IN THE MATTER OF AN ARBITRATION

 

 

 

BETWEEN

 

 

CANADIAN PACIFIC RAILWAY COMPANY

 

(the "Company")

 

 

 

AND

 

 

 

NATIONAL AUTOMOBILE, AEROSPACE, TRANSPORTATION AND GENERAL WORKERS UNION OF CANADA (CAW–TCA CANADA)
LOCAL 101

 

(the "Union")

 

 

 

RE DISCHARGE GRIEVANCE OF MACHINIST CLAUDE MARETTE

 

 

 

Sole Arbitrator:                                 Michel G. Picher

 

 

 

Appearing For The Company:

Dominique Launay                  – Counsel, Montreal

Karen Fleming                        – Counsel, Calgary

Gilles Pépin                             – Labour Relations Officer, Calgary

Gilles Chaisson                       – FCA, Witness

 

 

Appearing For The Union:

Abe Rosner                             – National Representative

Sylvian Levert                          – Regional Vice-President, Local 101

Claude Marette                        – Grievor

 

 

A hearing in this matter was held in Montreal on June 1, 2001

AWARD

 

            This arbitration concerns the termination of the grievor, Machinist Claude Marette, for alleged fraud in relation to the administration of the Job Security Agreement. Specifically, the Company alleges that the grievor failed to properly report his income from his employment outside the Company, thereby requiring the Company to top-up his earnings under the Job Security Agreement in amounts which were not justified. The grievor denies any fraud or attempt on his part to deceive the Company and on his behalf the Union maintains that any error with respect to the reporting of his income to the Company was occasioned by his lack of familiarity with his obligations under the Job Security Agreement and his relative inexperience with the allocation of commission income, which was the entire base of his earnings from outside employment as a self-employed life insurance agent.

 

            The Dispute and Joint Statement of Issue, filed at the hearing, reads as follows:

 

DISPUTE:

 

Dismissal of Machinist Claude Marette, Montreal.

 

JOINT STATEMENT OF ISSUE:

 

On October 4, 1999, the grievor was discharged for having allegedly fraudulently obtained Job Security benefits to which he was not entitled. The full reason for dismissal reads as follows:

 

« avoir collecter des sommes d’argent de façon frauduleuse pour les années 1996, 1997 et 1998, provenant d’un supplément suite à l’acceptation par le Comité de Réaménagement d’avoir approuver votre emploi à l’extérieur de CP Rail d’après l’Article 7B2.2(b) de l’entente sur la Sécurité d’emploi. »

 

The Union submits that there was no just cause for discipline, not to say dismissal. The Union requests that the grievor be reinstated to his employment with full compensation for any losses incurred.

 

The Company denies the Union’s contentions and request.

 

            There is no substantial dispute as to the facts pertinent to this grievance. The grievor has been employed by the Company since November of 1979, working as a machinist in the St. Luc Diesel Shop in Montreal, Mr. Marette was laid off on May 10, 1996. As the grievor’s layoff was contemplated to be permanent Mr. Marette was treated as being entitled to the “enhanced SUB and other options” provided under article 7B of the Job Security Agreement. Under the terms of article 7B a person in the position of the grievor, who retains an approved position outside the Company, is entitled to a top up of outside earnings to the rate of 100% of the wages for the position from which he or she was laid off. The grievor’s entitlement also included the right to continue pensionable service and to access health benefits at the employee’s expense.

 

            Following the grievor’s layoff, and a period of vacation, he obtained a position as an insurance agent in training with Industrial Alliance. He then approached the Labour Adjustment Committee (LAC) for approval of his outside employment for the purposes of the top up benefits provided under article 7B of the Job Security Agreement. A letter was provided to the Committee by the insurance agency director, Mr. André Sagala, dated August 19, 1996. It confirmed the grievor’s employment, indicating that he would commence a period of training, which was to last for a period of some two years, at a starting base salary of $400.00 per week. Mr. Sagala also advised the Committee that the grievor’s salary would be adjusted upwards every three months during the period of his training.

 

            The record before the Arbitrator confirms that the Company and Union members of the LAC were made aware of the fact that the grievor’s earnings were to be derived entirely from commissions, and that there could be some fluctuation in his weekly earnings. That is reflected in an e-mail communication sent from the Company’s labour relations officer, Mr. G. Pépin, to Union representative Gilles Antinozzi. That communication, in the Arbitrator’s translation from the French, reads in part as follows:

 

Insofar as the employment of Mr. Marette is concerned, after consulting with officers of the Industrial Alliance Company (life insurance company) it was confirmed that the job in question is permanent. Mr. Marette will be required to follow a training period of some two years to then become fully autonomous in his employment. His salary will be based upon his performance, that is to say that he works on commission.

 

The director of the agency of the insurance company expects that Mr. Marette will have an income of approximately $400.00 per week, which amount could go downwards or upwards depending on the sales which Mr. Marette makes. The LAC committee is willing to accept Mr. Marette’s employment subject to the following conditions:

 

1.   Given that the salary of Mr. Marette is not fixed and that it can fluctuate from week to week we reserve the ability to recover any salary excess should there be any, that is to say any amount in excess of 100% of his salary with CP and to deduct from the amount that he will receive when he is being compensated at 100%.

2.   We also reserve the right to review Mr. Marette’s employment every three months.

 

The foregoing conditions were accepted by Mr. Antinozzi, and on that basis Mr. Marette was approved for employment with the insurance agency.

