©b69r AD HOC 131



















A hearing in this matter was held at Ottawa on December 30, 1981.


©u28rG. Thiverge and J.D. Hunter for the union

©u37rA. Leger, A.D. Andrew and J. Cameron for the company


©b69r A W A R D

This matter was referred to the arbitrator by the parties pursuant to

the provisions of a Special Agreement dated July 7, 1978, between

them and other parties. The parties have, by agreement, extended the

time for the making of an award.


The Special Agreement relates to conditions and benefits to apply to

employees adversely affected by changes in railway passenger service

made in accordance with government initiatives introduced pursuant to

the Railway Passenger Services Adjustment Assistance Regulations.

The issue in the instant case relates to the interpretation of

article F of the Special Agreement.

The Statement of Facts in this matter, submitted jointly, is as



Mr. L. Montreuil has credit for 38 years and 9 months of

railway service. Most of that service was actually acquired

at Canadian National, but his CN service was continued

unbroken when he transferred to VIA in 1978.

While employed at CN, Mr. Montreuil did not contribute to

their pension plan. Upon transfer to VIA he was, however,

compelled to join the VIA pension plan. He has consequently

contributed to a company pension plan for a total of 3 years

and 3 months. In addition, he took advantage of an

opportunity to "buy back" 10 years of his previous

non-contributory service at CN. In other words, Mr.

Montreuil now has credit for 13 years and 3 months of

pensionable service under the VIA pension plan.

Mr. Montreuil was adversely affected by the service cuts made

at VIA on November 15, and is eligible to take advantage of

the Separation Plan, Article F, of The Special Agreement.

Article F.2 provides that an eligible employee with 35 or

more years of service will receive a separation allowance

which, when added to his company pension, will give him 80%

of his average earnings.

It is the Brotherhood's position that the separation

allowance must be sufficient to give Mr. Montreuil 80%,

regardless of how small his pension might be. If there is a

pension deficiency, the Brotherhood holds that the separation

allowance must be correspondingly increased to offset the

pension deficiency; if there is no pension deficiency, the

separation allowance itself would be relatively smaller.

It is the Corporation's position that the 80% mentioned in

Article F.2 is based on the assumption that an employee is a

fully paid-up member of the company pension plan. Although

an employee with a pension deficiency may have the right to

elect early retirement, his pension is lower than that of an

employee having no deficiency. Under the Separation Plan,

the Corporation maintains that the separation allowance

should not be greater for an employee having a pension

deficiency, than it would for another employee who is a fully

paid-up member of the pension plan.


Article F of the Special Agreement provides as follows:



F.1 An employee adversely affected by the implementation of

changes under the Regulations who:

(a) is sixty years of age or over and is eligible for

early retirement under his own company pension plan:


(b) is under sixty years of age, is eligible for early

retirement, and

(i) would be laid off at his home location; or

(ii) would be required to relocate in order to hold

employment; or

(iii) by electing for a separation allowance, would prevent

another employee in his seniority group at that

location with two or more years of service from being

laid off; or

(c) is one year or less away from eligibility for early

retirement under his company pension rules, and who

meets one of the conditions set out in sub-paragraph

(i), (ii), or(iii) of sub-paragraph (b) above shall

be entitled to elect to take early retirement and

receive a separation allowance as hereinafter


F.2 An employee defined in Article F. 1 (a) or F. 1 (b) above

shall receive a monthly separation allowance until the

age of 65 which, when added to his company pension, will

give him an amount equal to a percentage of his average

annual earnings over his best five-year period, as

defined under the pension rules. In accordance with the

following formula:

©b67r Years of Service Percentage Amount as

©b17rat Time Employee ©b26r Defined Above

©b19rElects Retirement

35 & over 80

34 78

33 76

32 74

31 72

30 70

29 68

28 66

27 64

26 62

25 or less 60




F.3 An employee defined in Article F. 1 (c) above (a) shall

receive the layoff benefits provided in Article "H" of

the relevant special agreement until he becomes eligible

for early retirement, and

(b) thereafter shall receive a monthly separation

allowance in accordance with Article F.2 above.

F.4 A separation allowance shall cease upon the death of the

employee who dies before reacting the age of 65.

F.5 An employee entitled to the separation allowance as

hereinabove set out may elect to receive in its stead a

lump sum payment equal to the present value of his

monthly separation payments calculated on the basis of a

discount rate of ten (10) per centum per annum.

