PSGB#P-2012-4483

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE ACT OF ONTARIO

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

Fred D’Intino

Complainant

• and -

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

Employer

BEFORE

Kathleen O’Neil

Chair

FOR THE COMPLAINANT

Fred D’Intino

FOR THE EMPLOYER

Peter Dailleboust Treasury Board Secretariat Legal Services Branch Counsel

CONFERENCE CALL October 1, 2014 WRITTEN SUBMISSIONS COMPLETED May 22, 2015

Decision

1This decision deals with two complaints filed by Mr. Fred D’Intino in which he complains that a lump sum paid to him in 2012 and subsequent years was incorrectly calculated. The employer takes the position that Mr. D’Intino’s terms and conditions of employment have been correctly applied. There was no objection to the Board’s jurisdiction to hear and determine this complaint.

2This case arises because two sets of changes came together to affect Mr. D’Intino’s compensation in 2010 and since 2011.

3The first change was individual, involving Mr. D’Intino’s acceptance of an acting assignment in 2010. Mr. D’Intino’s home position is as an Operational Manager, in the OCR16 classification. For the period November 1, 2010 to June 30, 2011, he served in an acting assignment as a Deputy Superintendent, which is in a higher rated classification, AIM18. He then stepped down to his former top level pay at the OCR16 rate, as of July 1, 2011.

4The second change relates to fiscal restraint measures which applied to the period of transition from Mr. D’Intino’s temporary assignment back to his home position. For the fiscal year 2011/2012, which starts on April 1, 2011, the employer introduced restraint measures impacting pay for performance for employees like Mr. D’Intino who are covered by the Management Compensation Plan (MCP). The MCP is set by a combination of directives issued by Management Board of Cabinet and government-wide compensation policies consistent with them, rather than by collective negotiations as is the case for members of bargaining units.

5For several years prior to 2012, employees such as the complainant had been able to increase their compensation by only one route: a favourable pay for performance rating from their superiors. Those ratings were translated, according to annually set policy, into a range of percentage increases. A zero percentage rating was reserved for those with problematic performance ratings, and a person covered by the MCP who met or exceeded performance expectations received an increase in each of the years leading up to this complaint.

6That changed in 2011/2012 because of fiscal restraint, when the range of performance awards was set at 0%, basically freezing wages, regardless of how effective performance was. In the policy dated September 28, 2012 which describes this, one reads that performance pay for the 2011-12 year is set at zero percent for non-bargaining unit Ontario Public Service employees, and that “the earnings of non-bargaining unit employees, who were eligible for performance pay, are to remain at 2011 levels.”

7The provision that pay was to remain at 2011 levels meant a straightforward wage freeze for employees who had been below the maximum of their pay grid in 2011. For those who were at the maximum of their pay range in 2011, pay for performance was paid out in late 2011, in lump sums which did not become part of their base salary. Just freezing the base salary would have meant a decline in basic compensation for those employees, as there were to be no performance-based increases in respect of the following fiscal year. Instead, the compensation policy with an effective date of September 28, 2012 provided for a different kind of lump sum payment, more of a maintenance payment, intended to ensure that the managers who received them did not experience a decline in their basic annual earnings. The payments, provided in December 2012, as retroactive compensation for the fiscal year April 1, 2011 to March 31, 2012, were equal to the amount of lump sum performance awards paid in 2011, but were explicitly not linked to the level of performance in the fiscal year for which they were granted. Eligibility for these lump sum payments was limited to employees who had been at the maximum of their grid in 2011, which included Mr. D’Intino. He was already at the top of the OCR 16 grid before moving into the AIM 18 acting assignment.

8Acting assignments are not unusual in the public service, and the applicable compensation policies contain detailed rules for how pay is to be calculated for employees moving between classifications. As Mr. D’Intino was in two different classifications during the fiscal year 2010-2011, his performance pay, which was set at a positive percentage for that fiscal year, was calculated first as an award for the total year, but then divided into two parts. For the period he had been in his home classification, April 1 to October 31, 2010, he was paid a lump sum, pro-rated for those seven months, which came to $1,616.12. For the 5 month period of that same fiscal year when Mr. D’Intino was in the higher level acting position, but at a level below the maximum of the higher salary range, his positive performance award was applied to increase his salary by $1,194, retroactively to April, 2011, a benefit he enjoyed for only the three months he was in the acting position within the next fiscal year.

