PSGB#P-2012-4162, P-2013-3247

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE ACT

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

Loris Puntillo

Complainant

• and -

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

Employer

BEFORE

Kathleen G. O’Neil

Chair

FOR THE COMPLAINANT

Loris Puntillo and John Hosegrove

FOR THE EMPLOYER

Peter Dailleboust Treasury Board Secretariat Legal Services Branch Counsel

WRITTEN SUBMISSIONS COMPLETED

October 27, 2014

Decision

1This decision deals with two complaints filed by Mr. Loris Puntillo in which he complains of inequity and arbitrary employer action in relation to a financial award given to some but not all Managers under the Management Compensation Plan. This is based mainly on the fact that, for the fiscal years 2011/2012 and 2012/2013, certain managers at the top of their pay grade received compensation in the form of a lump sum which other managers did not receive. The complainant submits that the failure to pay similar payments to other managers, including himself, is a financial penalty, constituting an unfair labour practice and an unequal wage compensation strategy for managerial staff. Further, Mr. Puntillo sees this as an issue of equal pay for work of equal value, and at odds with payroll compensation directives, policies and legislation based on principles of equity, fairness, transparency and merit-based compensation.

2The complainant also submits that there is an expectation that employees receive notice of a substantial change in terms and conditions of their employment, especially one concerning merit pay and compensation. In this regard, he makes reference to a decision under the Employment Standards Act (ESA) dated March 21, 2011, requiring such notice in a case involving the City of Toronto.

3It is the employer’s position that the applicable policy was applied correctly, and that the complaint does not make out a viable case for the remedies sought.

The Background Context

4Mr. Puntillo is among many who have filed complaints with this Board contesting certain aspects of their compensation, and/or that of others of their colleagues, for the fiscal year 2011/2012 and ongoing, flowing from decisions by the employer related to pay for performance. In that year, pay for performance was set at 0%. In explaining the background of this widespread issue, the Board wrote the following concerning other managerial complainants in its recent decision Smith et. al and the Crown in Right of Ontario (Ministry of Community Safety and Correctional Services,, PSGB # P-2012-4155, 2014 CanLII 48098 (ON PSGB), dated July 9, 2014 :

As employees excluded from collective bargaining, they are covered by the Management Compensation Plan (MCP), which 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. For several years prior to 2012, employees such as the complainants have 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. That changed in 2011/2012 because of fiscal restraint, when the range of performance awards was set at 0%, basically freezing wages, regardless of whether performance was worrisome or wonderful. 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.”

5As with the Smith complaint, the focus of this complaint is what appeared to some as an exception to the general wage freeze. This was explained in the Smith decision as follows:

Despite the general lack of increases, some members of the Management Compensation Plan received lump sum payments in the end of 2012, while others did not, and it is this difference that the complainants are seeking to remedy. The employer sees the lump sum payments as a way to ensure that the managers who received them did not experience a decline in their basic annual earnings, while the complainants see them as an arbitrary favouring of the group of employees already at the maximum in 2011, by giving them a payment which was unavailable to others. The payments were provided on December 20, 2012 and were equal to the amount of lump sum performance awards paid in 2011.

6The Smith et.al. complaint was dismissed in part as beyond the Board’s jurisdiction, and in part because it did not disclose a factual basis for a viable complaint, known as a prima facie case, as it would have required the Board to set new terms and conditions of employment in order to grant the complaints. Given the similarity of this complaint to the one dealt with in the Smith et.al. decision, the Board wrote to the complainant, pursuant to the Board’s Rule 11, indicating its intention to dismiss the complaint as one related to pay for performance, providing him with a copy of the Smith decision, and affording an opportunity to make submissions before it did so. Rule 11 reads as follows:

Where the Board considers that a complaint does not make out a case for the orders or remedies requested, even if all the facts stated in the complaint are assumed to be true, the Board may dismiss the complaint without a hearing or consultation. In its decision the Board will set out its reasons.

The Board has assumed the facts in Mr. Puntillo’s complaints to be true, although in this case there were no disputed facts. It is the interpretation of the terms of Mr. Puntillo’s contract of employment and the applicable policy and law which is at the basis of this dispute.

Considerations and Conclusions

7The complainant took the opportunity to make submissions, in which he submitted that the case law supplied, i.e. the Smith et. al. decision, is not applicable to his specific complaint. Further, he states that he met all of the employer’s pre-existing conditions which would have qualified him for payment of a performance/lump sum payments in the years 2010 through 2013. This appears to be a reference to the fact that, while at the top of his pay range in 2010/2011, he did not receive a performance rating in that year. The information provided by employer counsel was that this was because Mr. Puntillo’s performance plan was not finalized by him after it was returned for further work. He did not dispute the fact that he did not receive a lump sum, or any other, performance award in 2011.