F.6 An employee who receives the monthly separation allowance

under Article F.2 above shall be entitled to have his

group life insurance coverage continued for the duration

of his allowance and paid for by the company concerned.

F.7 An employee whose monthly separation allowance ceases at

age 65 in accordance with Article F.2 above, shall be

entitled to a life insurance policy, fully paid up by the

Company, in an amount equal to that in effect in existing

collective agreements.

F.8 An employee who is in receipt of a monthly separation

allowance calculated in accordance with Article F.2

above, and who lives in a province ,where medicare

premiums are required, will have his premiums paid by the

company concerned for the duration of his allowance but

only up to the amount of the maximum medicare allowance

provided under the existing collective agreements.

It is agreed that Mr. Montreuil is a person eligible to take

advantage of the separation plan, as set out in article F. The

particular issue is as to the extent of the separation allowance to

be paid to Mr. Montreuil pursuant to article F.2 of the agreement.

Mr. Montreuil is entitled to certain payments under a company pension

plan. Because, in his earlier employment, Mr. Montreuil had been a

member of what has been referred to as the "CN 1935" plan (which

provides a pension not based on earnings), and because his subsequent

"buy-back" of previous service for pension service has given him a

credit for only 13 years and 3 months of pensionable service (despite

his actual service of 38 years and 9 months), the result is that Mr.

Montreuil's pension is substantially lower than that of employees who

had, over the years, made more substantial contributions to one or

another of the pension plans from which employees may draw

earnings-based pensions.

The separation allowance contemplated by article F.2 is a payment

intended to make up the difference between the pension paid to a

person who retires, and an amount equal to a percentage of his

average annual earnings over his best five-year period. The

percentage varies in accordance with the table set out in article

F.2. In Mr. Montreuil's case, of course, the percentage is 80, since

he had more than 35 years' service at the time of electing early


The Special Agreement does not distinguish between employees by

reason of the pension plan or plans to which they may belong, nor

does it distinguish between them in terms of earnings or on any other

ground than length of service. It is clear from article F.2 that the

amount payable by way of the monthly separation allowance is an

amount that will vary from case to case. In each case, it must be

whatever amount is necessary so that, when it is added to his company

pension plan (whether the benefit under that plan be great or small)

will give an amount equal to the appropriate percentage of earnings.

The company, while not denying that the the grievor is entitled to

the benefit of article F.2, and to some payment by way of monthly

separation allowance, contends, in effect, that there should be a

limit to the amount paid in cases such as that of the grievor. It is

said in effect, that it is unfair to make larger payments in cases of

employees with "pension deficiencies" than in those of employees who

are fully paid up members of the pension plan.

In my view, the language of the Special Agreement, and in particular

of article F.2 does not allow this limitation on the payment to be

made thereunder. The formula established by article F.2 is quite

clearly stated and contains no ambiguous terms. No eligible person

is excluded from its benefit. There is no difficulty in computing

the amount necessary to be paid in any case, in order to bring the

total of pension plus separation allowance up to the percentage of

earnings applicable to that case.

Whether the results of the application of the formula in certain

cases should be regarded as fair or unfair is not in issue before me.

Whether or not the results may sometimes be considered as anomalous,

they are not absurd or contradictory; this is not a case in which the

ordinary sense of the words used should be modified to avoid

inconsistency: there is, in fact, no inconsistency with the other

provisions of the agreement.

Further, although it may or may not be the case that it was (or

would have been: this provision was established as part of the

Special Agreement by an award of an arbitrator), the "intent" of the

parties (or of the arbitrator) to deal only with employees who were

fully paid-up members of the pension plan, that intention does not

appear on the face of the agreement, which must be taken as being the

whole agreement between the parties.

It may be noted that article F of the Special Agreement provides for

other payments as well as that of the monthly separation allowance.

There is no necessary uniformity in these payments which, in certain

cases, could lead to larger payments in respect of some employees

than in respect of others, and without, perhaps,any basis in terms of

length of service or other contribution for such distinctions. It

could be argued (not successfully, I should think) that such payments

were "unfair". It is, in any event, quite clear that they are to be

made. That is true as well in the case of the monthly separation

allowance. It is to be remembered, finally, that the separation

allowance ceases at age 65 (or before, if the employee dies). It is

a quite special form of variable payment associated with early

retirement, and is not payable in the retirement period after that


For all of the foregoing reasons, the claim is allowed.

DATED AT TORONTO, this 8th day of February, 1982.







J.F.W. Weatherill