9Mr. D’Intino does not dispute his pay for the fiscal year 2010-2011, set out just above. The issue relates to the following fiscal year, and whether the combination of the transitional rules as to calculation of salary when moving between home and acting positions and the policy related to the maintenance lump sum in 2012 to 2014 were applied correctly.

10Most directly at issue is the provision of the pay-for-performance policy which provides that on return to the home position, the award for the home position is calculated as if the acting assignment had never occurred. Mr. D’Intino submits that the effect of that provision should mean that the amount of his lump sum payment in 2012 should be the same as if he had been in his home position for the whole time, pro-rated for the time he was in his home position, 9 months of the fiscal year 2011-2012. The figures provided by the employer establish that, if Mr. D’Intino had been in his home position for the entire fiscal year 2010-2011, his lump sum payment paid out in 2011 would have been $2,775.04, rather than $1,616.12.

11For the fiscal year 2011-2012, the pay for performance rates had been set at zero, so non-bargaining-unit staff did not receive any pay for performance. Instead, those who had received a lump sum above their maximum in 2011 and whose base compensation, as defined in the compensation policy, would have decreased as a result of the zero percentage performance awards, received a maintenance lump sum in the same amount as the lump sum portion of their performance award in respect of fiscal year 2010-2011. The employer’s position, supported by the policy, is that these 2012 lump sums were not pay for performance. Indeed, they were not provided for in the pay-for-performance policy, and they did not vary according to actual performance in the fiscal year 2011-2012, or thereafter. The policies which authorize them for the years 2012-2014 in evidence provide essentially the same eligibility requirements, with small differences in wording and references to the relevant fiscal year. The most relevant part of the text of the policy with effective date of September 28, 2012 is as follows:

Policy Statement

In accordance with Management Board of Cabinet Directive 33-36, performance pay for the 2011-12 year is set at zero per cent 0% for non-bargaining unit Ontario Public Service employees. The earnings of non-bargaining unit employees, who were eligible for performance pay, are to remain at 2011 levels.

Principles

The earnings of SMG, ITX, OPP1, OPP2, MCP and CC5 employees (non-bargaining employees), who were eligible for performance pay, are to remain at 2011 levels subject to the eligibility criteria and the exceptions set out in this policy.

Employees who are paid within the salary range of their position will have their earnings maintained at their 2011 level.

For employees who were at the maximum of their salary range on April 1, 2011, the application of the 0% performance pay may result in a reduction of their earnings in 2012 from the 2011 level.

A reduction in earnings occurs when the employee’s earnings (comprised of annualized base salary and variable re-earnable incentive payment) for the fiscal year starting April 1, 2012 are less than their annualized salary for the fiscal year starting April 1, 2011.

In these instances, the employees may be eligible to receive a payment to maintain their earnings at their previous year’s level.

A payment may also be awarded to preserve an employee’s earnings entitlements upon a promotion.

The amount of the payment is an amount up to the variable re-earnable incentive payment in respect of the 2010-11 performance cycle.

The payment does not alter the employee’s annual base salary or salary-based benefits and is not included in pensionable earnings calculations.

Employees who received a base salary adjustment, but not a variable re-earnable incentive payment in respect of the 2010-11 performance cycle are not eligible for a payment.

In the policies for fiscal years 2012-2013 and 2013-2014 the policy had a purpose section which referred to the compensation freeze as providing that “public sector managers would not earn any more money for the next two years than they did last year.” This change in wording provides more of a focus on limiting increases rather than preventing decreases.

12In 2012, Mr. D’Intino received the same amount as a lump sum as he received as a lump sum in 2011, i.e. $1,616.12. The question to be decided is whether he was entitled to more than that. He claims for the fiscal year 2011- 2012, when he was not in his home position for the full year, the difference between the $1,616.12 he received and the amount of a full-year’s award pro-rated for 9 months, and for the subsequent years, when he was in his home classification all year, a full-year’s award minus the $1,616.12 received in each year.