8In response to Mr. Puntillo’s submissions, employer counsel provided an explanation of how the pay for performance operating policy was applied to him for the 2010/11 performance year and how the policy relating to the lump sums referred to in Mr. Puntillo’s complaint applied to him in the year 2011/12. This indicates that, because he did not receive a lump sum payment in 2011, he did not receive one in subsequent years. It is the employer’s position that the policies were applied correctly given the circumstances of Mr. Puntillo’s case.

9The policy which provides for the disputed lump sum payments reads, in relevant part, as follows:

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 an 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.

The amount of the payment is an amount up to the variable re-earnable incentive payment in respect of the 2010-2011 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.

A Variable Re-earnable Incentive Payment is defined in the same policy as follows:

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.

This is the policy basis for the employer’s position that the lump sum payments paid for the fiscal year 2011/12, do not represent an increase in compensation for those who received them. Rather, the lump sum payments were provided as a way to prevent a decrease as compared to the year before for those who were eligible to receive them. As noted, the complainant’s view is that these lump sum payments were unfair because they were not paid to everyone.

10The Board has carefully reviewed this complaint, in light of the submissions referred to above, and the relevant policy. As noted in earlier decisions of this Board, in order for the Board to be able to award a remedy to a complainant, there must first be an existing term or condition of employment related to the facts complained of, something that is part of the complainant’s contract of employment. The term or condition of employment may be found in a contract, policy, statute or some more general principle of law. This is something more than a belief that something is unfair, no matter how deeply held.

Secondly, there must be a breach of that term or condition of employment, and thirdly, there must be a link between that breach and a remedy that the Board is empowered to give. See, for example: Antle v. Ontario (Ministry of Community Safety and Correctional Services), 2006 CanLII 30741 (ON PSGB) and Allen v. Ontario (Community Safety and Correctional Services), 2009 CanLII 43639 (ON PSGB).

11Mr. Puntillo’s complaint asks for relief based on a lack of transparency, fairness, equity and equal pay for equal work in the management compensation strategy for the fiscal year 2011/2012 and going forward. The full redress sought is to provide payments based on previous compensation policies and practices, or issue an equal bonus payment to all MCP staff, which will be addressed below.

12Mr. Puntillo is in a different factual position than most of the complainants in other cases challenging the same changes in compensation, in that it appears that he was at the maximum of his pay scale in 2011. However, he did not receive a lump sum award, or any other pay for performance that year, for other reasons, which Mr. Puntillo did not dispute in his complaint or subsequent submissions. To the extent that his complaint is, in origin, nonetheless a complaint that he was not awarded a lump sum in 2011 based on his performance, which would have formed the basis for receipt of lump sums in subsequent years, it is squarely a complaint about the denial of pay for performance, which is beyond the Board’s jurisdiction. Complaints about “compensation provided or denied to a public servant as a result of his or her performance” are specifically removed from the Board’s jurisdiction by s. 4(2) of Regulation 378/07 which provides that such complaints cannot be the subject of a complaint to this Board.

13Mr. Puntillo acknowledges that the Public Service of Ontario Act does not permit complaints involving performance related pay. Although Mr. Puntillo does not frame his complaint in terms of pay for performance, he does ask that the “previous compensation policies” be applied. The previous compensation policies that were applicable just before the disputed lump sum payments, provided only one way to increase salary for MCP employees, i.e. a favourable pay for performance award. To the extent that his request for relief is aimed at restoring those compensation policies as a way to obtain more compensation, the Board finds them to be in essence a request for pay for performance, or a complaint about the lack of it, and thus beyond the Board’s jurisdiction, as the Board lacks the power to remedy failure to pay performance-based compensation.

14To the extent that Mr. Puntillo complains that he should have received a lump sum payment in 2012 and following years, despite the fact that he did not receive one in 2011, the facts do not make out a viable case for a breach of the policy as to lump sum payments or any other term or condition of his employment that has been identified. This is because the policy requires a reduction in earnings as defined in that policy in order to qualify for the lump sum payment. According to the policy, set out above, a reduction occurs when an employee’s earnings, comprised of annualized base salary and any 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. Mr. Puntillo has not shown that his pay decreased in such a manner, and therefore the Board does not have a factual basis on which to find that the policy was not properly applied to him. The overall thrust of the compensation polices since 2011 has been to preserve the earnings of non-bargaining unit employees at 2011 levels. The facts before me do not show that Mr. Puntillo’s earnings fell below his 2011 level. He did not receive a lump sum performance award (called a variable re-earnable incentive payment in the policy set out above) in 2011, so the fact that he did not receive one in subsequent years did not result in a decrease in his pay. As the undisputed facts do not disclose a decrease in earnings between 2011 and 2012, the facts do not disclose a viable case of breach of the policy relating to the lump sum payments paid in 2012 and the intervening years. As a result, this portion of the complaint is dismissed for want of a viable or prima facie case.

