AD HOC 251

AWARD

The parties agreed I was properly constituted as a sole arbitrator with jurisdiction to deal with the matter in dispute. The facts giving rise to this dispute are not at issue and are as follows: 1. On July 6, 1985 a unanimous arbitration board determined that the Railway could operate with a reduced crew. As an integral part of that award the arbitration board awarded a lump sum payment of $2.5 million which was to be payable to members of the Union who qualified for protected employee status under the provisions of the award. At page 8 and 9 of Appendix I the board stated the following:

REDUCED CREW PRODUCTIVITY SAVINGS

It is common ground between these Parties, as it has been throughout the railroad industry, that a reduction in ‘crew consists’ is considered an increase in productivity.

The Board concurs with that view. Moreover, reduced crews should be considered a productivity increase under the provisions of the Compensation Stabilization Act. As well, the Compensation Stabilization Act specifically provides for the Parties to negotiate increases in productivity and for the Union to share in the resulting savings.

The Board must resolve the following issues:

1. Should a lump sum payment be made or should a perpetual payment be made each time a train runs reduced, i.e. the two (2) person crew shares a portion of the savings resulting from the elimination of the third person?

2. What amount should be awarded?

3. The implementation of the amount, i.e. how and when should the money be paid?

After examining the collective agreements throughout the North American railroad industry, the Board concluded that there is no consistent pattern in these agreements, and they were of little assistance. As well, in the Board’s view, any perpetual payment scheme creates potential difficulties, such as future grievances. Also, such a scheme would require considerable administration to implement and maintain.

Thus, the Board believes the most prudent method of payment is a lump sum paid as of the publication date of this Award. Under this scheme the employees receive the money ‘up front’ and realize a return on investment in the future. Therefore, it is our decision that a lump sum payment in the amount of two and one half million dollars ($2,500,000) shall be paid into an interest bearing trust account on the first business day following the date of this Award.

IMPLEMENTATION OF MONIES AWARDED

The matter of implementation of the monies awarded is referred back to the Monitoring Committee for resolution by October 31, 1985. Failing resolution by that date this matter shall be referred back to this Arbitration Board as expeditiously as possible for a final and binding resolution. The Parties are directed to decide how and when the monies will be paid out of the trust account referred to above.

THE ISSUE

The issue in this case is whether, for the purposes of Article 116(d) of the collective agreement, the productivity allowance (referred to above) forms a part of the 1986 earnings base upon which an employee’s annual vacation pay is calculated. Article 116(d) of the collective agreement reads as follows:

Vacation pay due for services rendered will be calculated on the basis of gross wages in the calendar year immediately preceding the year in which vacation is taken.

UNION ARGUMENT

Counsel for the Union asserts, for the purposes of Article 116(d), that the term gross wages is all encompassing and includes all payments under the collective agreement. Therefore, the monies received by members of the Union who were on the protected list as a result of the arbitration award, ought to be included as part of those employees’ gross wages for vacation calculations.

Counsel argued further that the payment to protected employees was a payment in return for them assuming additional duties when working on reduced crews in the future. In other words, it should be considered as a wage payment for that purpose.

Mr. Pidgeon also argues that the term gross wages must be given its dictionary meaning which would include payments paid to the protected employees who are working on reduced crews.

Mr. Pidgeon cited numerous authorities to support his contention that ‘gross earnings’ mean all compensation which is received by an employee. For example, he cited Collective Agreement Arbitration in Canada (2d), (Palmer) at p. 701:

… ‘Earnings’, clearly means all compensation which is received by an employee by way of pay, and it is not open in this day and age at this stage of labour-management relations to argue that labour does not earn whatever is granted in the way of wages and other pecuniary benefits for which labour has successfully bargained and which have found their way by mutual agreement into the collective agreement. …

What the union obtains in the area of vacation pay is usually ‘purchased’ by the sacrifice of some other monetary demand, such as an additional statutory holiday, a fringe benefit or wages. All of these … are ‘earned’; together they represent the total compensation which an employee expects to receive, and the employer expects to pay, as the labour cost of production.

In summary, Counsel for the Union urges me to declare that the lump payment paid to employees on the protected list be included in their gross wages for the purpose of Article 116(d).

COMPANY ARGUMENT

Counsel for the Railway takes the position that the productivity allowances which were distributed to protected employees of the Union in 1986 cannot be considered as ‘gross wages’ for the purpose of calculating an employee’s vacation pay pursuant to Article 116(d) of the collective agreement.