13In support of his position, Mr. D’Intino relies on the provision in the pay-for-performance operating policy to the effect that on return to the home position, the award for the home position is calculated as if the acting assignment had never occurred. As noted above, it is clear from the employer’s figures that if Mr. D’Intino had never been in the acting position, his performance award for the 2010-2011 fiscal year would have been $2,775.04, and that it would have been paid out as a lump sum because he was at the maximum of his salary grid. Mr. D’Intino points out that the result of the employer’s interpretation is that he has effectively been penalized for stepping up into the higher-rated position for as long as the pay for performance level is maintained at 0%. He states that he cannot believe that the intent of the policy was to financially disadvantage employees who step up to higher levels of manager, to gain career experience or help out when asked. He submits that the policies were not applied to him fairly, because the award is still being pro-rated, even though he is now working full years in his home position. He is of the view that he is being treated as if he never returned to his home position. Mr. D’Intino submits that this treatment is in contravention of the Principles of the Pay for Performance Operating Procedures where it is stated that the policy supports improved organizational performance and rewards excellence in employee performance.

14By contrast, the employer relies on the portion of the compensation policies for the years since 2011 that provide that managers may be entitled to a maintenance payment up to the variable re-earnable incentive payment in respect of the 2010-2011 performance cycle. The employer’s case is based on the straightforward arithmetic of the Iump sum portion of Mr. D’Intino’s 2011 performance award: Mr. D’Intino received $1,616.12 as a lump sum in respect of the 2010-2011 performance cycle. In the employer’s interpretation, this “up to” rule basically provides a cap on what he is entitled to receive in subsequent years, in the amount of the lump sum portion only of his 2010-2011 performance award.

15The term “Variable Re-earnable Incentive Payment” is defined as follows in the compensation policies since 2011:

Performance related payment, paid as a lump sum, to employees at the maximum of their salary range. The payment of a variable re-earnable incentive does not alter the employee’s annual base salary or salary based benefits and is not included in pensionable earnings calculations.

16The term “Variable Re-earnable Incentive Payment” is not found in the pre-2011 policy. The related term “re-earnable incentive award” is found in the Management Compensation Plan “Pay for Performance Operating Procedures” dated April 2008. It is not defined separately, but it is described in detail for each situation of movement in a manager’s career, both as to how it is calculated, and how it is paid. As noted above, in Mr. D’Intino’s situation, part of his re-earnable incentive award for 2010-2011 was paid as a lump sum, and part of it was paid to increase his salary during the portion of the following fiscal year that he was still in the higher paid acting position, but below the maximum of that range. The terms “within-range” award and “lump sum payments” are used to describe the two portions of the performance award in the Pay for Performance Operating Procedures dated May 16, 2008.

17The substantial merit in Mr. D’Intino’s claim is that his pay does not appear to be in line with the stated general intention of either the pre-2011 policies or the post-2011 ones, in two respects. His pay since 2011 has not been maintained at the 2011 levels, as defined in the policy, as the policy stated was the intention, and, since his return to his home position, the maintenance payment he has received does not reflect what it would have been if the performance award were applied as if the acting assignment had never occurred. From the fact that Mr. D’Intino received a maintenance payment in 2012, it is clear that the employer found that he met the basic eligibility criteria, which included that the provision of a 0% performance award would result in a reduction in earnings. This is the policy basis for any payment to maintain a manager’s earnings at the 2011 level.

18Mr. D’Intino compares what the lump sum portion of the incentive award for 2010-2011, would have been, calculated as if the acting assignment had never occurred, with what he actually received. As indicated above, the lump sum portion of the award would have been $2,775.04 if calculated as if the acting position had never occurred, but what he received in each of the subsequent years was $1,616, which is the amount pro-rated to take into account the acting assignment in the performance period 2010-2011. For the following years, he claims he should have, as a maintenance payment, an amount proportional to time he spent in his home position. For the years when he has worked the whole year in his home position, he is of the view that he should get the proportional maintenance payment, i.e. a full $2,775.04. Instead, he has received only $1,616, which represents the proportional amount for the year 2010-2011 when he worked 30.4 weeks of that year in his home position.

19On the other hand, the merit in the employer’s position is that the precise wording of the post-2011 policies appear to have been applied to Mr. D’Intino. The maintenance payment has been paid up to the amount of the lump sum payment made in terms of the variable re-earnable incentive in respect of the 2010-2011 performance period. This is in accordance with the provisions of the post-2011 compensation policies which provide that the amount of the maintenance payment is up to the variable re-earnable incentive payment in respect of the 2010-11 performance cycle, and the definition of the variable re-earnable incentive payment as a performance related payment, paid as a lump sum. As well, a notable feature of all the policies in question here is that they make it clear that all entitlements are subject to the criteria and exceptions within them. In the circumstances, the limitations provided in the written compensation policies and procedures are effective limitations on what the Board can award to a complainant. This is because the Board does not have the authority to create new terms and conditions of employment, only to enforce existing ones.

