SHP651

AWARD

The issues

1. This award concerns two matters. Firstly, it addresses a challenge by the Employer to my jurisdiction as arbitrator. Secondly, on consent of the parties, if I find I have jurisdiction to hear the grievance, certain steps should be taken to expedite resolution of the grievance, particularly that the Grievor be sent for a further medical assessment. The parties consent, if I have jurisdiction, that I appoint, on their behalf, a suitable medical expert to provide an opinion on the Grievor’s fitness at relevant times, as well as on his current fitness to return to work.

Factual background

2. Under the collective agreement, short term disability (STD) benefits are dealt with differently from long term disability (LTD) benefits. STD coverage is provided at the Employer’s expense; LTD coverage is provided at the employees’ expense. Although a joint railway union committee reviews and determines admission of any employee to the LTD plan, STD and LTD are both administered by the insurer, Great West Life.

3. The Grievor, Predrag Stanikic, PIN 877475, entered service with CN on September 10, 1996. He has been employed by CN as a heavy duty mechanic.

4. On November 3, 2007, the Grievor went on sick leave. He then filed a claim for STD benefits with the benefits insurer, Great West Life, under the collective agreement. The Grievor’s claim for short term disability (STD) benefits was approved by Great West Life on January 10, 2008.

5. Great West Life provides a fee for service to CN to provide STD benefit coverage. All premiums are paid by CN, the assessment of individual claims is made by Great West Life.

6. On July 28, 2008 the Grievor attended an independent medical examination (“IME”) arranged by Great West Life.

7. On August 14, 2008, following receipt of the IME report, Great West Life reviewed the Grievor’s file and decided to cease STD benefits payments to him. This was done on Great West Life’s assessment that the Grievor’s situation no longer constituted a “disability” under the benefit plan.

8. The Grievor appealed Great West Life decision to cease the payment of STD benefits. On October 28, 2008, the Grievor’s appeal was denied.

9. At the time the Grievor’s STD benefits ceased, on August 14, 2008, he needed a further 5 days of STD benefits to qualify for consideration to receive long term disability (LTD) benefits. Had his STD continued until August 19, 2008, he would have been eligible for benefits consideration by the LTD Committee (the committee of union representatives from the railway industry). By having his STD benefits cut 5 days earlier, he could not advance to receive LTD benefits.

10. The costs associated with maintaining LTD disability benefit coverage are borne entirely by the employees, through individual contributions remitted to Great West Life by means of deductions from their pay. The Company has no involvement or responsibility for the contract terms, or with the application, eligibility requirements, or other administrative decisions taken for the LTD plan. The LTD portion of the benefit plan is owned, controlled, and administered by the unions collectively (CAW, TCRC, USW, IBEW). They are the plan sponsors and administrators.

11. On February 10, 2009, the parties agreed that the Grievor could file a grievance directly at Step II of the grievance arbitration process, and the Union did so that day. On March 24, 2009 the Company denied the Grievance.

The arbitral jurisprudence on benefit plans

12. The arbitral jurisprudence talks of four classes of benefit scheme:

A plan or policy not mentioned in the collective agreement.
A collective agreement which specifically provides for the payment of benefits in certain circumstances.
A collective agreement which provides only for the payment of premiums for an insurance plan.
A policy or insurance document incorporated by reference into the collective agreement.[1]

13. Subject to the specific terms of the collective agreement, an arbitrator will generally not have jurisdiction to consider a benefits grievance against the employer under categories a) or c), but will generally have jurisdiction if the nature of the insurance plan falls under categories b) or d). This is because, under categories b) and d), an employee’s benefit entitlement is derived from the collective agreement, either expressly or inferentially. The Employer undertakes the benefits liability in the collective agreement and arranges insurance to cover that liability. In categories a) and c), the employer discharges its benefits liability by payment of the premium to the insurer. Disputes over the payment of benefits then lie between the individual employee and the insurer.

14. If the essential character of the dispute was not intended by the parties to be governed by the collective agreement (i.e., it does not engage the rights and obligations of the parties found expressly or by inference in that agreement), then the dispute does not arise out of the collective agreement and the arbitrator has no jurisdiction to deal with it.[2]

15. There are three broad types of insurance plans negotiated by employers. They are described in Telus Communications Inc. and Telecommunications Workers Union (Kellie Grievance) (2008), 176 L.A.C. (4th) 316 (Sims); [2008] C.L.A.D. No. 106, as follows:

23 The Employer suggests, from industry practice, and the case law, that long term disability benefits are provided in one of three general ways. The first is what I will call "pure insurance." In this situation, an Employer will pay an insurance company a fixed amount of money per employee per month for detailed coverage. The insurer takes the full risk of claims, and profits or losses, based on their subsequent claim experience. If the employee suffers an insured disability, the employee claims under the policy against the insurer, with resort to the Courts if necessary in the event of an unresolved dispute.

