from an established grid according to whether a manager was assessed as falling into the categories of “did not meet”, “met most”, “met all”, or “exceeded” key performance commitments. If managers “met all” performance expectations, as each of the grievors did, their award was 5% for each of the fiscal years 2003-04 and 2004-05. What was approved and offered by the employer was a two-step delivery of the applicable pay-for-performance award.

The first of the two steps was progression within the newly extended salary range up to the maximum. Using as a base the grievors’ salary rate as of March 31, the last day of the previous fiscal year, their base salary rate was increased up to the new maximum, effective April 1, the first day of the new fiscal year. This first step absorbed whatever portion of the percentage award was necessary to reach the new maximum of the range. The second step was to pay out any remaining portion of the percentage merit award in the form of a lump sum. This was the thrust of the uncontradicted evidence of the employer’s witness, Risa Caplan, a senior Corporate Compensation Specialist with the Ministry of Government Services, the central governmental agency charged with the responsibility of recommending managerial pay changes.

The evidence is persuasive that the grievors were paid according to the above sequence, as intended by the employer. One of the grievors introduced into evidence her pay stub for December 29, 2005, the first implementation date of the above changes. That pay stub indicates that a lump sum of $1,962.50 was paid, in addition to her regular pay. The grievors’ submissions indicated that the lump sum amounts were the same for each of them. Ms. Caplan said that the bi-weekly amount listed on the pay stub indicated an annual salary rate of $66,718, which is the new maximum for the fiscal year April 1, 2005- March 31, 2006. It can be seen that these two elements, the amount of the new salary maximum and the amount of the lump sum, are consistent with the method of delivery to which Ms. Caplan testified. That is, a grievor who had progressed by way of pay for performance to the annual salary maximum for the year April 1, 2004 to March 31, 2005, would have had a base salary of $65,410 (the maximum for the extended grid for the fiscal year 2004-2005) as of March 31, 2005. Her entitlement to a 5% award for “met all” effective the next day, April 1, 2005, calculates out to $3,270.50 to be applied to her pay in two steps. The first step was to progress the grievor as far as the $3,270.50 would take her in the newly extended salary grid. The new maximum for the fiscal year 2005-2006 was $66,718, allowing $1,308 of movement room ($66,718-$65,410 = $1,308). The rest of her 5% entitlement was paid out in the amount of $1,962.50. ($3,270.50 - $1,308 = $1,962.50)

In percentage terms, given that the maximum had been increased or extended by 2%, this meant that the first 2% of the grievors’ 5% merit award, effective each of April 1, 2004 and 2005, was delivered by way of progression within the newly extended range, and resulted in a 2% higher rate of pay each pay period. The rest, or 3%, was delivered by way of a lump sum, which did not increase the base salary any further.

When the grievors saw a lump sum of 3% as their pay for performance award on their pay stubs, they concluded there had been a miscalculation, that they were missing 2% of their 5% award for performance. These grievances followed.

The 3% lump sum is consistent with what the employer’s evidence showed was intended. The grievances raise the question as to whether it is also consistent with what was promised to them in writing.

Submissions and conclusions

The grievors indicated that there had been a lot of confusion and questions surrounding the pay for performance awards and how they would be implemented in the period leading up to this dispute. There were a number of employer communications, including a series of Question and Answer documents, in which clarification was attempted. The grievors specifically rely in this grievance on individual communications dated November 25, 2005, the pertinent content of which is almost identical. The grievors submitted that the individual letters clarified things and, in their view, constitute a promise from the employer, which was breached by the method of implementation.

The body of the individual letters, signed by Renée Reddick, Director, Total Compensation Strategy Branch, and dated November 25, 2005, in the version addressed to Mr. Smith, submitted on behalf of the 17 grievors from Maplehurst, reads as follows:

SUBJECT: Adjusted MCP Salary Rates -- December 1, 2005 Pay

I am writing to advise you of the first step in the implementation of the

new MCP salary ranges – the adjustment to your salary rate as of the December 1, 2005 pay.

As previously communicated by your HR Branch, the salary ranges for

MCP classes have been increased by 2% effective April 1, 2004 and 2% effective April 1, 2005. As a result, there are two basic circumstances that will result in salary adjustments due to these range changes.

FOR EMPLOYEES BELOW NEW MINIMUM

Employees below the new minimum on these effective dates will have their salaries adjusted prior to pay for performance (P4P) awards being applied, if applicable.

If you were an employee in this circumstance, you will receive a salary rate increase because you were either:

• below the new minimum either on April 1, 2004 or during 2004-05. As a result, your 2003-04 P4P award will also be recalculated based on the new minimum rate.

OR

• Below the new minimum as of or after April 1, 2004. Your 2004-05 P4P, if eligible, will be added to the new salary rate.

FOR EMPLOYEES AT OLD MAXIMUM

Employees at the maximum of the salary ranges who had increases constrained due to these limits will have their salaries adjusted prior to pay for performance (P4P) awards being applied, if applicable.

