CANADIAN RAILWAY OFFICE OF ARBITRATION
& DISPUTE RESOLUTION
CASE NO. 4409 Second Supplementary
Heard in Montreal, September 9, 2015
VIA RAIL CANADA INC.
There is a dispute between the parties concerning the implementation of the decision in CROA&DR 4409 of June 10, 2015.
There appeared on behalf of
M. Decary – Counsel, BCF, Montreal
J. F. Legault – Chief Legal Officer, Corporate Secretary, Montreal
W. Hlibchuk – Counsel, Montreal
E. Houlihan – Director Employee Relations, Montreal
B. A. Blair – Senior Advisor Employee Relations
L. F. Caron – Chief Human Resources, Officer
D. Bedard-Lapointe – Tax Lawyer, Stikeman Elliott
M. C. Levasseur – Counsel, BCF, Montreal
There appeared on behalf of
A. Rosner – National Staff, Montreal
R. Fitzgerald – National Staff, Toronto
D. Kissack – Regional Representative, Winnipeg
AWARD OF THE ARBITRATOR
1. Two issues are addressed in this Second Supplementary Award: a request for reconsideration by VIA; and an implementation request by Unifor.
2. An Award in this matter was issued on August 4, 2015 (“the original award” or “the August 4th award”). Issues of implementation arose between the parties and a Supplementary Award was issued on September 1, 2015. Pursuant to the Supplementary Award the Company mailed a notice to each employee and retiree, dated September 4, 2015. The notice provided, among other advice that, as a consequence of the August 4 award, VIA would reinstate the Old Rail Pass Program for members of the Union. It also highlighted an issue between the parties regarding the tax implications of the two programs, the Old and the New.
3. The Company’s reconsideration request is founded in paragraph 22 of the August 4th award. There the following statement was made: “The Corporation can make what changes it wants, provided it does not effectively or practically remove the value of the benefit contained in the notion of employees’ ‘free transportation privileges’”. The Corporation argues that, taking account particularly of the tax treatment of the free transportation privileges, the value of the benefit to employees of the New Rail Pass Program is materially better for employees than was the Old Rail Pass Program. The Corporation submits that, if the full financial and tax implications of the New Rail Pass Program are better understood, I should be persuaded that there was no reduction in the rail pass privileges enjoyed by employees (as was found in the original award), but, on the contrary, the value of the benefit was enhanced by the New Rail Pass Program. In these circumstances, I should exercise my discretion to reconsider the original award.
4. The Employer provided a chart comparing the cost and tax implications for two routes, as examples, to show that, with the free transportation privileges in the Old Rail Pass Program being a taxable benefit for the family members of employees, in the Company’s submission, the value of the New Rail Pass Program is greater than the value of the Old Rail Pass Program.
5. The evidence of a tax expert, Luc Bernier of Stikeman Elliott, was presented, based on the chart. He explains that the New Rail Pass Program is more financially advantageous for an employee than the Old Rail Pass Program principally because of the likely tax treatment by Revenue Canada and the Quebec tax authorities for the use by spouses/partners and dependents of the free transportation privileges in the Old Rail Pass Program. Under the Old Rail Pass Program the family of employees travelled free in economy. In the New Rail Pass Program 50% is charged for their fares. Mr. Bernier suggests the 50% charge will likely not cause the benefit to be treated as taxable by Revenue Canada. This is because 50% of the ticket is arguably fair market value for the ticket, hence there is no taxable benefit, whereas, under the Old Rail Pass Program, a free ticket is not fair market value and so is a taxable benefit.