15As for the alternate request that equal bonus payments be paid to all MCP staff, Mr. Puntillo has not established that there is any existing term of his employment providing such payments to those in his situation. Thus, there has been no breach shown of his terms and conditions of employment in this respect. As the Board is not empowered to create new terms and conditions of employment, the Board is not in a position to grant that remedial request.

16As noted, the complainant also relies on a claim to equal pay for equal work and unfair labour or pay practices. Similar arguments were also made by the complainants and dealt with by the Board in the Smith et.al decision. As to the equal pay argument, the Board wrote as follows:

There is also the claim for equal pay for equal work, including the statement that the arbitrary bonus payments violate the spirit of the Pay Equity Act. This aspect of the complaint has the ring of an allegation of an illegal compensation provision. And if there were anything in the alleged facts that established a viable basis for such a claim, the Board would have the jurisdiction to let the claim proceed. However, there is nothing in the material before me that constitutes a viable case of a violation of any policy or legislative provision as to equal pay for equal work. It can be seen from the provincial legislation providing for equal pay for equal work, and equal pay for work of equal value, that the kind of unequal pay that is illegal is that based on gender or sex discrimination. See, in particular, s. 42 (1) of The Employment Standards Act and section 8 of the Pay Equity Act where it is made clear that differences in compensation which are the result of compensation policies which do not discriminate on the basis of sex or gender do not constitute failures to pay equal pay in the sense prescribed by Ontario law. More generally, there is no suggestion of any gender-based disparity here, or of discrimination in wages on the basis of any other ground prohibited under the Ontario Human Rights Code. The only discrimination alleged is between those at the maximum of the pay grid in 2011, and those who were not. There is nothing in the material before me that persuades me that this is a viable claim of a breach of the complainants’ terms and conditions of employment, as there is no statute, policy or other term and condition of employment in evidence which arguably prohibits that kind of difference.

The above remarks are applicable to this complaint, with the exception that Mr. Puntillo was at the maximum of his salary range in 2011. Nonetheless, as discussed above, the fact that he did not receive a lump sum payment in 2011 has not been shown to be a breach of his terms and conditions of employment. Nor has it been shown to be an illegal differential payment on other grounds.

17As to the issues about transparency and general fairness of the disputed compensation terms, the Board wrote in response to similar themes in the Smith et.al. complaint:

Although it may be that specific communication earlier on might have given the complainants better understanding of the lump sum payments, and allayed concerns expressed in this complaint, there is nothing in the material before me that establishes a viable complaint of a violation of a specific term or condition of employment as to transparency, or specific amount of notice. As to the fact that the employer set the performance percentage at 0% after the performance year, the facts do not establish a viable case of a breach of the policy in this respect. The complainants had notice, in the longer standing pay for performance policy of the employer’s practice of setting the level of the performance award, if any, after the performance cycle, even if their attention was not specifically drawn to it before the compensation freeze at issue in this decision. More

generally, as in the Garratt decision, … [Garratt et al and the Crown in Right of Ontario (Ministry of Health and Long-term Care) P-2003-1670,

(O’Neil), 2005 CanLII 53194 (ON PSGB)], the allegations concerning transparency and fair and equitable treatment concerning wages are inseparable from the elements of the complaint which essentially ask the Board to set different terms and conditions of employment. I am not persuaded that they make out a viable allegation that is within the Board’s remedial authority.

To similar effect is the Board’s July 11, 2014 decision in Kaine v Ontario (Children and Youth Services), 2014 CanLII 48097 (ON PSGB), PSGB # P-2013-1036 (O’Neil).

