PSGB#2016-0599

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE OF ONTARIO ACT

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

O’Neil

Complainant

• and -

The Crown in Right of Ontario (Ministry of Government and Consumer Services)

Employer

BEFORE

Kathleen G. O’Neil

Chair

FOR THE COMPLAINANT

Dean O’Neil

FOR THE EMPLOYER

Stewart McMahon Treasury Board Secretariat Legal Services Branch Counsel

HEARING SUBMISSIONS

October 28, 2016 December 5, 2016

Decision

1This decision deals with the complaint of Dean O’Neil relating to his claim to pay improvements in respect of the period of salary continuance prior to his retirement. The employer has raised the preliminary objection to the Board’s jurisdiction that Mr. O’Neil’s complaint is related to pay for performance, a subject over which the Board has no jurisdiction. As well, the employer is of the view that the complainant has not made out a viable case for the payments he claims in light of the terms of the pertinent pay policies. The complainant disagrees on both points.

2The facts necessary to this preliminary decision are mostly not in dispute. It is primarily the legal conclusions that flow from the facts that are the subject of debate, as will be discussed below. In the case of any disputed facts on preliminary motions such as this, the Board takes any asserted facts relied on by the complainant as true and provable just for the purposes of the motion. If the matter proceeds, findings of fact will be made on any factual disputes according to the evidence put before the Board.

3Mr. O’Neil was an Employment Mobility Coordinator with Human Resources Ontario who had a very good performance record, often receiving evaluations which recognized that he had exceeded expectations. In late 2014, Mr. O’Neil was given formal notice of the fact that his position was being declared surplus, as a result of a reorganization affecting his work unit. The options available to him included remaining employed and available for a targeted direct assignment to managerial vacancies with priority consideration over applicants not in receipt of a notice of lay-off, as well as exit with salary and benefit continuance as pay in lieu of six months working notice. Mr. O’Neil signed a form choosing the exit option.

4His last day of work was January 22, 2015. The form he signed indicates his lay-off date as six months later, i.e. July 24, 2015. However, as he became eligible for retirement with an unreduced pension during the six-months’ notice period, he decided to access that. He retired effective April 30, 2015.

5In late 2015, the employer announced pay provisions for managers which had retroactive application to the period between Mr. O’Neil’s last day of work and his retirement. They provided, subject to certain conditions, for the continuance of lump sum payments to managers who had received them in 2011, and in addition provided a salary adjustment effective April 1, 2015. The latter was the first of its kind since the introduction of fiscal restraint measures in 2012.

6The payments in questions are referred to in policy documents issued late in 2015. The context for these payments, in general, is fiscal restraint which resulted in a freeze on managerial salaries from 2012 through 2015. For several years prior, managerial increases had been tied to individual performance, with higher percentage increases if performance exceeded expectations. The variable percentage amounts were applied to move the individual employee on the relevant salary grid up to the maximum. Employees who had reached the maximum of their pay range received any excess over the maximum as a lump sum. Mr. O’Neil was among those employees, who received annual remuneration which consisted of regular salary payments and a lump sum.

7When the managerial salary freeze was implemented, pay for performance was set at zero, preventing movement on the managerial salary grid. Managers who had received lump sums as part of their performance awards in 2011, because they were at the maximum of their pay grids, received payments in 2012 that were designed to prevent a decrease in annual compensation due to the lack of the lump sum portion of their compensation.

8When Mr. O’Neil heard about the new pay provisions announced in 2015, he understood them to be available to those still on payroll at the end of the fiscal year, March 31, 2015, as he was. He made inquiries with human resources staff about what was coming to him, and was initially provided with figures consistent with his understanding he would be eligible for the new compensation measures. Subsequently, the employer informed him that he was not eligible because of exceptions in the relevant pay policies relating to people on leave of absence pending termination or retirement. This complaint followed.