He argues further that in order for the Union to succeed it must demonstrate that the productivity allowance falls within the language of Article 116(d) of the collective agreement. More specifically, Mr. Greyell submits that the productivity allowance represents the Union’s share of long term productivity increases and cost savings realized by the Railway on account of reduced crew consists and, therefore, has nothing to do with the performance of work or rendering of services and does not compensate an employee for his labour or service.

In that regard he refers to the specific wording of the arbitration award dated July 6, 1985 wherein the arbitration board characterized the $2.5 million productivity allowance as representing the Union’s share of long term productivity increases and cost savings realized by the Railway on account of reduced crew consists.

In addition, Mr. Greyell points to the specific wording in the arbitration award which clearly states that the implementation of reduced crews must not result in employees having to perform additional duties which they were not normally required to perform at the time prior to the implementation of reduced crew consists. I ought to conclude that the productivity allowance does not reward an employee for his labour or service since reduced crews do not, by the very terms of the arbitration award, result in the performance of additional duties by crew members.

Mr. Greyell also urges me to consider the specific provisions of the Compensation Stabilization Act, S.B.C. 1982, c. 32, which he argues, govern the type of productivity savings awarded in the original arbitration award (July 6, 1985). Firstly, he argues the essential ingredient of the productivity concept is the element of conscious design intended by the parties to generate cost savings to the Employer. Secondly, he argues that the savings realized by increases in productivity are shared between the Employer and the groups, and not between the Employer and the individual employee. That is, productivity allowances are not linked to individual employee performance.

Mr. Greyell argues that it would be anomalous and contrary to the spirit and intent of the Compensation Stabilization Act, which governed this arbitration award and the collective agreement of the parties, to include productivity allowances in the calculation of annual vacation pay.

Additionally, Mr. Greyell points out that, at the time the parties submitted their compensation plan to the Compensation Stabilization Commissioner it did not include the $2.5 million payment as part of the gross wages of employees.

With respect to the specific provisions of Article 116(d), Mr. Greyell asserts that in light of his argument that the payment was not for services rendered, Article 116(d) should not be applied. In other words, he argues that the term wages in Article 116(d) contemplates remuneration paid for labour or service of an employee but does not contemplate monies received as a result of a productivity award, an award which is unrelated to an employee’s performance of work and labour.

Finally, Mr. Greyell points to the number of other payments made to employees who work for the Railway which are not included in gross wages for the purposes of vacation pay. Specifically, he points to the medical premiums, life insurance premiums, safety wear, and awards paid under the Company’s suggestion system.

CONSIDERATION OF EVIDENCE AND DECISION

Firstly, it should be noted that the parties did not address themselves to the issue before me during the many days of hearings which were held with respect to the reduced crew prior to July 6, 1985. Therefore, no mutual intent, or any intent for that matter, can be derived from the conduct of the parties during negotiations.

Secondly, the award was consciously crafted to provide for $2.5 million (with accruing interest) as a lump sum payment as recognition of and as a result of productivity increases resulting from reduced crews. In other words, it was to be the Union’s share in the increase in productivity realized from working with a reduced crew. Also, the award was consciously designed to harmonize with the requirements of the Compensation Stabilization Act. At page 8 of Appendix 1 of the July 6, 1985 award the board stated:

It is common ground between these Parties, as it has been throughout the railroad industry, that a reduction in ‘crew consists’ is considered an increase in productivity.

I note also, that the Employer filed the required CSP forms and included the lump sum payment referred to above as productivity bonus and further that the Union did not take issue with that characterization of the payment at that time.

The significance of this fact is that if the Union had insisted that the payment to the protected employees was part of each individuals’ gross wages rather than a sharing of savings resulting from a productivity increase, there is a good likelihood that the wage increase would have exceeded the CSP guidelines.

Further, at the time the CSP forms were submitted to the Compensation Stabilization Commissioner the lump sum payment was characterized as a productivity savings as it was in the earlier arbitration award with no challenge from the Union.

In the result, under the particular circumstances of this case, it was not intended by the original arbitration board to be included in gross wages for the purpose of vacation pay.

With respect to the Union’s argument that the term gross wages should be interpreted as being all encompassing, I note that the practice of the parties has been to not include a number of monetary items in the gross wages for the calculation of vacation pay. Therefore, when coupled with the fact that the matter before me was not raised in the interest arbitration, it is not now open for this board to award a benefit which was not negotiated or awarded in the original award. To do so, in my opinion, would be to gain a benefit in this arbitration which was neither argued nor contemplated during collective bargaining.

The grievance is dismissed.

It is so awarded.

Dated at Vancouver, British Columbia this 13th day of May, 1988.

(signed) VINCENT L. READY

ARBITRATOR