Labatt's incentive payment calculated from earnings of last day worked, which was lower for workers on LTD
A voluntary retirement incentive did not discriminate against disabled employees by calculating their 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 Breweries employees were set in collective agreements — in each new agreement, wages were set at a higher rate than in the previous one. There were no wage progressions — each employee received the set wages in the collective agreement until the next agreement. The collective agreement allowed for higher wages for “seniority employees” and as a result did not guarantee the same pay for everyone for the same work.
Long-term disability (LTD) benefits were part of the Labatt benefits package, and the negotiated LTD plan paid about two-thirds of the disabled employee’s regular earnings when the employee was at work, if the employee 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 were increased. If an employee on LTD recovered and was able to return to her former job, she would be paid the current wage rate as stipulated in the collective agreement.
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 and go on pension. In return, those employees would receive a lump sum payment. The opportunity was offered to all employees who were at least 55 years old 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 on the total of 70 employees.
The incentive 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 those employees who were currently working.
Calculation of payments unfair: Union
The union grieved this arrangement, arguing the employees on LTD were being discriminated against because of their disability by receiving lower payments. The union recommended the payment to the LTD employees be calculated using the current job rates for the positions in which they had last worked, which would result in everyone being treated equally.
The arbitrator noted that 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 their LTD benefit payments to their pensions — under the collective agreement, LTD benefits could not continue past the age of 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.
The arbitrator found 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, due to the increase in wage rates. More senior employees would also receive a greater payment if they were making a higher wage. This was contemplated because the employees were “individually being offered different amounts to ‘quit’ depending on their personal work circumstances and the value of their work contribution to the enterprise,” said the arbitrator.
Active employees would give up more
Though active employees who volunteered for the VSP received a greater payment, they were also giving up their existing job with its 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 was 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 eliminate senior positions. However, it was still made available to LTD employees who were not contributing to wage costs and were 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 eligible group — 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).”
The arbitrator found 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. 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 was 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 claimaints’ disability,” said the arbitrator.
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