If you were an employee in this circumstance, your salary rate will be increased prior to pay for performance (P4P) awards being applied, if applicable, where:

• You received all or a portion of your P4P award for 2003-04 in lump

sum because you reached the maximum of the old salary range,

OR

• You received a mid-year rate adjustment that was constrained by the

old maximum.

Your adjusted salary rate will be reflected in your December 1, 2005 pay although the retroactive amounts resulting from the above noted change will be paid in January/February 2006 at a still to be determined date.

All 2004-05 P4P awards will be calculated based on the new salary ranges and will be processed for the December 29, 2005 pay date back to April 1, 2005.

Thank you for your patience. I regret any inconvenience the delayed payment may cause you. If you have any specific questions on your salary changes, please contact your HR Branch.

[underlining not in the original]

The version of this letter addressed to the seven grievors from Vanier does not contain the wording underlined in the above quotation, perhaps because it deals with employees below the new minimum, a circumstance which did not apply to any of the grievors.

The wording from the letters relied on in the grievances is: “As a result of the salary range adjustments, your salary rate will be increased prior to pay for performance (P4P) awards being applied …:” The grievors took this wording to mean that their individual salary rates would be increased 2% prior to the application of their performance awards. In the employer’s view, this wording does not promise an extra 2% increase, and must be read in context of the whole letter, and the other communications on the subject, which made it clear that all progression in the range would be by way of merit awards. The employer’s position is that the extension of the range itself did not move any individual; rather, it provided additional room within which an individual could move by way of merit awards.

Further, the employer relies on Ms. Caplan’s evidence that the letters sent to individual employees were in reference to the processing of the 2004/05 pay-for-performance awards, and that the letters were describing the payroll transactions that would take place, rather than offering a 2% increase to individuals prior to their pay for performance awards. Her testimony indicated that in order to ready managers’ salaries to receive the 04/05 awards, their 03/04 salaries would have been revisited, and where applicable, given the prior year’s performance rating, the salary would have been adjusted to the new maximum. The evidence establishes that for people at the old maximum, who received a performance award in 2003/04 large enough to take them to the newly extended maximum for that year, their salary rate was adjusted, i.e. increased, prior to the pay for performance award for 04/05 being applied. The difference between the parties is that the grievors believed that this would be a 2% general adjustment to their salary rate prior to the application of the 5% performance award. Instead, what the employer offered and approved adjusted the salary rate in a different way, delivering the 5% in the two steps mentioned above, first increasing the individual’s salary rate to the new maximum, by way of the merit award, rather than a general increase, and then paying the rest in a lump sum.

The grievors also rely on the following extract from other individual letters they received in November 2005, advising them that they had “met all” key performance expectations and therefore would receive a 5% percentage increase, as follows:

As a result of your rating, an increase to your salary will be processed retroactive to April 1, 2005. Any amount over the maximum of the salary range will be paid as a one-time lump sum payment. Your pay for performance award will be reflected on the December 19, 2005 pay. For all eligible periods, the following chart indicates the percentage of increase associated with your performance rating:

[5% for each of the grievors]

The grievors say that a promissory estoppel applies here, that they were promised a 5% increase, on which they relied to incur financial obligations over the holiday season in 2005, and then were only paid 3% at the end of the year. They ask that they be paid an additional 2%, which would be the result if the increase to the salary ranges was implemented as an increase to their individual salary rates before the 5% merit award. Looking at the November 25 letters, Mr. Smith indicated all the grievors were in the situation indicated, i.e. all had reached the maximum of the old salary range, so that all or a portion of the 03/04 performance award had been paid in a lump sum. Thus, the grievors take the position that they were entitled to the increase to the range before their performance award was calculated. Mr. Smith also took issue with the idea that the new system was purely performance based, because part of the scheme is a 20% cap on how many employees can be classified as “exceeds”.

On behalf of the employer, counsel submits that this dispute results from a misreading of the material in evidence, and amounts to a complaint concerning the move to a purely performance based compensation system. The employer notes that the increases to the ranges occurred at the same time as the transition to the performance based system, and submits that there is no evidence that the increases to the ranges created an entitlement for the grievors to receive the extra 2% they are claiming. In essence, in counsel’s view, the grievances are asking for a policy change, back to across-the-board increases, which have been eliminated in the management compensation plan.

Reference is made to the following Board decisions to support the employer’s request for the dismissal of the grievance: Garratt, et al. and the Crown in Right of Ontario (Ministry of Health and Long Term Care) P-2003-1670 (O’Neil), decision on the preliminary objection dated May 17, 2005 and on the merits dated December 7, 2005; Ronkai. and the Crown in Right of Ontario (Ministry of Community Safety and Corrections) P-2004-0267 (O’Neil); Drakos. and the Crown in Right of Ontario (Ministry of Community Safety and Corrections) P-2004-1721 (O’Neil); Woodward. and the Crown in Right of Ontario (Ministry of Community and Social Services) P-2005-1853 (O’Neil); Hill, et.al.. and the Crown in Right of Ontario (Ministry of Community Safety and Corrections) P-2004-3699 (O’Neil); Mously, Lister, Watson. and the Crown in Right of Ontario (Ministry of Solicitor General and Correctional Services) P/0068/96, P/0171/96, P/0172/96 (Leighton) and Nancy Marshall and the Crown in Right of Ontario (Ministry of Health and Long Term Care) P-2004-2738 (O’Neil).