Issues in dispute

9The issues arising in respect of the above-noted facts are as follows, which will be dealt with in turn:

a) Does the Board have jurisdiction over the complaint, or is it excluded as related to pay for performance?

b) If the Board does have jurisdiction, is the complainant eligible for additional compensation under the terms of compensation policies announced in late 2015?

c) If the complainant is not eligible for additional compensation according to the relevant policy provisions, is he nonetheless entitled to compensation because he was not given sufficient information to consent to the retirement option he indicated as his choice in late 2014.

a) Jurisdiction

10Mr. O’Neil’s complaint claims that he should receive pay for performance or similar related payments. The employer says that this is clearly beyond the Board’s jurisdiction because s. 4 (2) of Regulation 378/07 removes from the Board’s jurisdiction claims for compensation “provided or denied to a public servant as a result of the evaluation of his or her performance”. The complainant acknowledges that there was wording in his complaint related to pay for performance, but notes that he wrote it before the employer produced the pay policies in question, which he had not been able to access before disclosure during the Board’s complaint procedure. He is now focusing on the payments provided in the policies to which he has been given access during the disclosure process before the Board.

11The employer argues that the Board has already decided that a complaint such as this one relates to pay for performance, citing Smith et al and the Crown in Right of Ontario (Ministry of Community Safety and Correctional Services,, PSGB# P-2012-4155 (O’Neil), 2014 CanLII 48098 (ON PSGB) and related decisions such as Kaine v Ontario (Children and Youth Services), 2014 CanLII 48097 (ON PSGB). Those decisions dealt with complaints from managers in response to the freezing of managerial wages referred to above. The complainants in the Smith and Kaine cases were not at the maximum of their pay scale, but claimed entitlement to the same lump sums as those received by managers who were at the top of their pay grids.

12The Board dismissed the complaints on the basis that what the complainants were complaining about was basically the denial of pay for performance, and to that extent was beyond the Board’s jurisdiction. As well, the decisions found that their complaint did not make out a viable case for the lump sums they were seeking, as they were not eligible under the terms of the relevant policies for the lump sum payments they were seeking because they had not been at the top of their pay grids in 2011. Mr. O’Neil argues in this case that he is not in the same position as the complainants in the Smith and Kaine decisions, as he was in the group that was at the top of his grid in 2011, and had received the lump sums that the complainants in those cases had not. I accept this submission. Further, I am of the view that what Mr. O’Neil is claiming here is not pay for performance, and thus the statutory bar to complaints of that kind does not deprive the Board of jurisdiction in this case.

13The statutory bar is found in Regulation 378/07 under The Public Service of Ontario Act, 2006 which removes certain matters from the subjects that may be brought as a complaint to the Board. Specifically, subsection 4(2), paragraph 5, removes the matter of “The compensation provided or denied to a public servant as a result of the evaluation of his or her performance” from complaints that may be brought to the Board. As explained in the Board’s decision in D’Intino v Ontario (Community Safety and Correctional Services), 2015 CanLII 47392 (ON PSGB) (O’Neil), the lump sum payments since 2012 have not been linked to performance. Their purpose is to maintain earnings levels while the pay grids were frozen, and pay for performance was set at zero. These particular lump sum payments were not provided for in the pay-for-performance policy, and they do not reflect variation according to performance in the preceding fiscal year, which is a principal feature of the structure of the pay for performance policy. This is further supported by the provisions of a document entitled “Questions & Answers”, revised January 26, 2016 from the employer’s Employee Relations Division, which makes clear that managerial employees were not receiving performance pay for the 2014-2015 performance year.

14The only element of the policy that is at all linked to performance is a provision in the policy for the Deputy Minister to approve payments of less than the full amount where an employee has not performed at an acceptable level in the previous fiscal year, but that is not relevant to Mr. O’Neil’s case. Otherwise, performance in the previous year has no effect on receipt of the lump sums. Mr. O’Neil was denied the lump sum because he was considered by the employer to be on a leave of absence pending termination, not because of his performance, which has never been problematic.

