Union disputes calculation of retirement gratuities

A GRIEVANCE concerning retirement gratuities for employees who work less than 10  months per year was dismissed recently. The Lincoln County Catholic School Board and Welland County Catholic School Board merged to become the employer. The collective agreement had provisions for the payment of a retirement gratuity to former employees of both boards.

The formula was: “50 per cent of their accumulated sick leave to a maximum of six (6) months earnings, based on the actual earnings at January 1, 1999.” In addition, the agreement stated: “It is understood that the Ontario Municipal Act limits a maximum payment of six (6) months’ salary.”

The act also referred to the maximum amount of a sick leave gratuity in the following terms: “A maximum of one-half year’s earnings at the rate received by him or her immediately before termination of employment.”

The employer used a formula that took the yearly earnings of an employee (for example $30,000) and divided them in half to obtain six months’ earnings (in this example, $15,000).

But the Canadian Union of Public Employees, Local 1317, said the proper calculation in the above example would be to divide the yearly salary by 10 ($3,000) for the monthly salary. That should then be multiplied by six ($18,000) for the amount of the retirement gratuity.

But the employer argued its calculation was logical as there are 12 months in a year and the collective agreement entitled employees to a maximum gratuity of six months’ earnings. Therefore, workers were entitled to a maximum retirement gratuity of 50 per cent (6/12ths).

The union’s methodology would result in the 10-month employee being eligible for a maximum gratuity of 60 per cent of their yearly salary whereas a 12-month employee would only be eligible for a maximum gratuity of 50 per cent, said the employer.

Arbitrator Larry Steinberg said the language of the collective agreement was clear that retirement gratuities were to be based on six months’ earnings based on the actual yearly earnings at Jan. 1, 1999. And the employer adopted an approach that was simple to administer, in dividing yearly earnings in half. This was also consistent with the language used in the act since it reflected a “half year’s earnings," he said.

However, the parties did not use the language from the act. They used the concept of six months’ earnings which seemed to imply they contemplated converting the yearly earnings amount to a monthly amount, said Steinberg. So, the union’s approach was consistent with the language the parties used in the agreement.

The question boiled down to what the parties intended by the reference to the act, said Steinberg. And the language in the act is unambiguous. The legislature intended that sick leave gratuities should be capped at one-half of what an employee would earn in a year. For employees who work 12 months, that would obviously be six months of earnings. For employees who work 10 months, that would be five months of earnings.

“Did the parties intend to depart from this paradigm when they used the expression '6 months' earnings' in Article 20.03(a) and (e)? Did the parties intend that employees who work 10 months were to receive a proportionally greater amount of retirement gratuity than 12-month employees?” asked Steinberg.

“I can think of no reason why the answer to either question would be in the affirmative. There was no policy reason advanced at the hearing that would explain why one group of employees would or should be entitled to a proportionally greater amount than another group of employees.”

On balance, the agreement was intended to reflect the maximum entitlement in the act for the retirement gratuity, he said, finding the employer correctly determined the gratuity. The grievance was dismissed.