SHP 332



Ontario Northland Railway


National Automobile Aerospace and Agricultural Implement Workers Union of Canada







There appeared on behalf of the Union:

Brian Stevens President, Local 103

Michael Pilon Vice-President, Local 103



There appeared on behalf of the Company:

M. J. Restoule Labour Relations Assistant


A hearing in this matter was held in North Bay, Ontario on November 5, 1990.



The Dispute and Statement of Fact and Issue filed by the Union at the hearing is as follows:

Ex Parte Dispute:

Concerning the discontinuance of the Medicare Allowance to Brian Stevens and other employees located in the Province of Ontario.

Ex Parte Statement of Fact and Issue

The parties to the Collective Agreement have incorporated by reference (Rule 51.1), an Employee Benefit Plan Supplemental Agreement, which makes provisions, under Appendix "C", for the payment of a Medicare Allowance.

The Province of Ontario enacted the Employer Health Tax Act effective January 1, 1990, eliminating the requirement for individuals to make premium payments towards OHIP.

It is the contention of the Union that the tax levied by the Employer Health Tax Act does not constitute any amount that the O.N.R. is required to pay for under the Supplemental Agreement and further contends that the doctrine of estoppel also applies towards these payments and therefore Brian Stevens, (and all other employees in the Province of Ontario) should continue to receive the full medicare allowance.

The Company refused the Union's request.


The material establishes that for a good number of years the collective agreement has incorporated, by reference under Rule 51.1, a Supplemental Agreement establishing the terms of the Employees' Benefit Plan. Appendix "C" of the Supplemental Agreement provides for medicare allowances. That provision reads, in part, as follows:


1. Allowances will be paid by the Company for medical-surgical benefits to be applied against payments provided for under any government medical care program as follows:

(a) Eligible employees, regardless of marital status, residents in the Province of Quebec, an allowance of $10.00 per month.

(b) Eligible employees resident in the Province of Ontario. Monthly allowances as follows:

*Employees with no dependents $12.50

*Employees with dependents $45.00

2. Such allowances will first be used to pay any amount the Company is, or might be in the future, required to pay for such medical-surgical benefits under any medical care program.

3. If no monthly amount is payable or if the monthly amount payable, or to be payable, by an employee, or by an employee and the Company, account medical-surgical benefits is less than the allowance, the difference will be paid to the employee on the payroll and if the monthly amount is greater, the reference will be deducted from the employee's wages.

4. Subject to the provisions of the above sections an employee qualifies for an allowance for any month only if he performs compensated service in the payroll period which contains the tenth day of the month or in the payroll period immediately preceding. The application of this section will not operate to deny an eligible employee the allowance for any month in which he performs compensated service nor to grant him the allowance for any month in which he does not perform compensated service.

5. Notwithstanding the provisions of Section 4 above an eligible employee who does not perform compensated service in such pay periods but who is in receipt of a weekly indemnity payment under the provisions of Section 1(b) of this agreement or an Unemployment Insurance benefit as contemplated in Section 1(c) of Appendix "B" or who is off work account W.C.B. disability will be treated as follows:

(i) if he is resident in a province where a medicare premium or medicare tax is payable, he will be eligible for the amount of such premium or tax up to the maximum amount stipulated in Section 1 of this Appendix, or such lesser amount as is required to pay the premium or tax in such province.

(ii) if he is resident in a province where no medicare premium or medicare tax is required, no payment will be made.

This section 5 will apply only for a maximum period of 26 weeks for each period of disability.

NOTE 1: The provisions contained in this section shall apply to employees represented by the Unions signatory to the Master Agreement dated May 14, 1971 between the Railways and Associated Railway Unions in lieu of the provisions contained in Article 111 of the said Master Agreement.

NOTE 2: The provisions contained in this section shall not result in a duplication of benefits as a consequence of similar provisions in any other agreement.