20There are two provisions which limit the application of the general policy statements, which together convince the Board that the post-2011 policies, read in detail, do not provide what Mr. D’Intino claims. First, there is the limit in the post 2011 policies of a payment “up to” the lump sum payment in respect of the 2010-2011 performance period. Secondly, there is the following provision in the 2008 Pay for Performance Operating Procedure:

• On return to the home position, the award for the home position is calculated as if the acting assignment had never occurred. The salary is increased by the amount of the award, up to, but not exceeding, the maximum of the salary range for the home position (any lump sum above the maximum has already been paid).

• No further lump sum is owed on return to the home position, as any lump sum owed to the employee was paid out at the time the pay for performance awards were processed (during the acting assignment). [Italics added for emphasis]

21I have carefully considered Mr. D’Intino’s submission about the Compensation Policy and Eligibility procedures for 2012, 2013, 2014 to the effect that none of these policies override the 2008 Pay for Performance procedures which provide that on return to the home position, “the award for the home position is calculated as if the acting assignment had never occurred.”

22The answer to this submission is that, although Mr. D’Intino is correct that, for determining the home position salary, the time in the acting assignment is treated as if it never occurred during the previous performance cycle, that is not the case for the application and payment of the lump sum in respect of that fiscal year. The policy goes on to provide that in applying the calculation, as noted above, “If the employee was eligible for an award in the home position and already received a prorated lump sum award, no further lump sum is owed.” This creates a perhaps less noticeable, but nonetheless present, distinction between how the award is calculated and how it is applied and paid. This did not likely have any negative effect during years where there was a positive incentive percentage the following year. However, when the zero percentage award is combined with the absence of proportionality concerning the lump sum in the post-2011 compensation policies, there is the negative effect Mr. D’Intino has identified.

23Given the above limitations, the Board has come to the conclusion that it does not have a basis on which to order the employer to pay more than the payment made in relation to the 2010-2011 performance cycle, and thus this grievance will be dismissed. The Board does not have the discretion to ignore the limitations inserted into the post-2011 compensation policies.

24With that said, it is clear that the expectations created by the policy statements and the general equities of the situation would support the result that Mr. D’Intino is seeking. The effect of the wage freeze since 2011 was to suspend the performance related percentage payments contemplated in the pay for performance scheme. In order to carry out the wage restraint policy, however, it does not appear that it was necessary to also suspend the more general, and time-honoured, provision of those policies, concerning proportionality to the time worked in any given position. Indeed, the later policies do not explicitly do so. For instance, there is no suggestion that for the base salary of any classification, the rules related to proportion of time worked in a position are not being applied throughout the OPS. Nonetheless, a lack of proportionality in respect of the lump sum maintenance payment is the effect of the current wording of the post-2011 policies.

25Why the principle that pay is proportional to the time worked in a position was not integrated into the post-2011 policies in respect of the lump sum maintenance payment is not in evidence. The amount of the maintenance payment could have been defined in a manner proportional to the amount of time spent in the relevant position. It is frankly mystifying as to why the detailed attention given to movements in a manager’s career in the pre-2011 policy are not captured in the compensation policies for the intervening fiscal years, so that a person such as Mr. D’Intino would not be held to a maintenance payment at a level proportional to a partial year in his position, when he is now working a full year in that position. There is no policy reason made known to the Board why a manager who was fully effective in both his home and more highly rated positions should be paid less in subsequent years than if he had not taken on the challenge of the higher-rated position. Clearly, this is something that could be remedied, retroactively and going forward, in any future policies for periods in which the percentage performance awards remain at 0%.

26Mr. D’Intino, as noted above, accepts that he was paid properly in respect of the fiscal year 2010-2011, the last time there was any performance-related payment. What is missing in the subsequent compensation policies is any provision to acknowledge the effect of the partial year in his home position, which would be in line with the proportionality provisions in the previous policies, and the present ones in terms of base salary. However, to summarize, without a provision in the compensation policies applicable to the years since 2011 which provides for payment of the lump sum in a manner proportional to the time spent in the home position, the Board is not in a position to grant Mr. D’Intino’s complaint.

27In the result, the complaint is dismissed.