6. Mr. Bernier explains, in his evidence at the hearing, that, transportation privileges for family members (spouses/partners and dependents) are taxable, but, administratively, the tax authorities in Canada and Quebec have not yet seen fit to apply this tax. That has been the case since 1988. Mr. Bernier’s opinion is precautionary. Because, on his reading of the law and his knowledge of Revenue Canada administrative policy, the benefit is taxable, he anticipates, because of a change in Revenue Canada’s policy, that the authorities will likely begin to tax the free transportation privileges for family members. So he has recommended – and the Company intends to apply his recommendation – that these privileges under the Old Rail Pass Program be treated as taxable benefits and that, in future, assuming the continuation of the Old Rail Pass Program, they should be reported as taxable benefits on the T4s of employees.
7. At the hearing, Mr. Bernier accepted that the free transportation privileges for family members of retirees are not taxable.
8. Mr. Bernier’s interpretation is based on the following changes to the tax regulations. The general rule of tax law is that a benefit from employment is taxable unless expressly exempted. So, but for an exemption, free transportation privileges are taxable. An exemption was provided in a 1964 Information Bulletin from the tax authorities. It read:
Where, in the transportation industry, an employee is given the privilege of a free pass for himself and his family on vehicles operated by his employer, he is not regarded as receiving a taxable benefit.
9. This gave a general exemption for free transportation privileges for the families of VIA employees, among transportation employees. That was the status quo until 1988.
10. Information Bulletin, IT-407R issued in 1999, reiterating a position established in 1988, expressed the exemption more narrowly, as section 43:
43. Employees of bus and rail companies will not be taxed on the use of passes.
11. The most recent iteration of this bulletin is on April 15, 2013. The exemption from 1988 therefore applied only to bus and rail companies, rather than the whole transportation industry (airline and other transportation companies were expressly removed from the exemption in other provisions) and, Mr. Bernier argues, applied also only to the actual employee and not to the use of passes by their families. He says this interpretation in supported by the wording of the provision in French, which reads:
43. L'utilisation des laissez-passer par des employés de compagnies de transport par autobus et par chemin de fer n'est pas un avantage imposable.
12. The Union interprets the provision differently. It argues the privilege is possessed by the employee, and applies to family members, as it did from 1964. The reference is to a single pass, meaning that possessed by the employee and their family members. In any event, the Union makes the point that this rule, in French and English, has been in effect since 1988 without the free transportation privileges for family members being taxed by the authorities.
13. Information Bulletin, IT-407R (1999) is relevant also to the position of pensioners and their family members. Section 44 reads:
44. Retired employees of transportation companies will not be taxed on pass benefits under any circumstances.
14. Given the broad scope of this provision, at the hearing Mr. Bernier accepted this likely meant that the free transportation privileges in the Old Rail Pass Program for the family members of retirees would not likely be taxable.
15. There was reference also to a Revenue Canada directive on June 11, 2009 regarding transit employees. It expressly makes the free travel benefits of family transportation on transit a taxable benefit as from 2010.
Surface Transit Passes Provided to Family Members of Transit Employees
Employers sometimes provide free or discounted transit passes to family members of employees that are employed in the business of operating bus, streetcar, subway, commuter train, and ferry services. The CRA had administratively allowed for the non-taxable status of these passes when provided to the transit employees and their families.
Effective from 2010, the non-taxation of free or discounted surface transit passes only applies for passes provided to the transit employee and for the exclusive use of the employee. Free or discounted passes provided for an employee's family member will represent a taxable benefit to the employee. Furthermore, passes provided to employees who work in functions separate from the transportation operations will continue to represent a taxable employment benefit under this policy (e.g., municipal employees not directly employed by a transit commission).
16. Some suggestion was made at the hearing by the Company that it operates as a transit company. Although some commuters use VIA trains, VIA is not a public commuter transit service. It is a rail company. The 2009 tax bulletin did not therefore apply to VIA.
17. The Union refers to the 2009 bulletin to show, firstly, that there was an express announcement that free transportation privileges for transit employees’ family members would be taxable, but there has been no such express announcement for the equivalent in rail transportation. The Employer refers to the tax bulletin to argue there is no logical tax policy reason why the benefit should be taxable for transit employees, but not rail employees.
