PSGB#P-2014-4771
IN THE MATTER OF AN ARBITRATION
Under
THE PUBLIC SERVICE ACT OF ONTARIO
Before
THE PUBLIC SERVICE GRIEVANCE BOARD
BETWEEN
Pasquale Naccarato
Complainant
- and -
The Crown in Right of Ontario (Ministry of the Attorney General)
Employer
BEFORE
Kathleen G. O’Neil
Chair
FOR THE COMPLAINANT
Pasquale Naccarato
FOR THE EMPLOYER
Omar Shahab Treasury Board Secretariat Legal Services Branch Counsel
HEARING
July 31, 2015
Decision
1This decision deals with the employer’s preliminary objection to the complaint of Pasquale Naccarato, which claims entitlement to a lump sum payment for 2014 and 2015. The employer maintains that the adjudication of this complaint should not proceed on the merits because it is foreclosed by Minutes of Settlement. By contrast, the complainant takes the position that he should be permitted to raise the unique circumstances of his case, including what he alleges is a misrepresentation and failure to disclose important information prior to the signing of the Minutes of Settlement.
The factual context
2The facts necessary to this decision are those asserted by Mr. Naccarato, which are assumed to be true for the purposes of this motion, and are summarized below. Although the employer reserved its right to contest facts should the matter be allowed to proceed, there was no significant dispute about the facts, although there is disagreement about their legal effect.
3On December 6, 2013, Mr. Naccarato and the employer entered into a document entitled “Memorandum of Settlement and Release”, which provided for terms on which his dismissal without cause would proceed. It was intended to be confidential, so I will describe only the terms necessary to this decision, and in a manner which protects the confidentiality of the terms to the extent possible. Nonetheless, in coming to my decision, I have considered the document in its entirety.
4Mr. Naccarato remained on payroll between November 11, 2013 and September 1, 2015, the effective date of his dismissal, but was not required to provide any services to the employer for that period. The employer agreed to pay a fixed sum of money, from which the payments made during the period he remained on payroll would be deducted. The language of the settlement includes an agreement that the payments contemplated by the agreement represent pay in lieu of notice, severance pay and any and all damages, real or anticipated resulting from the employee’s employment or dismissal therefrom. An amount was agreed to be reimbursed in respect of legal advice to Mr. Naccarato relating to the Minutes of Settlement, and they contain an acknowledgment that he had read and understood the agreement and had an opportunity to seek and obtain independent legal advice, and that he voluntarily accepted its terms when he signed it.
5There was a detailed release clause which included a release from claims under the Public Service Act 2006 and its regulations, and an agreement that the payments agreed to satisfied any and all obligations the employee may have pursuant to the Public Service of Ontario Act. As well, the parties agreed to the following paragraph:
The parties agree that this Agreement [the Minutes of Settlement] constitutes the entire agreement between the parties and supersedes any and all written agreements, arrangements, or understandings between the Parties in connection with or incidental to the employment of the Employee or the termination of such employment.
6What started the chain of events which resulted in this complaint was Mr. Naccarato’s receipt of a lump sum payment on September 11, 2014, in addition to his regular payroll payment. Mr. Naccarato cites press releases which quote a Treasury Board spokesperson as describing the lump sum payments as part of regular compensation to ensure managers did not receive a lower salary than in previous years, and not pay for performance. As discussed more fully in several decisions of this Board starting with Smith et. al and the Crown in Right of Ontario (Ministry of Community Safety and Correctional Services, PSGB# P-2012-4155, dated July 9, 2014 (O’Neil), 2014 CanLII 48098 (ON PSGB), such payments were paid to employees who had been at the maximum of their pay scales in 2011. Pursuant to the terms of the pay for performance policy, they received their pay for performance in a lump sum, rather than an increase in salary rate, so that their annual compensation included their salary and the lump sum payment. By contrast, managers who were not at the top of their salary grids received pay for performance as salary rate increases up to the maximum of the grid. When the employer set pay for performance at 0% as part of a wage restraint program after 2011, there was no opportunity to be paid pay for performance. The employer decided to pay lump sum payments for managers who had been at the top of the pay grid to maintain their compensation at the pre-restraint level, so that it would be a compensation freeze, rather than a pay cut. Mr. Naccarato acknowledges that he had in fact received such lump sums in previous years.