24 In the second category of cases, the relationship between the insurer and the employer is more complex. If the experience under the plan is better than originally predicted and the premium paid exceeds that necessary for the payment of claims, a fund for contingencies and certain other specified expenses or profits, then the Employer can recover this notional surplus. In some cases, and apparently under this plan the insurer can recover additional monies from the Employer if its experience is the other way round, and the costs yield a deficit after the premiums are paid. In this type of situation, the insurer is still the party that pays the claims, but the insurer and the Employer adjust their anticipated payments and receipts at the end of the day to reflect actual experience.

25 The third type of arrangement is what has come to be known as an "administrative services agreement" or "administrative services only" arrangement (ASO or ASA arrangements). In this situation the insurance company agrees to receive and process claims as it would otherwise do, but to pass the total costs of paying the benefits, plus an administrative fee, back to the Employer. Under this arrangement the insurance company does the paperwork and adjudication, but the Employer bears directly the burden of the payments. In some such cases (and perhaps all; the evidence is not before me) the contract documents say specifically the insurance company providing the administrative services will not be liable for any claims under the plan, only the Employer.

CN’s insurance plan

16. The collective agreement provides, at Rule 50, for the Employee Benefit Plan (“the Plan”). It reads:

RULE 50

Employee Benefit Plan - Life Insurance, Sickness and Paid Maternity Leave Benefits

50.1 The Employee Benefit Plan shall be that Plan established by the Employee Benefit Plan - Supplemental Agreement dated July 25, 1986, as revised, amended or superseded by any Agreement to which the parties to this collective agreement are signatories.

17. The Employee Benefit Plan – Supplemental Agreement of July 25, 1986 (“the 1986 Agreement”) sets out in detail the benefits to which employees are entitled. It has since been amended by memoranda of settlement between the parties, the latest on January 14, 2007. The 1986 Agreement describes, for example, the weekly indemnity benefits each eligible employee is to receive when unable to perform their duties by reason of non-occupational accident or injury. Weekly indemnity (STD) benefits run for up to 26 weeks.

18. The printed version of the collective agreement issued to all employees contains the Plan. So the reference in Rule 50 to the Employee Benefit Plan is available within the collective agreement. The booklet of the Plan explains to employees that the benefits available to them “under the Benefit Plan” for employees represented by the Union were “put in place as a result of negotiations between CN and your labour union”. The booklet describes in detail the benefits negotiated under the collective agreement.

19. Under Article V – Administrative Committee – of the 1986 Agreement, a joint union – management committee is established, representative of the railway unions and the Company. If the Committee is unable to reach a decision on any question within its jurisdiction, they may require the question to be referred to a referee.

20. According to the Union, the joint union-management Benefits Administration Committee (BAC) meets regularly to review STD benefit claim denials made by Great West Life, the benefits administrator, and not infrequently the decision by Great West Life to deny STD benefits is overturned by the BAC. This role by the BAC is disputed by the Company. The Company says that the BAC meets infrequently and its role has been restricted to extending the time limits for filing benefits claims, dealing with only a few such requests each year. It does not overrule determinations made by Great West Life on benefits entitlement.

21. Article VI describes the Powers and Duties of the Committee. Among the powers are the following: to admit a non-eligible employee to limited coverage; to exclude any eligible employee from coverage.

22. CN’s arrangement with Great West Life is the following: CN is invoiced by Great West Life, based on the amounts paid out by Great West Life as STD benefits, with a fee charged by Great West Life for its administrative service.

23. CN therefore has an administrative services arrangement (ASO) with Great West Life to administer the STD benefits of the Plan agreed under the collective agreement.

24. Under Rule 27.6 of the collective agreement, employees have a right to grieve if they believe any provision of the collective agreement has been violated. The provision reads:

27.6 Should employees subject to this Agreement believe they have been unjustly dealt with, or that any of the provisions of this Agreement have been violated, they shall present their alleged grievance to their immediate supervisor for adjustment. If not so adjusted, and they wish to have the matter progressed, they shall present it in writing to the authorized local union representative(s), within 20 calendar days from the date of the alleged grievance, outlining all pertinent details and the date of the occurrence of alleged grievance.

The parties’ submissions

25. The Employer submits that there is no allegation in the grievance that the coverage set out in the STD portion of the Plan is insufficient or in any way falls short of CN’s obligations under the collective agreement regarding the extent of the coverage to which employees are entitled.

