SHP 114



VIA Rail Canada Inc.

(the "Corporation")


Canadian Brotherhood of Railway, Transport and General Workers

(the "Brotherhood")




SOLE ARBITRATOR: J. F. W. Weatherill



There appeared on behalf of the Corporation:

A. Leger,

A. D. Andrew

J. Cameron



And on behalf of the Brotherhood:

G. Thivierge

J. D. Hunter



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




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 follows:


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 Brotherhoodís 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 Corporationís 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:

Article F - Separation Plan

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; or

(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 provided..

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:

Years of Service Percentage

at Time Employee Amount as

Elects Retirement Defined Above

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 reaching the age of 65.

F.5 An employee entitled to the separation allowance as herein above 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 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. Montreuilís 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. Montreuilís case, of course, the percentage is 80, since he had more than 36 yearsí service at the time of electing early retirement.

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 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 age.

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

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

(signed) J. F. W. Weatherill