(emphasis added)

It is common ground that the amounts described in paragraph 1 correspond to what were, until January 1, 1990, the amounts payable as OHIP premiums under the terms of the Health Insurance Act, R.S.O. 1980 c. 197. Effective January 1, 1990, under the Employer Health Tax Act, S.O. 1989 c.76 s.41, those premiums were abolished. The new law is titled "An Act to impose a Tax on Employers for the purpose of providing Health Care and to revise the requirements respecting the payment of Premiums under the Health Insurance Act". It provides that every employer in Ontario is to pay to the Crown in right of Ontario a tax calculated on the payroll of the employer on an annual basis. The representation of the Company is that under the new law it is required, effectively, to pay some $60.00 monthly for each employee on its payroll.

The position of the Union is straightforward. It argues that the amounts of $12.50 and $45.00 appearing in article 1(b) of Appendix C of the Supplemental Agreement are a discrete monetary benefit negotiated on behalf of its members. It submits that so long as the requirement to pay premiums into the OHIP plan continued those monies could be viewed as an amount which the Company was "... required to pay for such medical-surgical benefits under any medical care program" within the meaning of article 2 of the Appendix. It stresses the provision of Article 3, whereby if no monthly amount is payable, the difference is to be paid to the employee. In the Union's submission, with the implementation of the payroll tax under the Employer Health Tax Act, the Company was no longer required to pay the amounts under any medical care program. It submits, as a consequence, that the monies are to be returned to the employees. In the Union's submission the Employer Health Tax Act merely provides for a direct tax payable by the Company, and that the Company's obligations under that statute do not relate to the payment of medical-surgical benefits under a medical care program within the contemplation of Appendix C of the collective agreement.

The issue becomes whether the Company is entitled, as it claims it is, to apply the medicare allowances towards its obligation to pay the taxes levied on its payroll under the Employer Health Tax Act or whether, as the Union claims, those monies are to be refunded in whole to the employees.

The Union relies on the decision of Arbitrator Weatherill in Canadian Railway Office of Arbitration Case No. 1064, a case heard on April 12, 1983 between CP Rail and the Brotherhood of Locomotive Engineers. In that case, which arose in Manitoba, the collective agreement made provision for medicare allowance in terms substantially similar to those appearing in the Supplemental Agreement in the case at hand. When the Government of Manitoba abolished health care premiums by enacting the Health and Post Secondary Education Tax Levy Act, S.M. 1982 c.40 substituting a direct payroll tax upon employers, the Brotherhood claimed that the tax was not required to be paid for basic medical surgical benefits under any government medical care plan. On that basis it claimed the Company was obliged to pay the medicare allowance directly to the employees. In finding that the grievance must succeed the Arbitrator reasoned, in part, as follows:

The title tells us that the Act is one respecting a "Health and Post Secondary Education Tax Levy", and a survey of the provisions of the statute show that it is precisely what it purports to be. It is a statute imposing a tax levy. While the provisions of the statute itself shed no light on the matter, the title suggests, and the statements made in the Legislative Assembly at the time show that the tax on remuneration was considered by the government to be preferable to some other method of increasing revenues, and that the need for such increased revenues was felt particularly in the areas of health care and post-secondary education. The need for funds in those areas, was, I think it is fair to say, the fundamental motivation behind the legislation. It does not follow from that that the tax imposed under the Act is an amount employers are "required to pay for basic medical-surgical under any government medical care plan".

In my view, the Health and Post Secondary Education Tax Levy Act cannot be described as a "medical care plan". It is not a "plan" in any accepted sense it is a taxing statute and it does not provide for medical care, except in the extremely vague sense that it raises funds some of which will presumably go towards the provision of medical care. Certainly the Act makes no mention of "basic medical-surgical benefits", and nothing in the statute, not even its title, could be read as suggesting that any amount this employer might be required to pay under the Act was for "basic medical-surgical benefits". It may also be noted that nothing in the Act deals with the extent to which revenues raised thereunder would be apportioned towards "Health" (whether or not in aid of a medical care plan), or "Post Secondary Education", and indeed the Act does not itself require that any disbursements from the Consolidated Fund be made, nor does it set out limitations on the purposes for which payments may be made from the Fund.