26. The Company points out that neither the STD portion of the Plan nor the LTD portion is managed by CN. Both are administered by Great West Life. CN submits it therefore has no control or oversight over the administration or fate of any STD or LTD claims filed with Great West Life. Further, as regards the LTD portion of the Plan, CN says it has no legal responsibility beyond deducting the required premiums from the wages of the eligible employees on the instructions of the LTD sponsors, the unions.

27. The Company argues it had no role whatsoever in determining whether the Grievor’s STD benefits would be discontinued. That was entirely a decision by Great West Life on the basis of a professional assessment it obtained at its own initiative. The Company submits that the Collective Agreement and the STD portion of the Plan make no reference to any possibility for CN to intervene or even be consulted by Great West Life on the management of STD claims. The Company should not therefore face a grievance over a decision made by Great West Life.

28. CN submits that the references to STD in the Plan do not constitute an undertaking by the Company to guarantee the payment of STD benefits when the insurer managing the Plan has refused to pay them. CN argues that no provisions of the collective agreement imposes such an extensive obligation. In short, the Company submits that the parties did not intend that CN would act as guarantor of the management of STD by Great West Life.

29. CN submits that, if it must answer the grievance, it would be placed in the position of having to re-litigate issues already decided by Great West Life through the appeal process set out for STD benefits in the Plan. This would have the effect of making CN a co-insurer with Great West Life.

30. The Union points out that the Plan has been revised in each new round of bargaining. The parties must negotiate any change to the Plan because it is part of the collective agreement. In the Union’s submission, Great West Life acts under the Plan in the collective agreement.

31. The Union contends that the collective agreement does not say the Company must go and buy a plan, it describes the Plan and the benefits that must be provided. The arrangement between CN and Great West Life must conform with the Plan as set out in the collective agreement.

Decision

32. The Employer refers to B.C. Rail Ltd. and C.A.W., Local 110 (2003), AH544 (Diebolt), April 13, 2003. That decision has a useful analysis of the STD and LTD benefits coverage in the railway industry. It points out, at p.8, that the collective agreement, like that in the case before me, contemplates that the STD benefits administrator, here Great West Life, is not necessarily the final arbiter of eligibility for weekly indemnity payments. The 1986 Agreement provides a dispute resolution process to address disputes between the parties, including disputes over eligibility for benefits coverage.

33. The question, following Coca-Cola Bottling, above, at ¶55, is whether the Employer is primarily liable for the STD benefits. If so, I have jurisdiction. If not, and the Employer’s obligation is merely to pay insurance premiums, then I do not. In other words, does the dispute over benefits arise primarily under the collective agreement, or does it arise primarily from the policy of insurance?

34. The Union refers to Canadian National Railway Company and Brotherhood of Maintenance of Way Employees (1989), CROA Case No. 2945 (M. Picher) (of May 19, 1998). The case is directly in point. Arbitrator Picher rejected a jurisdictional challenge identical to that made in this case. On language very similar[3] to that in Rule 50, the arbitrator found as follows:

I am satisfied that by the foregoing provision the parties agreed that the Company bears the collective agreement obligation to provide benefits as described in the plan referred to, and that any failure to provide such benefits is a matter which can be grieved as part of the enforcement of article 41.1. Consequently, the rejection of an employee’s claim for reasons which are arguably beyond the terms of the benefit plan must itself be arbitrable. …

35. I follow the same approach. As a result, my conclusion on jurisdiction is as follows. I have jurisdiction over the grievance which concerns a denial of STD benefits by Great West Life because CN is primarily responsible for providing those benefits. Although, in practice, CN plays no part in the determination of who gets STD benefits – because Great West Life acts on CN’s behalf in doing so – that does not mean that CN does not carry the legal burden to provide STD benefits when they are due to an employee under the collective agreement. The determination of that issue therefore fall to be determined by an arbitrator under the collective agreement.

36. Great West Life acts for the Employer in carrying out its obligations to provide STD benefits as described in the collective agreement. The STD benefits are provided for by reference in the collective agreement. The STD Plan therefore falls into category d) described above: the policy is incorporated by reference into the collective agreement, in Rule 50.

Conclusions

37. How do these conclusions apply to the facts of this case? The grievance is that the Grievor was wrongfully denied a continuation of his STD benefits. That issue falls within my jurisdiction. The issue is whether the Grievor should have continued to receive STD benefits for the remaining period of 5 days, the period that would have exhausted his STD benefits and made him eligible to apply for LTD benefits.

38. Having reached this conclusion, the parties are agreed, subject to their reserving their rights with respect to the content of the report of an independent medical expert (“the psychiatrist”), that I direct the appointment of the psychiatrist in order to obtain an independent medical report, on such terms as I considers appropriate.

