SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 11-CV-00428466
DATE: 20120705

RE: Ashok Kumar
Respondent

Unilever Canada Inc. and the Union, the Milk and Bread Drivers,
Dairy Employees, Caterers & Allied Employees, Local Union, No. 647
Moving Parties

BEFORE: Justice Moore

COUNSEL:
Ashok Kumar, In Person, the Respondent
Melanie D. McNaught , For Unilever Canada Inc.
Michael Church , For the Union, the Milk and Bread Drivers, Dairy Employees, Caterers & Allied Employees, Local Union, No. 647

HEARD: 28 June 2012

E N D O R S E M E N T

[ 1 ] The applicants in this matter are the former employer [Unilever] and the trade union [union] that Mr. Kumar was a member of during his many years of employment at Unilever.

[ 2 ] The dispute here revolves around Mr. Kumar's claim for short-term disability benefits while an employee, a claim of about $25,000 in benefits.

[ 3 ] In 2008, Unilever decided to downsize its operations and it offered employees, including Mr. Kumar, voluntary severance packages. Mr. Kumar accepted an enhanced severance package which resulted in payments to him totaling over $157,000.

[ 4 ] The settlement package specified that any dispute regarding the severance offer would be covered by the collective agreement. After Mr. Kumar accepted that offer but before his term of work ended, he applied for disability benefits. His application was denied and a union grievance was filed on 19 September 2008 on his behalf.

[ 5 ] By letter dated 23 December 2008, Unilever made a without prejudice settlement offer to Mr. Kumar to settle the outstanding grievance regarding his short-term disability benefits claim. The parties agree that that offer was not accepted.

[ 6 ] Mr. Kumar's employment at Unilever terminated as of 31 December 2008

[ 7 ] Subsequently, Mr. Kumar asked whether his benefits claim could be reconsidered and paid. By letter dated 15 January 2009, Unilever wrote to Mr. Kumar pointing out that the claim to benefits and the grievance arising therefrom could be settled but not after 28 January 2009.

[ 8 ] By letter dated 17 February 2009, Unilever wrote to Mr. Kumar and again offered to settle the short-term disability benefits claim; that offer was valid to 5:00 PM on 25 February 2009. Mr. Kumar did not accept that offer either.

[ 9 ] In December of 2009, Mr. Kumar contacted his union representative to ask whether he could still accept the previous offer to settle his benefits claims. The union contacted the company; the company declined to re-offer a settlement. The union wrote to Mr. Kumar, on 8 December 2009, to advise that all settlement offers had expired and would not be renewed. In that letter, the union explained that Mr. Kumar's belief that he was entitled to punitive or other damages in addition to the disability benefits claimed was unreasonable and not supported by labour arbitration jurisprudence. The letter also confirmed that the union had explained to Mr. Kumar many times, in person and on the phone, that his continued refusal to accept his grievance settlement could seriously jeopardize it. The union further advised that Mr. Kumar's file would be closed and if he wished to object to this letter, he could do so by appealing in writing to the Local Union Executive Board within 10 calendar days. Mr. Kumar did not do so and nor did he file a civil action or complaint to the Labour Relations Board.

[ 10 ] In July of 2010, Mr. Kumar filed an application for enforcement of an alleged settlement of his claim for disability benefits. The Ontario Labour Relations Board dismissed that application, in part because the alleged settlement was not a proceeding under the Act, but was a matter that was not finalized pursuant to the provisions of the collective agreement.

[ 11 ] Mr. Kumar brought this action claiming damages as particularized in his statement of claim issued in June of 2011. Even after this action began, Mr. Kumar's counsel wrote to the Ministry of Labour asking for the appointment of an arbitrator. This action and that application were ongoing at the same time.

[ 12 ] The applicants take the position that there is no overlapping jurisdiction between a labour arbitration and a claim for damages in this court.

[ 13 ] Both the union and Unilever objected to Mr. Kumar's request to have an arbitrator appointed and by letter dated 21 February 2012, the Ministry dismissed Mr. Kumar's request for the appointment of an arbitrator agreeing, thereby, with the position of the union and Unilever that Mr. Kumar was not a party to the collective agreement and not entitled to pursue a claim for the appointment of an arbitrator.

[ 14 ] The evidence confirms that entitlement to short-term disability benefits arises from the provisions of the collective agreement, specifically Article 11 [Health and Welfare Plans] and the appendix to the agreement. Unilever was therefore contractually obligated to provide disability coverage to its employees. The collective agreement specified that adjudication of entitlement to these disability benefits was performed by an independent third-party insurer on an administration services only basis.