7In the fall of 2014, the employer concluded that, given the terms of the settlement, the payment of the lump sum to Mr. Naccarato for 2014 was in error, and deducted it from Mr. Naccarato’s pay in installments during the last 7 pay cycles of 2014. Mr. Naccarato’s claim is essentially that the compensation in the Minutes of Settlement should have included the amount of the lump sum payment for 2014 and 2015. He claims he should not have had the amounts deducted in 2014, and he should receive an equivalent amount in 2015. It is not disputed that if he were paid these lump sums in addition to the fixed amount in the Minutes of Settlement, it would be a greater amount of compensation than contemplated in that agreement.
8There was no discussion of the lump sum payments prior to the signing of the Minutes of Settlement. Although in arriving at the fixed amount in the Minutes of Settlement, the parties were approximating pay for a contemplated number of months of the complainant’s salary, the fixed amount is not characterized as the result of a formula of any kind, or as representing what Mr. Naccarato would have been paid had he continued to be in active employment. Nor is there is a clause that specifically precludes him from receiving performance based or other payouts.
Considerations and conclusions
9The employer framed its motion as a request to dismiss for want of a prima facie case, i.e. it is the employer’s position that, even assuming all the facts asserted by Mr. Naccarato to be true, there is not a sufficient basis for his complaint to succeed. Counsel argues that the wording of the settlement and the relevant jurisprudence make it clear that the facts alleged do not entitle him to the lump sums he claims. Cases referred to are listed in the Appendix, all of which have been considered, and will be discussed as necessary below.
10Counsel stresses that parties to settlements are held to the clear language they have signed unless there are very exceptional circumstances which, in the employer’s view, are not present in the facts alleged. Referring to the clause stating that the Minutes of Settlement were the entire arrangement and superseded all other arrangements, counsel argues that there are no longer any other terms and conditions of employment for Mr. Naccarato. What is contained in its wording is what is enforceable, and two years of lump sums over and above the significant fixed sum mentioned there was not one of the terms.
11Counsel also argues that the press release information amounts to extrinsic evidence which is not admissible to interpret the agreement unless there is ambiguity in the settlement. It is the employer’s position that the wording of the settlement is very clear, and there is no need to look outside its terms to understand its meaning. Further, even if one takes account of a press release in 2014, it says nothing about the entitlement of a person who has signed an exit agreement who is no longer in active employment who has agreed to other terms to govern his departure.
12By contrast, Mr. Naccarato’s submission is that the employer essentially deceived him or engaged in misrepresentation in not confirming his total compensation to him during the negotiations that lead to the agreement, which would have included the lump sum payment. He is of the view that the employer alone must disclose how a termination benefit is calculated and disclose that to the employee. He asserts that in withholding this vital compensation information, the employer did not act in good faith. Because of this failure to disclose, Mr. Naccarato submits that the intent involved in the agreement, to which he would normally be held accountable, is questionable. He alleges that the employer hid what was his true total compensation, in effect reducing the compensation package by up to 4% compared to what it should have been. Mr. Naccarato submits that prior to 2014, the employer never explained what the lump sums were for, and only admitted that they were part of managers’ legal total compensation in September 2014. He asserts that the information was withheld from him and other employees for political reasons.
13Mr. Naccarato quotes Black’s Law Dictionary’s definition of bad faith as generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or neglect or refusal to fulfill some duty, not prompted by an honest mistake, but by some interested or sinister motive. Mr. Naccarato asserts that the employer categorically acted in bad faith as the lump sum was provided for 3 years with no memo, letter or justification sent to the employees impacted. He further asserts that the employer did not update the Pay and Compensation Directives to deal with the lump sum payments in order to avoid public scrutiny. It is his view that the announcement in September 2014 was an admission of bad faith and a retroactive clarification to the Pay and Compensation directives, which proves that the employer acted in bad faith on and before the day he signed the Minutes of Settlement.
14It is the complainant’s contention that granting the employer’s motion would release them from any liability when dealing with its employees in bad faith. The Board is urged to hold the employer accountable for not disclosing his true compensation. Had the employer told him that the lump sum was part of his compensation, he would have added that to the amount of the settlement.
15As discussed in previous decisions of this Board, such as Younger, cited in the appendix, the Minutes of Settlement are a contract, and answering the question as to whether they preclude this complaint from proceeding involves interpreting their terms to ascertain what the parties intended in that respect. The rules of interpretation include that the parties are assumed to have expressed their intentions in the words that they used, and that they are to be held to the plain meaning of those words, understood in context, unless to do so would lead to some absurd or illegal result, or there is reason to find that it was not a valid contract in the first place.