39. The parties are further agreed that I require the Grievor to sign suitable releases of medical documents to the Company and to the Union so that both parties have full access to all relevant medical information for the purposes of the grievance.

40. I direct, pursuant to the parties’ agreement, should either of them want to rely on any particular medical document, that they will provide the document to the other party. Further, any correspondence or documents received from, or sent to, Great West Life will be exchanged between the parties.

41. I direct the appointment of the psychiatrist on the following terms.

42. The parties will jointly appoint the psychiatrist to conduct the medical assessment. If they are unable to agree, I remain seized to make the appointment after hearing the parties’ submissions by conference call between them.

43. Once the identity of the psychiatrist has been agreed or determined, I will write to the psychiatrist on behalf of the parties.

44. To this end, the Grievor is requested to sign an appropriate release in favour of the Employer and the Union, Great West Life, the psychiatrist and the arbitrator, in the form attached to this award, to enable the parties, the arbitrator and the psychiatrist to have full access to the medical reports and other documents relevant to the assessment. The relevant medical reports and other documents are the following:

Summary of Great West Life Claim – P. Stanikic, PIN 877475;
Medical report of Dr. S.E. Bruun-Meyer of July 28, 2008;
Medical report of Dr. Anne Vagi of August 5, 2008;
Medical report of Dr. Christopher Doyle of August 19, 2008;
Medical report of Dr. Michael Weinstock of August 28, 2008;
Letter of Great West Life to the Grievor of September 22, 2008;
Medical report of Dr. Michael Weinstock of October 27, 2008;
Report from Great West Life to the Employer of October 28, 2008, with attachment;
Medical report of Dr. Christopher Doyle of examination on September 10, 2009, including medication prescriptions;
Medical Report of Dr. Michael Weinstock of September 29, 2009;
Such other medical reports either party wishes to have included.

45. These documents are to be provided to me by the parties. I will send all of the medical reports to the psychiatrist, under a letter of appointment.

46. In the letter of appointment I will convey to the psychiatrist that he/she is to liaise with Mr. Drew Ratajewski, the Union’s representative (tel. (905) 552-0363), to schedule the appointment(s) for the Grievor’s assessment.

47. The Grievor is requested to attend the appointment and such additional appointments as the psychiatrist may require so that the psychiatrist may prepare a medical report of his condition (“the report”).

48. The psychiatrist will be asked to report on the following:

Is the Grievor suffering from a psychiatric disorder?
If so, what is the diagnosis?
Was the Grievor suffering from a disability (making him unfit to attend work) during the period from August 14, 2008 to the date of the assessment, or during any period within?
If the Grievor has a disability, but is now fit to return to work, whether the Grievor requires accommodation at work;
If so, what accommodation the Grievor requires;
What treatment, if any, is recommended for the Grievor.

49. The report will be provided to me. I will then remit the report to the Union and the Employer. The Union will provide a copy of the report to the Grievor. The costs of the assessment and the report will be part of the arbitrator’s costs.

50. I remain seized of the grievance with respect to its STD benefits claim, if the parties are unable to resolve the matter on receipt of the report.

DATED at TORONTO on January 25, 2010.

______________________

Christopher J. Albertyn

AUTHORIZATION FOR RELEASE OF INFORMATION

Date:

Employee’s Name: Predrag Stanikic

Employee’s Date of Birth: October 25, 1948

I authorize Canadian National Railway, the CAW-Canada, Local 100, Great West Life and the arbitrator to have full access to all of my medical records.

I further authorize Canadian National Railway, the CAW-Canada, Local 100 and Great West Life to release all of my medical records to the arbitrator and to the psychiatrist for the purposes of the award to which this authorization is attached.

I further authorize release of the psychiatrist’s report to Canadian National Railway, the CAW-Canada, Local 100, Great West Life and the arbitrator pursuant to the award.

___________________

Predrag Stanikic

[1] Coca-Cola Bottling Ltd. v. United Food and Commercial Workers International Union (Boud Grievance) (1994), 44 L.A.C. (4th) 151 (Swan); [1994] O.L.A.A. No. 31.

[2] See London Life Insurance Co. v. Dubreuil Brother Employees Association, (2000) 49 O.R. (3d) 766 (O.Ct.A.), leave to appeal to the S.C.C. denied [2000] S.C.C.A. 496, at ¶¶34-35.

[3] 41.1 Health and Welfare benefits will be provided in accordance with Employee Benefit Plan Supplemental Agreement (the “EBP”) dated July 25, 1986, as revised, amended or superseded by any agreement to which the parties to this collective agreement are signatory.