It may be that if the funds so raised are used in substantial part to fund a government medical care plan, and in particular to finance basic medical-surgical benefits, then an inequitable situation will have arisen for this employer, who, having regard to the medical care allowance being paid to employees may be considered as paying for medicare benefits more than once. That issue, however, is not before me. The issue before me is one of interpretation of the precise and they are quite precise provisions of the Collective Agreement. Are the payments made by the Company pursuant to The Health and Post Secondary Education Tax Levy Act, S.M. 1982, c.40 amounts which the Company is "required to pay for basic medical-surgical under an government medical care plan", within the meaning of Article 27(2)(b) of the Collective Agreement? No, in my view, they are not.

For the foregoing reasons it is my conclusion that the Company was not entitled to discontinue payment of the Medicare Allowance to employees located in the Province of Manitoba. The grievance is allowed.

In the Arbitrator's view, while there are some similarities between the events and issues considered in CROA 1064, there are also some important distinctions between the facts of that case and the case at hand. The first difference of note is the language of the agreement. In CROA 1064 the language was framed in respect of the obligation of the Employer to pay for benefits "... under any government medical care plan". The concept of a "plan" was focused upon by the Arbitrator, who concluded that the provincial statute could not be characterized as a plan in the sense contemplated in the parties' agreement.

The language of the supplemental agreement before me is not framed with reference to any medical care plan. Rather, paragraph 1 of Appendix `C' speaks of the obligation of the Employer to make payments "... under any government medical care program ...". Similarly, paragraph 2 refers to making payment for benefits "... under any medical care program".

In the Arbitrator's view there is a difference between a medical insurance plan and the broader concept of "any government medical care program" as reflected in the agreement before me. Can it be said that the Health Insurance Act, taken together with the Employer Health Tax Act can be fairly characterized as a government medical care program under which the Company is required to make payments? I think that it can. As the full title of the Employer Health Tax Act implies, it is established to require employers to make payments to provide health care. While it is true that the payments are no longer in the form of premiums for individual employees, they are nonetheless employee-related insofar as they are based on the Employer's payroll. In these circumstances I find it difficult to characterize the monthly allowances negotiated by the parties as other than monies which must "first be used to pay any amount the Company is ... required to pay for such medical-surgical benefits under any medical care program".

It is apparent, moreover, from the language of paragraph 2 of Appendix `C' that the parties negotiated the medical allowance in the contemplation that there might be some future change in the framework of the medical care program, insofar as they referred to amounts which the Company is, "or might be in the future", required to pay. In the Arbitrator's view, having regard to the original intention of the parties' agreement, the more compelling conclusion is that the Company and Employer intended the medical allowances to be payable in the manner described within Appendix 'C' in the context of the broadest form of governmental medical care program, and did not predicate their agreement on the existence of any particular model of insurance plan. In my view the fundamental bargain struck by the parties was that the monies negotiated as medicare allowance should be applied to any funds which the Company might be obliged to pay under any government medical care program in the broadest sense.

A second distinction arises as between this case and CROA 1064. As already noted, in the instant case the Employer Health Tax Act is dedicated solely to raising funds for the purpose of providing health care. Unlike the Manitoba statute under consideration in the prior case, the Ontario law does not allow for the mixture of funds intended for any other purpose, such as education or any other government activity. The framing of the statute in those narrow terms serves, in the Arbitrator's view, to maintain a clearly identifiable system of funding a provincial medical care program. Most significantly for the case at hand, it seems to me undeniable that the funds paid by the Company in respect of that statute, even if they be characterized as a tax, nevertheless qualify as an amount which it is required to pay under a medical care program. In the Arbitrator's view the framing of the Ontario statute in its more restrictive terms leads to a conclusion substantially different from that which was found in CROA 1064.

Lastly, the Arbitrator can find no basis for the application of the doctrine of estoppel in this case. The evidence reveals that during the course of bargaining the Union's representative voiced the view that in the event of individual OHIP premiums being no longer payable, the medicare allowance should be remitted directly to the employee. There is no trace in the minutes of the meetings of any acceptance of that position on the part of the employer. In fact the substance of the give and take between the parties appears to have been restricted to the amount of the allowance payable, and no change in the language of the Appendix was made which might bear on this issue. Absent any evidence of clear acceptance by the Company of the position put forward by the Union's representative, I am unable to sustain the submission that the Employer is estopped from denying this grievance.

For the foregoing reasons the grievance must be dismissed.

DATED at Toronto this 19th day of November, 1990.

(sgd) M. G. Picher