[ 15 ] A refusal to pay disability benefits becomes arbitrable under the collective agreement. In this case, Mr. Kumar filed a grievance and the union pursued it. At best, Mr. Kumar was entitled to short-term disability benefits capped at 26 weeks of entitlement. The employer having offered to pay the claim in full, by December of 2008, removed any appetite for the union to pursue the claim into arbitration.

[ 16 ] The applicants insist that Mr. Kumar was offered his entire entitlement to disability benefits but he wanted more; specifically, he wanted punitive damages. In the circumstances of this case, the union was not prepared to pursue a claim for such damages, in part because punitive damages are not specifically recoverable for breach of the collective agreement and, in any event, the union took the position that such damages were not reasonably claimed in view of the offer of full settlement made by the employer.

[ 17 ] The union points out that if a worker is upset with the union's processing of a grievance, there is a mechanism under the Labour Relations Act (s. 74) to complain of the union’s breach of its duty of fair representation but Mr. Kumar has filed no such complaint.

The positions of the parties

The Applicants’ Position

Jurisdiction of the Court

[ 18 ] The applicants submit that Mr. Kumar was a member of the union and the bargaining unit of employees at Unilever. The relationship between the parties is regulated by the collective agreement and, as such, complaints or grievances relating to employment matters must be resolved through the arbitral process and not through the courts. [1]

[ 19 ] The applicants point to several decisions of this court and of appellate courts in support of the proposition that where the employment relationship is governed by a collective agreement, arbitration is the sole and exclusive means by which employees can have their grievances addressed. [2]

[ 20 ] The applicants submit that in order to determine when a dispute can be litigated, the court must engage in a two part analysis which involves examining the relevant legislation describing the role of the arbitrator and then examining the nature of the dispute.

The role of the arbitrator

[ 21 ] The Labour Relations Act states at s. 48(1) that:

Every collective agreement shall provide for the final and binding settlement by arbitration, without stoppage of work, of all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement, including any question as to whether the matter is arbitrable.

[ 22 ] The applicants therefore insist that the jurisdiction to resolve labour disputes under collective agreements in Ontario falls exclusively to a labour arbitrator.

Nature of the dispute

[ 23 ] The issue of short-term disability benefits is described within the collective agreement and is, therefore, a matter arising from the "interpretation, application, administration or alleged violation of the agreement" and, as such, falls within the exclusive jurisdiction of a labour arbitrator. [3]

[ 24 ] The applicants submit and I agree that Ontario courts have routinely acknowledged their lack of jurisdiction with respect to benefit entitlement when it is expressly set out in the terms of the collective agreement. [4]

[ 25 ] The applicants further submit that Mr. Kumar acknowledged the arbitral dispute resolution procedure as appropriate by filing a grievance in respect of issues arising from his claim for short-term disability benefits.

[ 26 ] The applicants submit that the jurisdiction to determine whether a settlement has been reached under collective agreement and to enforce an alleged settlement lies with the labour arbitrator, not with the court [5]

[ 27 ] The applicants therefore submit that the statement of claim discloses no cause of action and that the action must therefore be dismissed.

Limitations Defence

[ 28 ] Further, and in the alternative, the applicants submit that Mr. Kumar's claims in this action are statute barred by operation of the Limitations Act. [6] For purposes of this argument, Unilever’s position is the same whether the court finds that Unilever agreed to settle the disability claim or whether it did not; in either case, it insists that the plaintiff knew or ought to have known by 25 February 2009 that his claim had not been paid and that it would not be paid.

[ 29 ] Mr. Kumar took no steps to institute legal proceedings in this court between February 2009 and 10 June 2011. He has not explained that delay and he is presumed to have known on or shortly after 25 February 2009 that Unilever was in breach of the obligation that he insists it owed to pay disability benefits.

[ 30 ] Mr. Kumar, it is argued, was obliged to be prompt to explain his delay and having failed to do so, his claim must be dismissed on this alternate ground. I find that Mr. Kumar knew by 25 February 2009 that he had rejected the last opportunity he had been given to settle for full payment of the disability benefits he sought. He waited until 10 June 2011 to bring this action, more than the two years afforded him under the Limitations Act

The Respondent's Position

[ 31 ] Mr. Kumar submits that his claims raise issues of contract and promise to pay that are not part of the collective agreement.

[ 32 ] As he is not a party to the collective agreement, Mr. Kumar says that he cannot succeed in any request to have an arbitrator appointed and there is therefore no other forum apart from this court to decide the issues raised in the statement of claim.