 

            It does not appear disputed that as an insurance agent paid solely on the basis of commission the grievor, like others in his position, had a banked commission pool at his disposal, referred to as “le fonds d’établissement”. In keeping with industry practice, the agency which retained his services paid an initial advance into the fund so established, allowing him to draw minimal salary during the initial stages of his work as an insurance agent. As his commission income increased, monies would be paid into the fund, both to cover off his advances and to provide a “rainy day” pool of earnings from which he could draw his salary in leaner times. Indeed, it is the acknowledgement of that very fact of fluctuating income which seems to have prompted the condition stipulated by the Company for the approval of the job taken by Mr. Marette.

 

            The record discloses that over time the grievor’s weekly salary did increase. In November of 1996 it rose from $400.00 to $415.00, apparently after a deduction of some $37.00 for the rental of a computer. On July 14, 1997 the grievor’s pay stub reflected a salary which had risen to $436.27. It is noteworthy that that pay stub also indicated that the grievor had commission earnings of $12,453.84. It appears that at the time of that notation the Company’s representative, Mr. Gilles Pépin again consulted Mr. Sagala who apparently explained the workings of the “fonds d’établissement”. No further issue was then taken by the Company with respect to the irregularity of the fund until April of 1999.

 

            Meanwhile the grievor’s reported weekly salary did continue to rise. It was $480.00 in October of 1998, $560.00 in January of 1999, $800.00 on March 5, 1999 and $820.00 as of April 29, 1999. As the grievor’s salary exceeded his former earnings as a machinist, he advised the Company on March 5, 1999 that he would no longer require a wage top up, although he reserved his right to claim his benefits under article 7A of the Job Security Agreement.

 

            At or about that time the Company requested Mr. Marette’s T-4 income tax statements and subsequently, on July 29, 1999 requested copies of his full income tax filings for the three year period 1996, 1997 and 1998. Mr. Marette was fully forthcoming with all documentation requested.

 

            The Company ultimately came to the conclusion that the manner in which Mr. Marette reported his income forced the Company to pay him wage top ups for periods of time during which he had in fact earned more in commission earnings, although those earnings remained sheltered in the “fonds d’établissement”. According to its representative, the grievor effectively manipulated the “fonds d’établissement” to maintain his weekly salary at a lower level, thereby gaining for himself top up payments which were not justified. As noted in the joint statement of issue, the grievor was ultimately discharged for fraudulently collecting salary top up payments from the Company for the years 1996, 1997 and 1998.

 

            Upon a review of the entirety of the evidence, and bearing in mind that the onus is upon the Company to establish, on the balance of probabilities, that the grievor deliberately engaged in a scheme to defraud his employer of the top up payments, the Arbitrator has considerable difficulty with the position of the Company. Firstly, it should be stressed that there appears to be no precedent in the experience of the LAC for approving and administering top up payments to an individual who is essentially self employed, within the framework of the insurance agency industry. It does not appear disputed that the Company’s representative was made aware of the operation of the “fonds d’établissement”, and the basis upon which certain of the grievor’s commission earnings might be set aside for later withdrawal. Most significantly, it is not clear from the evidence before the Arbitrator that there was any deliberate intent on the part of Mr. Marette at any time to conceal his earnings from the Company. That would appear evident, for example, by the fact that on one occasion his pay stub openly reflected commission earnings in excess of $12,000.00, as revealed to the Company in July of 1997. By the same token, the grievor himself does not dispute that by reason of his own unfamiliarity there might in fact have been some overpayment if close regard was had to the totality of his earnings over the three year period. In that regard he has at all times indicated that he is willing to reimburse the Company for any excess which might have been paid to him.

 

            In reviewing the facts of this case it appears to the Arbitrator that there has been a shared responsibility as between the Company and Mr. Marette for the resulting uncertainty, not to say confusion, surrounding the actual amount of his earnings for any given period of time. It is only after what seemed to be a dramatic rise in the grievor’s salary that the Company began to have concerns, and sought further information about his actual commission earnings. However, as counsel for the Union stresses, that very rise in earnings worked to the Company’s advantage, as its own obligation to top up Mr. Marette’s salary dwindled correspondingly, to the point of its termination in March of 1999. On the whole, I am not prepared to find that there was, as the Company alleges, fraud on the part of Mr. Marette in his dealings with the Company. That said, however, it does appear that there was a degree of negligence on the part of the grievor, inconsistent with his obligations to the Company, in fully reporting to the Company the amount of his commission earnings, and the method by which he determined his own salary. In that regard there was, in my view, a failure of care and candour on the part of Mr. Marette which did merit some degree of discipline. I am not satisfied, however, that the outright discharge of the grievor for fraud is justified in the circumstances.

 

            In the result, the grievance should be allowed, in part. The Arbitrator substitutes for the discharge of Mr. Marette a suspension by reason of his negligence in failing to  fully and carefully report the structure and amount of his income over the period 1996, 1997 and 1998. The grievor’s reinstatement into employment, which for all practical purposes relates more strictly to his recall rights and participation in pension and other benefits, is conditional upon the grievor agreeing to review with the Company the amount of his income, properly calculated over the three year period, and to repay to the Company any overage in the top up which he received, a payment which would in any event be consistent with the fluctuation clause stipulated by the Company as part of the approval for his employment by the LAC, under the provisions of the Job Security Agreement. The Arbitrator retains jurisdiction in the event that the parties should be unable to agree on the amount of adjustment, if any, to be paid, or any other aspect of the interpretation or implementation of this award.

 

 

Dated at Toronto, this 19th day of June, 2001

 

 

_________________________________________

MICHEL G. PICHER

ARBITRATOR