18. Since the hearing there has been email correspondence to me by VIA with additional evidence. In this subsequent email, objected to by the Union, Mr. Bernier advises that he has engaged in further consultation with the tax authorities and he now has confirmation not only that the tax authorities may tax the free transportation privileges in the Old Rail Pass Program, but that they intend to do so. Further, he has changed his position on the family members of pensioners (those who retired directly from VIA), stating that the tax authorities treat them as no different from employees, and that their free transportation will also be taxed. In the alternative to its objection to the Company’s post-hearing evidence, the Union has asked that it be permitted to cross-examine Mr. Bernier on his additional evidence.
19. I conclude from Mr. Bernier’s evidence at the hearing that there is a distinct possibility that the tax authorities may start to tax free transportation for family members, despite the non-application of that approach since 1988. It may well be that, as a result, there would be some financial advantages for employees in the New Rail Pass Program over the Old Rail Pass Program, once they are taxed on the free family transportation travel in economy, and particularly if they use the opportunities for business and sleeper tickets under the New Rail Pass Program.
20. The value of the free transportation privileges benefit has a number of components. To do an exact evaluation of the relative value to employees of the Old and the New would require a practical analysis, for each individual, of the value of the benefits, including the tax implications of the two programs. Assuming the tax implications are as Mr. Bernier claims, the evaluation of the relative benefit to employees of the two programs would require a thorough assessment of incidence of usage and preferences (how many use economy travel, how many prefer to travel in economy, how many now make use of the more expensive opportunities for travel, how many travel with their families, how many travel with guests, how many prefer the certainty of an advanced booking even if it is a taxable benefit, etc.).
21. The Union’s case is about the loss of the free transportation privileges their members had in economy class. In pursuing that case it acts in the manner it considers best articulates the value its members place on the free transportation privileges they had in the Old Rail Pass Program that they have lost. By bringing the grievance the Union sought to restore the value of the benefit its member had: free rail travel, booked in advance, for its members travelling in economy class. That was the promise of the collective agreement and it is the promise that the Union wishes to retain. In the absence of an individual assessment of the value of the benefit for each employee, I must have regard to the value ascribed to the benefit by the Union, as representative of its members, notwithstanding the new information on the benefit being taxable.
22. It is important to note that I am engaged in a rights arbitration, under the parties’ grievance procedure, not an interest arbitration. An interest arbitration would determine what should be the components of the Rail Pass Program. I was engaged only in determining whether the collective agreement was breached and I found that to be so on the basis of the removal of the free transportation privileges for economy travel for family members of employees.
23. When should an arbitrator reconsider their decision? The cases provided by the Employer show that, where arbitrators have based their decisions on erroneous data, they should properly take account of the correct data and amend their awards accordingly (see Chandler v. Alberta Association of Architects,  2 SCR 848, 1989 CanLII 41 (SCC); Canada Post Corporation v. Canadian Union of Postal Workers, 2008 CanLII 32313 (ON SCDC)). But, as was said in Chandler v. Alberta Association of Architects, at p.862:
… there is a sound policy reason for recognizing the finality of proceedings before administrative tribunals. As a general rule, once such a tribunal has reached a final decision in respect to the matter that is before it in accordance with its enabling statute, that decision cannot be revisited because the tribunal has changed its mind, made an error within jurisdiction or because there has been a change of circumstances. It can only do so if authorized by statute or if there has been a slip or error within the exceptions enunciated in Paper Machinery Ltd. v. J. O. Ross Engineering Corp., 1934 CanLII 1 (SCC),  S.C.R. 186.
24. The exceptions in Paper Machinery Ltd. v. J. O. Ross Engineering Corp. are described as, “where there had been a slip in drawing it up, and, where there was an error in expressing the manifest intention of the court”.