15To summarize, the complainants in Smith and Kaine were claiming a return to merit pay or pay for performance, and saw the lump sums received by managers who were at the top of the grid as an unfair pay increase to only some managers, whereas it was designed to prevent a decrease instead for managers in different situations than they were. By contrast, Mr. O’Neil is not claiming a return to merit pay or pay for performance. Rather, he is claiming payments which did not vary with performance, including the lump sum designed to prevent a decrease from 2011 levels which he had received since 2012. As well, he claims access to the new pay adjustment effective April 1, 2015, the first day of the fiscal year 2015/16, a month prior to his retirement. These claims are not beyond the Board’s jurisdiction and thus the employer’s motion in this respect is denied.

b. Compensation changes announced in 2015 - Lump Sum and Increase to Base Salary

16As noted above, Mr. O’Neil’s claim is to have access to the pay improvements announced in the end of 2015. The employer argues that Mr. O’Neil was not eligible for the payments he claims because, as of March 31, 2015, the date specified in the policy for the determination of entitlement, he was on leave of absence with salary continuance. The detailed provisions of the relevant pay policy documents, in the employer’s view, mean that someone in Mr. O’Neil’s position did not qualify for the payments he seeks.

17There are two compensation directives at issue here. A Directive from Management Board of Cabinet #33-54, dated November 17, 2015, provided once again that pay for performance awards were set at 0%, but where that would result in a reduction of earnings, a lump sum would be available in the same amount as the lump sum paid in 2011. Important to the issue in dispute, the policy document made eligibility "subject to the rules in any written compensation policies issued by the Public Service Commission."

18Further rules appear in a subsequent document entitled "Compensation Policy and Eligibility Procedures 2015", effective November 20, 2015, in which criteria for eligibility were elaborated. This document states that earnings of managerial employees "who were eligible for performance pay, are to remain at 2011-12 levels subject to the eligibility criteria and the exceptions set out in this policy." Mr. O’Neil submits that his earnings were not maintained at 2011-12 levels, because he was not granted the lump sum intended to prevent a reduction in earnings from the 2011 compensation levels.

19The same 2015 policy provides two initial eligibility requirements in order to receive a lump sum in 2015. The first is that the employee received a lump sum in respect of a non-bargaining unit position in respect of the 2010-11 performance cycle. There is no dispute that Mr. O'Neil met that requirement. Secondly, though, the employee had to continue to be in a non-bargaining position on the last day of the 2014-15 fiscal year, i.e. March 31, 2015. The employer notes that Mr. O'Neil's position was abolished as of January 23, 2015, as indicated in the personnel documents in evidence, while Mr. O’Neil emphasizes that he was still an employee as of March 31, 2015. The employer argued that it was not necessary to resolve the issue of whether Mr. O’Neil was in a non-bargaining position on March 31, 2015, because of another provision of the policy relating to those on salary continuance.

20The policy has specific eligibility criteria in respect of employees who were on leave of absence in 2014-15, and who terminated their employment in that fiscal year. Key to this dispute is the following wording:

A non-bargaining employee who meets the initial eligibility criteria and who terminates his/her employment due to the reasons below (on or after the last working day of the 2014/15 fiscal year, is eligible for the payment.

Death

Resignation

Retirement

For clarity, employees who have terminated their employment before the last working day of the 2014-15 fiscal year, but have elected to take a leave of absence with pay in lieu of their termination pay, in accordance with the Management Board of Cabinet Compensation Directive, section 68, or have extended their service through the conversion of time banking credits, are not eligible for a payment.

For further clarity, employees who have terminated their employment before the last working day of the 2014-15 fiscal year, but have elected to receive their written notice of lay off, issued in accordance with the Employment Policy, as salary continuance, are not eligible for a payment. Similarly, Senior Management Group employees who have been issued a surplus notice, and have elected immediate exit under the Executive Transition Support Program are not eligible for a payment.