16The allegation of bad faith must be dealt with first, as bad faith could affect the validity of the contract. If the facts disclosed a viable foundation for such a complaint, it is one that the Board could hear, as bad faith is an element, along with duress or fraud, that may lead to a conclusion that there was no real consent to a contract such as a settlement. However, assuming the facts asserted by Mr. Naccarato to be true, I do not find that they disclose a sound basis for a finding of bad faith. The facts which Mr. Naccarato asserts amount to bad faith are that the employer had not acknowledged prior to 2014 that the lump sum payments that he had received were part of his regular compensation, and that the employer did not disclose this during the negotiations, confirm his total compensation or explicitly state the basis for the calculation of the fixed amount agreed to.
17Although the employer is assumed to have intended its actions, there is no sufficient basis in those facts to find or infer that the failure to raise the issue of the lump sums amounts to bad faith. Most importantly, the lump sums were not a matter exclusively within the knowledge of the employer. Mr. Naccarato acknowledges he was aware he had received them more than once prior to 2014. In any event, the employer’s representatives were not obliged to invite him to consider whether the significant sum already agreed to should be enhanced by including further entitlement to sums equivalent to two years of lump sum payments. As well, he had his own legal advice, something it is clear he had disclosed to the employer. Mr. Naccarato argues that the legal advice he received was without the benefit of full disclosure of what his total compensation actually was. Since there is no assertion that he did not know what he had been paid in the period leading up to the settlement, I do not find that the fact that the lawyer did not have specific disclosure from the employer changes anything. Mr. Naccarato worked for the government of Ontario for 34 years, and there is simply no basis for me to find that what he had been personally paid was a secret to him, or that he believed that the lump sum payments he had received both before and after the start of the wage restraint program were not part of his compensation package.
18As to the idea that Mr. Naccarato did not know until after he signed the agreement that the employer considered the lump sums to be part of his regular compensation, I do not find that this is a sufficiently material consideration to find that the contract is not binding. Having received such a payment at least twice after the restraint program began, he might reasonably have considered them regular himself. More to the point, and in any event, he was completely at liberty to ask that they be included in the settlement negotiations, regardless of how the employer characterized them. It is possible the employer might have agreed to include them, or not, but there is no legal requirement of which I am aware that its representatives offer to do so. There is simply an insufficient basis in the facts asserted for the Board to find that the employer’s failure to raise the issue of including the lump sums in the offered compensation amounts to bad faith. Further, there is no evidence that Mr. Naccarato was discouraged from asking for clarification or any confirmation of the terms of his compensation package prior to agreeing to the Minutes of Settlement, or that he was denied any request for information about the lump sum payments during the negotiations.
19Mr. Naccarato also asserts that the reason the employer did not share the fact that the lump sum payments were part of regular compensation was a desire to avoid public embarrassment. Even assuming this to be true, it does not lead to a proper inference of bad faith, or intentional misrepresentation to him in its negotiations with him, in not offering him more compensation than it did. There is no indication at all that the Treasury Board spokesperson involved had anything to do with the negotiations with Mr. Naccarato. Although, as Mr. Naccarato points out, there is only one legal employer, it is the conduct of the representatives with which he dealt that he is saying was improper. More importantly, there is no basis in the material on which to infer any intention on the employer’s part that the general approach to lump sum payments referred to in the press releases would apply to persons not in active employment who had agreed to other terms governing their relationship with the employer.
20Further, there is no allegation or fact that gives some other basis for the Board to find that the Minutes of Settlement are not enforceable. Therefore, the question becomes whether this complaint can proceed in light of the settlement terms. As in several of the cases cited in the Appendix, the terms of the agreement are very clear that the settlement was intended to resolve all matters and issues relating to the employee’s employment and dismissal from employment. This complaint clearly is in respect of a matter and issue relating to Mr. Naccarato’s employment, which, by operation of its enforceable terms, was resolved by the Minutes of Settlement.