25. In Grier v. Metro International Trucks Ltd., 1996 CanLII 11795 (ON SC), the headnote states:
A flexible approach to the doctrine of functus officio was called for in the circumstances. It was clear that the referee relied on an important fact which was incorrect. Her first decision was a nullity. She intended to make a final disposition but that disposition was fatally tainted by her reliance on a crucial finding which proved to be incorrect. She should be permitted to reconsider the matter afresh and render a valid decision. The parties were entitled to a decision on the merits based on a full and accurate statement of the facts.
26. The Company argues that, in the prior hearing before me, the tax issue was not specifically addressed, so my comparison of the Old Rail Pass Program and the New Rail Pass Program occurred without paying sufficient regard to the tax consequences and tax issues, now clarified.
27. The tax issue was not focused on previously. It has been substantially illuminated now, and the possible tax implications of maintaining the Old Rail Pass Program have now been clarified. However, I find that the principles for reconsideration of an earlier decision do not apply to the present case. That is because what governed the original award was the parties’ statement of dispute, and their respective Ex Parte Statements of Issue. As the Union argues, there was never an issue of which program, the old or the new, would be better for employees. The case was not about the relative merits of the two programs. That is what the Employer would like it now to become, but that is not what was before me. The dispute was framed simply by both parties and nowhere was I asked to determine, akin to the role of an interest arbitrator, which was the better of the two programs. My task was to decide whether the Company violated the collective agreement when it removed free transportation privileges that included employees’ family members. There was also a preliminary matter over my jurisdiction that VIA felt the changes to the program were not arbitrable. Those were the only issues. The parties presented full submissions on them. I ruled on both. I found there was a violation of the collective agreement because an aspect of the free transportation privileges had been removed when the Union and its members had an entitlement to those privileges under the collective agreement.
28. The Canadian Railway Office of Arbitration Memorandum of Agreement of 2004, containing CROA’s Rules of Procedure, provides the following at s. 14:
14. The decision of the arbitrator shall be limited to the disputes or questions contained in the joint statement submitted by the parties or in the separate statement or statements as the case may be, or, where the applicable collective agreement itself defines and restricts the issues, conditions or questions which may be arbitrated, to such issues, conditions or questions. …
29. Arbitration is intended to be a final process. The CROA Rule require that the arbitrator’s decision be limited to the issues stated by the parties for determination. I find that to embark on the reconsideration the Employer requests would be contrary to Rule 14. The relative merits of the old and new rail pass programs were not at issue in the parties’ statements of issue, and they cannot become so now.
30. In the result, I do not find that an error was made in the earlier determination. I am therefore not persuaded that grounds have been made out for the reconsideration request. The request is denied.
31. I turn to the second issue, an implementation request by the Union. The Company has indicated that it might ask people who took advantage of the New Rail Pass Program to reimburse the Company for the benefits of that program as a result of the Company’s decision to reinstate the full Old Rail Pass Program in the event the original decision is not reversed (as has now occurred). The Union argues that employees were not notified of the potential jeopardy of taking advantage of the New Rail Pass Program at the time they did so, and it submits it would be unjust that they be required to refund expenditure they incurred in the good faith assumption they were entitled to do so. The Union argues that the Company cannot require reimbursement retroactively when, at the time, the New Rail Pass Program was in effect. It argues that employees must be notified of any jeopardy as of a specific future date, after which they would book under the New Rail Pass Program at their peril. The Union seeks an order that there be no reimbursement request by the Company so that, when the Old Rail Pass Program is reinstated, there is no prejudice to any employee who has used the New Rail Pass Program.
32. Mr. Hlibchuk, for the Company, argues the Union’s request is premature because the Company has not confirmed whether it will claim any reimbursement and, if so, from what date. Only once that is determined by the Company, and if there is to be a claim for reimbursement, is there a real implementation issue.
33. I agree. The issue has not yet crystalized. However, should there be any issue of retroactive reimbursement for payments made during the period when the New Rail Pass Program was in effect, I remain seized to address it, as with other issues of implementation of the original award.
October 5, 2015 _______________