21Mr. O'Neil takes the position that this wording does not disqualify him, as he was not terminated until his retirement date, which was April 30, 2015. As he notes, the pension documents, termination and severance pay calculations were all based on that date as the termination date. His benefits were transferred as of that date, and he was offered to return as a fixed term employee as of May 1, 2015. It is also clear that he exited the workplace on January 22, 2015, and did not report to work after that date. Mr. O’Neil expressed his dismay at the lack of clarity and consistency in the policies, documents and employer arguments, in terms of the use of the distinct terms of “exit” and “termination” seemingly interchangeably. He notes that the term “exit” does not appear as a disqualifier in the policy documents.

22Further, Mr. O’Neil states he did not elect a leave of absence. The question of a leave of absence is also relevant to the second entitlement sought by Mr. O’Neil, i.e. an increase to his base salary effective April 1, 2015. The Management Board of Cabinet directive relevant to this claim is entitled “Directive for Determination of Remuneration – 33-55”. In summary, it provides for two alternative types of increase to base salary for managers. For those in receipt of a lump sum pursuant to directive 33-54, discussed above, the adjustment was in the same amount as that lump sum. As well, such employees were entitled to a further 3% adjustment to their individual base salary in effect on March 31, 2015, paid as a lump sum to the extent it was over the salary range maximum for the employee’s position in effect on April 1, 2015. Such adjustment is specifically said not to be included in any pensionable earnings calculations.

23Directive 33-55’s alternative adjustment was for those who did not receive a lump sum under Directive 33-54. This provided for a 5% adjustment to base salary in effect on March 31, 2015. Again, to the extent it was over the salary range maximum for the employee’s position in effect on April 1, 2015, it was payable as a lump sum, not to be included in any pensionable earnings calculations. Important to this case, there is a paragraph entitled “Exception”, which provides that neither of those alternative payments will be made for service after April 1, 2015 where “the public servant is on a leave of absence pending termination of employment”.

24Mr. O’Neil submits that being on a leave of absence requires either that the employee apply to be on leave, or the employer places the employee on leave, and that in either case, the employer must advise the employee that he or she will be placed on a leave. In this case, he was not so advised until he started inquiring about the payments that are the subject of this grievance, long after he had made his decisions about his exit options. He notes that the period between the last day of work and effective retirement date was never called a leave of absence during his time as an HR professional, and the personnel forms he signed in respect of his departure do not call it a Leave of Absence either. He maintains that the employer was avoiding calling it a leave of absence, and instead used the specific wording “elimination of position” on the personnel forms documenting his exit from the workplace. Mr. O’Neil maintains that it was only called a leave of absence once the employer took the position of denying him the payments in question.

25The employer submitted “screen shots” of computerized records created January 29, after Mr. O’Neil’s last day of work, indicating that Mr. O’Neil was on leave of absence related to pay in lieu of notice. Further, the Question and Answer document referred to above, revised January 26, 2016, states on pg. 5:

Employees who are on a paid or unpaid leave of absence on April 1, 2015, are eligible to receive the 3% or 5% salary progression adjustment.

For clarity, employees on a leave of absence pending termination are not eligible for a salary progression adjustment.

26Mr. O’Neil also submits he was never informed that not reporting to work between January and the end of April would have such a negative financial impact, as his salary on his last day of work has ongoing impact on his finances, including pension. Mr. O’Neil submits that if the employer knew of this, they had an obligation to tell him, and if they did not know, then the employer should absorb the cost of their mistake. He notes that he had the foresight to say he had expectations before he left, in that he wrote on his “Payment Request Form” before he left the work force that he was asking for “P4P/Increases/et. unknown amount at this time” to be paid and deferred to the following taxation year.

27Mr. O’Neil makes the point that he was promised salary and benefit continuance, and that the announcements in the end of 2015 referred to salary and benefits for the period he was still an employee. He also emphasizes that he was never told that salary and benefit continuance would exclude salary and benefit improvements and changes. The only exclusions were STSP and LTIP. He sees the retroactive attempt to deprive him of the salary and benefit improvements as the implementation of a retroactive penalty.