[ 33 ] Mr. Kumar sees a distinction between the interpretation, application, administration or violation of the collective agreement and the issues in dispute in this litigation that he describes as involving the interpretation and enforcement of the severance package contract.

[ 34 ] There are no specific terms in the collective agreement about the retirement package that Mr. Kumar accepted in this matter and so he argues that determining entitlement to the relief claimed in this action is a matter of enforcement of the settlement agreement, a contract.

[ 35 ] He insists that the essential character of the dispute is a breach of contract.

[ 36 ] In any event, Mr. Kumar submits that the issues in this case are not arbitrable because the applicants have refused to refer them to arbitration and by virtue of that, he argues that the applicants have presumably chosen this case to be decided by the court.

[ 37 ] As for the Limitations Act defence raised by the applicants, Mr. Kumar states that the limitation period did not begin to run until he discovered that the applicants ultimately did not want to pay the disability benefits claim, although he has not stated when that was. In any event, he asks the court to exercise discretion to allow the action to continue.

Analysis and Disposition

[ 38 ] Article 5 of the collective agreement sets out the provisions relating to the grievance procedure for matters arising from the agreement and establishes the right of the parties to refer matters to binding arbitration.

[ 39 ] Article 11 and the Welfare Plan Summary appended to the collective agreement set out the terms and conditions for employer paid short term disability benefits as described above in these reasons.

[ 40 ] At its essence, Mr. Kumar’s claims in this matter are claims to disability benefits and for damages for Unilever’s alleged failure to pay such benefits. He filed a claim for benefits as the collective agreement allowed. The claim was duly reviewed by an independent insurer, also in accordance with the procedure mandated by the collective agreement. The outcome of that review was negative from Mr. Kumar’s perspective.

[ 41 ] Mr. Kumar urged the union to take his claim further and, again as contemplated by the collective agreement, the union filed a grievance. To this point, all parties had acted reasonably and entirely in compliance with the provisions of the collective agreement respecting short term disability benefits entitlement and claims handling protocols.

[ 42 ] Had Unilever not offered to settle the claim, the grievance would have continued forward to and through the arbitration process called for by the collective agreement and the Labour Relations Act to resolve such disputes.

[ 43 ] Mr. Kumar’s claims in this action do not arise from any breach of the severance package that he accepted, nor of any stand-alone contract apart from the collective agreement. In any event, it is the essential character of the dispute between the parties, not the legal framework in which the dispute is cast which will be determinative of the appropriate forum for settlement of the issue. [7] His entitlement to disability benefits arose from and fell to be processed for payment in the manner described by the collective agreement, assuming the appropriate disability could be properly made out.

[ 44 ] But Unilever did offer to pay Mr. Kumar’s claims, repeatedly and in full. These offers rendered moot the grievance and/or arbitration procedures that would otherwise have well served the parties. It was open to Mr. Kumar to settle his claim to benefits without need of arbitral or court proceedings but he chose not to.

[ 45 ] This is not a situation in which Mr. Kumar had no avenue to follow, arising from the collective agreement and provincial legislation, such that he faced a real deprivation of ultimate remedy. [8] His remedy was clearly spelled out for Mr. Kumar in the collective agreement and the binding arbitration that it and the Labour Relations Act contemplate. There is neither need for nor any basis to look beyond these for access to justice.

[ 46 ] The fact that Mr. Kumar unreasonably chose not to settle his claim and took no steps to complain that the union failed him in its duty of fair representation in the grievance and/or arbitral process does not create a need for this court to become involved nor jurisdiction to do so.

[ 47 ] This court’s jurisdiction simply does not overlap that of the labour arbitrators appointed under the Labour Relations Act . The claims at issue in this matter arise out of the interpretation, application, administration or alleged violation of the collective agreement and must be resolved according to the provisions of the collective agreement and the binding arbitration process it calls for. This court lacks jurisdiction over such matters; an arbitrator has sole jurisdiction. [9]

[ 48 ] This matter is well described in the words of Lax J. [10] :

This is a dispute that has an express connection to the conditions of employment. It involves the interpretation of benefits obtained through the collective bargaining process. I conclude that it cannot be the subject of a court action and the claim must be dismissed.

[ 49 ] Mr. Kumar’s action in this court is therefore dismissed. Although the applicants have succeeded on the jurisdiction issue and it is not necessary to address other issues upon this application, in order that Mr. Kumar might more fully understand the outcome, I shall address them.

