Labatt’s severance program a perfect pour, says arbitrator

Voluntary retirement incentive did not discriminate against LTD workers
By Jeffrey R. Smith
|Canadian HR Reporter|Last Updated: 10/20/2014

A voluntary retirement incentive did not discriminate against disabled employees by calculating payment based on what they earned when they worked, rather than the current wages for their positions, an arbitrator has ruled.

Pay rates for Labatt employees were set in collective agreements so in each new agreement, wages were set at a higher rate — there were no wage progressions. The agreement allowed for higher wages for "seniority employees" and did not guarantee the same pay for everyone for the same work.

Long-term disability (LTD) benefits were part of the benefits package and the negotiated LTD plan paid about two-thirds of a disabled employee’s regular earnings if she was "totally and permanently disabled and is unable to do any job at all."

The LTD benefit payments remained tied to the disabled employee’s wages when she stopped working and did not increase when wage rates increased. If an employee on LTD recovered and was able to return to her former job, she would be paid the current wage rate.

In 2008, Labatt Breweries Ontario and its main union negotiated a one-time, voluntary severance program (VSP) that encouraged long-time employees to voluntarily retire. In return, they would receive a lump-sum payment.

The opportunity was offered to all employees who were at least 55 and whose age and years of service totalled at least 85, whether actively employed or not. The program would be rolled out over the next few years until 2012, with a cap at 70 employees. The payment was slated to be equal to "800 hours’ (pay) at the employee’s base hourly rate on his last day of work."

Seventy employees opted to accept the incentive — 62 active employees and eight employees who had been gone from the workplace for several years and were receiving (LTD) benefits. Because of the wording in the agreement, the payment to the employees who were on LTD was calculated to be their pay when they last actually worked, which was several years in the past and, therefore, significantly lower than employees who were currently working.

The union grieved this arrangement, arguing employees on LTD were being discriminated against because of their disability. The union recommended the payment to LTD employees be calculated using the current job rates for the positions in which they had last worked.

Arbitrator looks at LTDs

The arbitrator noted the LTD employees had been gone from the workplace for many years, in most cases, and it was "extremely unlikely" they would be able to return to work.

It was just a matter of time until they had to transition from long-term disability benefit payments to their pensions — under the collective agreement, LTD benefits could not continue past age 65.

The arbitrator also pointed out the LTD plan was a partial indemnification for the wage losses of disabled employees and was fixed in relation to their past earnings.

There was no question an employee who went on LTD at a later date than one who went on it earlier would receive a greater incentive payment under the VSP, found the arbitrator. More senior employees would also receive a greater payment if they were making a higher wage.

Though active employees who volunteered for the program received a greater payment, they were also giving up their existing jobs with a greater flow of wages.

LTD employees who gave up their status received payment based on their full wages when last working, even though LTD benefits were only paying them two-thirds of that amount. LTD employees were being compensated differently, but what they were exchanging was different as well, said the arbitrator.

"The VSP offers volunteers a choice between continuing their current situation (whatever it is) and receiving a lump sum payment as an inducement to retire on pension," said the arbitrator.

"It is the individual employee who decides to change the status quo, based upon his/her own assessment of the options and his/her own personal circumstances."

The arbitrator also found the intention of the VSP was to cut wage costs by eliminating senior positions. However, it was still made available to long-term disability employees who were not contributing to wage costs and not making actual contributions to Labatt.

In addition, the VSP was negotiated by Labatt and the union and, at that time, neither felt the formula was discriminatory or unfair to any group eligible — and both would be responsible for any discriminatory elements. Since it was voluntary, no one was obliged to participate and each employee could choose to maintain the status quo, said the arbitrator.

"The very fact the parties have created a differential payment…recognizes that the benefit is not just contingent upon ‘employment’ alone, but should be evaluated in relation to the value of work done," said the arbitrator.

"Because in each instance what is being paid to employees reflects the ‘value’ of the work that they provided — a sum ‘objectively’ determined from time to time, on an hourly basis, through the process of collective bargaining, and irrespective of the personal circumstances of individual employees (and entirely unrelated to the protected attributes in the Human Rights Code)."

Regular employees and LTD employees should not be comparable — one group consisted of regular contributors to the company who could continue to work as long as they wished and the other didn’t work and likely wouldn’t again, said the arbitrator. For the purposes of determining discrimination, a proper comparator group would be other long-service employees who were away on leaves of absence. Since an employee who had been on leave who volunteered for the VSP would receive a payment calculated by what she earned when last at work, the comparator group was treated the same.

The arbitrator ruled the buyout formula in the Labatt VSP was not discriminatory and not based on an unwarranted prejudice against employees not working and receiving LTD benefits.

"I am not persuaded that it was unlawfully discriminatory to pay the potential takers in relation to the price paid for the work last performed — at least where, as here, the escalation of rates which produces the discrepancy, occurred in the ordinary course of bargaining and had nothing to do with the claimants’ disability," said the arbitrator.

For more information see:

Labatt Breweries Ontario and SEIU, Local 2 (voluntary severance program), Re, 2014 CarswellOnt 11888 (Ont. Arb.).

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. For more information, visit

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