28In support of his arguments, Mr. O’Neil referred to the following case law, which he argues supports the idea that he is entitled to any bonus or salary increase payable during the notice period pending termination: Styles v Alberta Investment Management Corporation, 2015 ABQB 621. I note that, since Mr. O’Neil submitted his argument, there has been a decision of the Alberta Court of Appeal on the same Styles case, dated January 4, 2017, and reported at 2017 ABCA 1; Lin v. Ontario Teachers' Pension Plan, 2016 ONCA 619, adopting the reasoning of Kiteley J. in Schumacher v. Toronto Dominion Bank (1997), 1997 CanLII 12329 (ON SC), 147 D.L.R (4th) 128 (Ont. S.C.J.), to the effect that a terminated employee’s involuntary inability to comply with a condition of a bonus plan requiring continued employment ought not to be justification in declining the award of the bonus as part of his wrongful dismissal damages; Chen v. Purdue Pharma Inc., 2015 ONSC 1967; and Kielb v National Money Mart Company, 2015 ONSC 3790. Employer counsel argues these cases are not applicable to the instant complaint which does not involve a wrongful dismissal.

29As an alternative to the jurisdictional argument dealt with above, the employer’s motion invited a preliminary finding that there was no viable case for the remedy the complainant seeks, based on the undisputed facts and the wording of the pay policies in question. However, the employer also acknowledged that there might be evidence required on the question of the third issue, i.e. whether his election was effective given the information he had when he made it in 2014.

30Having decided the jurisdictional issue, and having carefully considered the parties’ arguments summarized above, together with the documentary evidence, the Board has concluded that it is best not to determine the question of Mr. O’Neil’s entitlement under the policies as part of the preliminary motion, in respect of which Mr. O’Neil’s asserted facts are deemed true and provable but findings on disputed facts are not made. In this respect, it is the Board’s view that the issues related to the interpretation of the policies discussed above, and the issue raised about Mr. O’Neil’s election of his exit option are potentially entwined. In these circumstances, the Board finds it preferable to determine those issues when it is clear if there are any remaining issues of fact, and when both parties’ assertions of fact and evidence are on the same footing.

31As well, given the parties’ focus on other aspects of the case, the issue of whether or not Mr. O’Neil continued to be “in a non-bargaining position on the last working day of the 2014-2015 fiscal year” for the purposes of the “Compensation Policy and Eligibility Procedures 2015”, dated November 20, 2015, was not fully addressed in the context of the preliminary motion, an issue on which the Board invites submissions.

32Further, in support of the employer’s argument as to interpretation of the relevant policies, counsel submitted that Mr. O’Neil would not have been eligible for similar payments under prior policies either, and referred to the policies on Pay for Performance in this respect. Given the Board’s finding that the payments sought by Mr. O’Neil were not provided in the Pay for Performance policy, it appears that the policies in the years between 2012 and 2015 relating to the lump sums received by Mr. O’Neil, which did not vary according to performance in the preceding cycle, would be of assistance to the Board in determining the remaining issues.

33In light of the above, the Board remains seized of the issues other than the jurisdictional one determined above, and will schedule a conference call for the following purposes:

a) to see if there is any remaining factual dispute, and if so whether it can be resolved without oral evidence, in light of the fact that the parties had considerably narrowed the factual issues as of Mr. O’Neil’s e-mail to employer counsel of December 4, 2016. This would include the issue of whether there is any dispute between the parties as to whether the complainant was in a non-bargaining unit position as of March 31, 2015.

b) If there are no remaining factual disputes, to hear any further argument the parties wish to make on the remaining issues, i.e. whether Mr. O’Neil is entitled to compensation according to the relevant policies, or because of the issues he raises as to his information base when he opted to exit with salary continuance until retirement.

c) If there are significant remaining factual disputes, the Board will discuss with the parties whether they can be dealt with by conference call as requested by Mr. O’Neil.