[ 50 ] The action will be dismissed as well upon the alternate ground that even if this court had jurisdiction to hear it, Mr. Kumar waited too long before instituting these proceedings and the applicable two year limitation period had lapsed before the statement of claim issued.

[ 51 ] Mr. Kumar has framed his action against Unilever as a breach of contract claim. As such, the limitation period begins to run from the moment of the breach, the moment when he discovered or ought reasonably to have discovered his cause of action. [11]

[ 52 ] The statement of claim asserts that an agreement was reached on 23 December 2008. The agreement is pleaded to have included disability benefits for the period from 17 July 2008 through to 31 December 2008. Interest on unpaid benefits is claimed from 17 February 2009 forward.

[ 53 ] I find that Mr. Kumar knew by 25 February 2009, the date of expiry of Unilever’s settlement offer that his claimed benefits were not paid nor going to be.

[ 54 ] Mr. Kumar bears an onus of establishing that he did not discover his claim on the date that the alleged breach of contract occurred. He has not met that onus. The limitation period had expired before this action began and the action must be dismissed accordingly.

[ 55 ] The statement of claim does not articulate the claims made against the union with the necessary degree of clarity. It appears to me, however, that Mr. Kumar’s complaint against the union is that it did not meet its duty of fair representation under the Labour Relations Act; but the Board has exclusive authority to determine whether the union has met its duties under section 74 of that act. Accordingly, this court has no jurisdiction and the action against the union must be dismissed on that basis.

[ 56 ] I am also aware of the provisions of the Rights of Labour Act [12] mandating that a union shall not be made a party to any action in any court unless it may be so made a party irrespective of the Act or of the Labour Relations Act. There is no basis for the union to be a party to this action and the action must be dismissed accordingly.

Costs

[ 57 ] Before hearing this matter upon its merits, I required the parties to exchange costs demands. In this way, Mr. Kumar was made aware of the size and shape of the financial jeopardy he assumed by allowing the matter to proceed to a judicial determination. The costs sought by the applicants totaled over $25,000, approximately the same amount as the disability benefits at issue in this matter.

[ 58 ] Costs typically follow the event and this case needs be no exception. The applicants have each been completely successful in their applications and they will recover their costs on partial indemnity bases from Mr. Kumar.

[ 59 ] In fixing costs, I recall to mind the factors in Rule 57 and apply the words of Perell J. that:

The court's discretion to award costs is designed to further three fundamental purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to encourage settlements; and (3) to discourage and sanction inappropriate behaviour by litigants in their conduct of the proceedings. [13]

[ 60 ] Mr. Kumar had at least two opportunities to settle and recover the entirety of his claim for disability benefits by February of 2009. He opted to reject perfectly reasonable offers and demanded punitive damages. There is no basis in the facts of this case to conclude that there was any merit to that demand. [14] In my view Mr. Kumar did not act reasonably by rejecting settlement options and by engaging the machinery of motions court to resolve this case. His conduct in so doing is to be discouraged and sanctioned.

[ 61 ] The applicants have been required to defend this action and to invest considerable time, effort and money in the process. This said, however, this was not a complex matter, the law having been well settled long before this application was launched. The legal issues are important to the union and to Unilever as well as to unions, employers and all who follow labour law in terms of the orderly adjudication of matters arising from a collective agreement.

[ 62 ] The factual matrix from which this application emerged is not at all complex and not really contested. All issues are important to Mr. Kumar, financially and otherwise.

[ 63 ] The amount claimed in the action is substantial but only to the extent that a punitive damages exposure can be thought to be a realistic exposure; otherwise the quantum at issue is very small for an action in this court.

[ 64 ] Mr. Kumar offered no submissions on the reasonableness, or otherwise, of the amounts claimed in costs by the applicants and nor did he assist the court with submissions on his reasonable expectations as the paying party.

[ 65 ] Stepping back from these and all other factors enumerated in Rule 57, and considering the overall reasonableness of the costs that Mr. Kumar ought fairly to be required to pay, I cannot overlook the fact that although the evidence of Mr. Kumar’s financial wherewithal, his ability to pay costs in this matter, is scant, his evidence confirms that he worked for Unilever steadily from 1972 through 2008 in a variety of positions and the last position he held was as a receiver in the Shipping and Receiving Department. There is no suggestion that he is a man of substantial financial means.

[ 66 ] In all of the circumstances, I fix costs at a total of $10,000 to be paid by Mr. Kumar to the applicants. The applicants will recover $5,000 each.

[ 67 ] An Order shall issue in the form and content of the draft Order, filed as amended.

Moore J.

Released: 5 July 2012