18The Smith and Kaine decisions also dealt with the argument concerning the Employment Standards Act made by Mr. Puntillo in one of his complaints. In support of this position, the complainant refers to a March 21, 2011 decision under that legislation. This is presumably the decision rendered on that date dealt with in Smith and Kaine , i.e., Non-union Staff of the City of Toronto and the City of Toronto ; Claim #’s 70063991-1, etc., a decision of Employment Standards Officer Rick Richards, concerning pay for performance for the City of Toronto non-bargaining unit employees. In that decision, it was found that there is an expectation that employees receive notice of a substantial change in terms and conditions of their employment, especially one concerning merit pay and compensation. Further, it held that the merit pay of the City staff amounted to “earned wages” and was therefore payable. The following excerpt from the Kaine decision dealing with this point is also applicable to this complaint:

The complainant also states that there is an expectation that employees receive notice of a substantial change in terms and conditions of their employment, especially one concerning merit pay and compensation. The complainant states that no such notice has been received to date announcing the continuing entitlement to bonuses solely for current and former staff already at the max of their salary grid. The reference to “earned wages” is a reference to the requirement in Part V of The Employment Standards Act that the employer pay earned wages, which was the basis of the City of Toronto decision. The reference to bonuses solely for those at the maximum of the grid was also the focus of the Smith complaint. These themes were addressed in the Smith decision, cited above, as follows:

I have also carefully considered the viability of the claim that the complainants had a legitimate expectation that they would be paid pay for performance or that they would receive reasonable notice if they were not going to receive it. Reference was made in this respect to the City of Toronto decision, cited above. Quite apart

from the undisputed fact that Part V of The Employment Standards Act, relied on as the basis of that decision, does not bind the Crown, I find the facts of that case sufficiently different that the decision lends little support to the complainants’ case.

The findings of fact included that the employer, by way of a vote at City Council, had authorized the payments in question, and then tried to withdraw them after the employees’ right to them had vested. In this case, there is no evidence that the payments sought had been authorized for those who were not at the maximum of the grid in 2011. As well, although there is little doubt that the pay for performance policy is a term and condition of employment of the complainants, just as it was for the non-union City employees, there is nothing in the City of Toronto decision that indicates that part of the City’s policy was an express provision that the levels of pay for performance could be set at 0% in any year. No doubt, the fact that performance awards had been made in all recent years distracted from employees’ concentration on the part of the policy that allowed the employer to refrain from approving performance awards for any given performance cycle. Most basically though, there is no exemption in The Employment Standards Act from the consideration of complaints related to pay for performance as there is in this Board’s governing regulation.

In other words, it is true that Pay for Performance is a term and condition of managers’ employment, but is one which the regulation removes from the complaints which the Board has the power to consider or remedy. In any event, the Pay for Performance policies include explicit provisions that awards may not be granted in any given year, and that the amount of any award will be set after the performance cycle. Therefore, although the pay for performance policy is no doubt intended to help motivate managers to perform well, in the form currently in evidence, it does not guarantee any payment in any given performance cycle, and explicitly provides that the level of any payment will be set retroactively.

19Mr. Puntillo also asserted in his complaints that the employer’s actions amounted to bad faith, an unfair labour practice, or the imposition of a monetary penalty. The Board does not find a sufficient basis in the facts underlying the complaint to find that the compensation changes are improper in those ways either. In respect of bad faith, there is nothing to suggest that the failure to pay a lump sum to Mr. Puntillo was for an improper reason, or was in bad faith, in the sense of pretending to do one thing while actually doing something else. In terms of the assertion that there is an unfair labour practice, there is no statutory or other provision mentioned that would prohibit the contested lump sum payments. It appears that the complainant is using the term to

describe the allegation of general unfairness dealt with above, and in the case law cited above. Understood as a payment to maintain all managers’ pay at 2011 levels, the lump sum payments do not make out a prima facie case for any remedy. Nor is there any

factual basis in the material for the Board to find that the failure to pay a lump sum to Mr. Puntillo is a monetary penalty.

20As with many other complaints before this Board, this complaint is in essence about the absence of a desired term or condition of employment, rather than a request to remedy a breach of an identifiable existing term or condition of employment. What the complainant is claiming would be tantamount to creating a term or condition of employment that would grant him a lump sum payment in 2012 and after, despite not having received one in 2011, or to grant him some other kind of increase in the intervening years, despite the general wage freeze. This is not something provided for in the current policy or other terms and conditions of employment, so the fact that the complainant did not receive a lump sum payment or other additional compensation has not been shown to breach an existing term or condition of employment.

21The Board is not entitled to “remedy” a situation unless it finds a breach of an established term or condition or employment, or a sufficient basis to conclude that the employer conduct is arbitrary, in bad faith, discriminatory in the sense of based on some illegal ground or in breach of some other principle of law or statutory provision. For the reasons set out above, this is not such a case.

22For all of the above reasons, the Board finds that the complaint must be dismissed as beyond its jurisdiction as it relates to the denial of pay for performance and in respect of its claims for the setting of new terms and conditions of employment, and as failing to make out a viable case of a breach of any existing term or condition of employment.

23In the result, the grievance is dismissed.