21More specifically, this complaint is a claim for entitlement to compensation in relation to an allegation against the employer in respect of employment or flowing from his dismissal arising under the Public Service of Ontario Act, something specifically foreclosed by the terms of the settlement. Mr. Naccarato and the employer, the parties to the Minutes of Settlement here in question, expressly turned their minds to whether he should be entitled to bring such a claim. They have expressed their intention in very clear terms to the effect that he has given up the right to bring a claim such as this. To repeat what the Board said in Younger:
Absent duress, which is not alleged, or some other circumstance that would justify not enforcing this clear contract, it is the Board’s duty to enforce that settlement, rather than to re-open it. As the Board wrote in De Boer and the Crown in Right of Ontario (Ministry of Community Safety and Correctional Services) (O’Neil) PSGB #P-2005-1033 at pg. 10:
It is very important as a matter of policy that agreements voluntarily signed be upheld, or workplace parties would not be able to have confidence in the finality of agreements made and their ability to govern their affairs accordingly. The question of finality of agreements is fundamental to the entire legal system, and is especially important in the ongoing operation of any workplace. Otherwise, parties would be constantly wondering which agreement they could count on, and which one would be subject to being reconsidered indefinitely in the future
Moreover, the case law is clear that a settlement will not be set aside because a party later feels he or she might not have entered into it on the same terms if further information had been available to them (See Re Selkirk College v. British Columbia Government and Service Employees’ Union, (1996), 1996 CanLII 20430 (BC LA), 59 L.A.C. (4th) 14 (Chertkow, B.C.) at pg. 11, or because each and every possible compensation issue which might have been addressed by the perfectly informed party was not included in the final package of settlement terms (see Re Canada Post Corp and CUPW, (1993) 36 L.A.C. (4th) 216 (Jolliffe) at pg. 14. As well, the fact that the parties did not specifically cover every possible entitlement does not diminish the effect of comprehensive release language (See Toronto (City) v. Toronto Civic Employees’ Union, Local 416, (2002) 2002 CanLII 79089 (ON LA), 106 L.A.C. (4th) 159 (Luborsky) at pg. 6).
22It is clear that Mr. Naccarato has come to feel that he was not fairly dealt with by the employer. However, having carefully reviewed all the submissions and arguments made, the Board is not in a position to give effect to his claim. The Minutes of Settlement were very clear in providing for a fixed sum, rather than any term that might have included compensation for lump sum payments. Even if Mr. Naccarato would have been entitled to such payments if he had remained in active employment, once he signed the Minutes of Settlement, they were the terms that govern his relationship with the employer. The Board finds no prima facie or viable case for bad faith or any other reason not to uphold the parties’ clear agreement. Absent facts that would have lead the Board to find that the Minutes of Settlement are unenforceable, there can be no prima facie case for this claim under the Public Service of Ontario Act, because Mr. Naccarato has agreed to release the employer from claims under the Public Service of Ontario Act.
23For the above reasons, the employer’s motion is granted and the complaint is dismissed.
Dated at Toronto this 3rd day of November, 2015
APPENDIX
AUTHORITIES RELIED ON BY THE EMPLOYER
Robert Younger and The Crown in Right of Ontario (Ministry of the Environment), PSGB No. P-2006-2458, July 18, 2007 (O’Neil)
Karen McDonald and The Crown in Right of Ontario (Ministry of Community Safety and Correctional Services), PSGB No. P-2010-1258, P-2010-2168, July 15, 2011 (O’Neil)
Timothy Bingham and The Crown in Right of Ontario (Ministry of Government Services), PSGB No. P-2010-0028, P-2010-0544, January 6, 2011 (O’Neil).
OPSEU (Morsi) and The Crown in Right of Ontario (Ministry of Finance), GSB No. 2006-2863, 2006-2864 etc., June 15, 2012 (Devins).
OPSEU (Abick) and The Crown in Right of Ontario (Ministry of Municipal Affairs and Housing), GSB No. 2013-1624, 201-3506 etc., November 4, 2014 (Williamson)
Canada Post Corp. and C.U.P.W. (Winlaw), Re, 36 L.A.C. (4TH) 216, July 23, 1993 (Jolliffe)
Selkirk College and British Columbia Government and Service Employees’ Union (Hatherly Grievance), 59 L.A.C. (4TH) 15, October 22, 1966 (Chertkow)
Toronto (City) v. Toronto Civic Employees’ Union, Local 415 (Watters Grievance) 2002 CanLII 79089 (ON LA), 106 L.A.C. (4TH) 159, April 3, 2002 (Luborsky)
Fisher and Ludlow Inc. v. CAW-Canada, Local 504 (Walton Grievance), 220 L.A.C. (4TH) 436, May 29, 2012 (E. Newman)
Re Riverside Hospital and O.P.S.E.U., [1992] O.L.A.A. No. 996, September 22 1992 (Dunn).