The issue to be determined is whether the grievors are entitled to an additional 2% individual salary increase prior to their merit awards.

Starting with the letter dated November 25, 2005, set out above, it is possible to read the document in the manner that the grievors did. And the promise of a 5% increase in the letters defining the merit award was clearly read by the grievors as meaning a 5% increase to the base salary rate. Nonetheless, in light of the other evidence before the Board, the evidence falls short of establishing that they were entitled to a 2% individual increase to their salary rate prior to the application of the performance award, or that they were entitled to the entire 5% performance award as an increase to their base salary rate. Rather, the evidence is persuasive that what the employer approved, and offered to the employees, was a 2% extension to the salary maximum, allowing additional earnings potential, for those with merit awards at a sufficient level to progress to the maximum of the range. The pertinence of the wording relied on by the grievors in the November 25 document, read in light of the other documents and evidence, was that, prior to the calculation of the 04/05 merit award, which was implemented on the first day of the 05/06 fiscal year, their 04/05 salary was to be adjusted to take into account how far they would have travelled, by merit, on the pay grid, if the extensions to the ranges had been in place during the actual fiscal year 04/05. This would provide the correct base salary as of March 31, 2005 so that the 04/05 merit awards could be calculated and implemented effective April 1, 2005, the first day of the 05/06 fiscal year.

This conclusion is supported by the evidence of Ms. Caplan, as well as by other material filed with the Board. For instance, the subject is dealt with in one of the question and answer hand-outs sent to the Vanier grievors on October 31, 2005 in the following way:

Q6: When will our raises to our base pay and the retro for our earnings since April 1, 2004 appear on our pay?

A. There will be different processes depending on where you are in the salary range (I.e. minimum, within the range or maximum). As the implementation of the increases has changed from the past, the process and payments need to be reworked and recalculated. The following will provide you with additional information:

{sections dealing with Managers below salary minimum and maximum omitted here for the sake of brevity}

Managers at Maximum Salary

• Managers, at the previous salary range maximum effective April 1, 2004, will have their salaries recalculated to apply the lump sum award up to the new salary range maximum. For example, the recalculation that will occur for a manager who “met all “ (5%):

• Old April 1, 2004 salary plus 2% = new April 1, 2004 salary max

• Balance of P4P 04/05 award 3% paid as a lump sum payment on the new max rate.

• This will result in MCP managers receiving their correctly adjusted salary rates in advance of payment of the 2004/05 P4P awards.

• The adjustments to the base rates will be reflected on your December 1, 2005 pay. The retroactive adjustments, based on these new rates, will not be reflected on the December 1, 2005 pay.

Q7. When will we receive our 2004/05 pay for performance award?

A. Ontario Shared Services is calculating the awards now based on the salary in effect on March 31, 2005. The 2005 P4P awards (salary increases and lump sum payments) will be reflected on the December 29, 2005 pay.

And further:

Q15: Are we going to be brought up-to-date with P4P instead of being behind a year?

A. The awards for performance are based on past performance (e.g. April 1, 2004 to March 31, 2005). The increase for performance is on a go forward basis (April 1, 2005). We acknowledge the performance awards have not been paid in a timely manner.

The examples provided in a similar hand-out received by one of the grievors on November 4, 2005 also bear out the above interpretation.

The separate, but related, issue of whether there were any across-the-board

increases was dealt with in the same hand-out as follows:

Q 4: Are salary increases automatic?

A: In most cases no. Although MCP salaries have received increases – sometimes referred to as “automatic”, “across the board”, “salary revisions”, “cost of living adjustments”, etc. in the past, the employer has now moved to a full pay for performance system.

and

Q 9. Will all salary increases in the future be based on pay for performance?

A: Yes. A manager within MCP will progress through the salary range through P4P. Your increases will be determined by your performance.

Especially in a context of transition to a full merit-based pay scheme, being implemented retroactively, there was ample room for misunderstanding of the somewhat complex scheme involved here. Nonetheless, having carefully reviewed the oral and documentary evidence before me, in light of the submissions made, it is my conclusion that the grievance cannot succeed, as the employer was not offering what the grievors are claiming as a term or condition of their employment. Thus, it never became a contractual term which the Board might enforce. Thus, the circumstances do not disclose a breach of a term or condition of the grievors’ employment, and no remedy is in order.

In the result, for the reasons set out above, the grievance is dismissed.

Dated at Toronto this 5th day of October, 2006