IN THE MATTER OF A RIGHTS ARBITRATION PlJlZSUANT TO THE SOCIAL
CONTRACT MEMORANDUM OF UNDERSTANDING
BETWEEN:
The Hanover Police Services Board
(The "Board)
AND
The Hanover Police Association
(The "Association")
AND in the matter of an Association grievance
ARBITRATOR:
Wm. A. Marcotte
APPEARANCES:
FOR THE BOARD:
Wm. J. Milks, consultant
R.F. Major, chief of police
F. Peppler, board chair
FOR THE ASSOCIATION:
J. Custode, past president
S. Radke, president
R. Clinch, civilian rep.
Hearing held in Hanover on September 13, 1995.
,
AWARD
In its grievance, dated June 15, 1995, the Association claims that the Board "has determined a
savings of wages through illness for the year 1994 and has not reimbursed the Association those
savings as specified in the Social Contract between the two Parties." The Association, by way of
remedy, seeks for the above savings to be distributed among its members. The Board position is
that there are no savings attributable for 1994 to the parties' local agreement and to the Sectoral
Framework provisions, pursuant to the Social Contract Act. 1993, to which the Association is
entitled by way of reimbursement. In the alternative, the Board claims that, should it be found
that there are attributable savings, reimbursement to the Association members is prohibited by
the provisions of the Social Contract Act.
The relevant facts are straightforward and not in dispute. The Social Contract Act, 1993, which
received Royal assent on July 8, 1993, was enacted in an attempt by the provincial government to
reduce public services expenditures. Relevant for our purposes, expenditure reduction targets
were set for the provincial police services sector, including targets for each police services board.
On July 2, 1993, provincial representatives of the 116 police services boards and police
associations signed a Sectoral Agreement with the intention, stated at p.3, that:
This document establishes a range of options from which local Police Services Boards,
Police Associations and employees of police services within the police sector may consider
to help achieve the necessary combination of measures to realize the Social Contract
expenditure reduction targets, preserve existing wage rates and benefit levels and minimize
the necessity to resort to layoffs.
Also, pursuant to paragraph 6 of the Sectoral Framework, each collective bargaining dyad which
normally negotiates collective agreements has the ability to negotiate "local agreements"
containing "elements" that, "may be relied upon in part or in whole, so long as the combination
of measures selected by the local parties satisfies the savings requirements of the Social Contract
Act." (Paragraph 6 lists 19 elements that address methods or ways of achieving.the expenditure
reduction targets.) The parties to this dispute entered into a local agreement, the "Social Contract
.
3
a
Memorandum of Understanding", on August 3, 1993, which agreement, at p.2, "incorporates in
its entirety the Sector [sic] Framework Agreement and the parties agree to adopt those
responsibilities which have mandatory application at the local level." The local agreement is in
effect from June 14, 1993 to March 31, 1996, i.e., the time period of the Social Contract Act.
The local agreement provides for a number of methods for achieving the parties' 1994
expenditure reduction target of 28,697 dollars, which amount is attributable to those employees
covered by the parties' collective agreement including:
Salary rates to be frozen as of June 14, 1993 and a deferral of negotiated (under the collective
agreement) salary increases of 2% effective January 1, 1994, and 1% effective July 1, 1994,
until December 31, 1996, "Said deferment [sic] shall be applied to the Police Services
targeted savings each year of the Social Contract."
a
Deferral of "Bar Service as of June 14, 1993... until March 31, 1996."
a
Deferral of "incentive payments as of June 14,1993... until March 31, 1996."
An agreement "to work towards a savings in overtime costs each year of the Social Contract."
a
A series of "Additional or alternate saving measures" including, for example, "reduction in
the use of dry cleaning and clothlng allowances", "reduction in gas consumption through
efficient use of cruiser patrols", and, "deferral of the budget money for the leased unmarked
police vehicle."
Unpaid leaves of absence to a maximum of 12 days per year from June 14, 1993 to March 3 1,
1996.
Staff attrition savings.
As well, the parties agreed to certain measures for "productivity gain sharing achieved through
the elimination of waste and inefficiency."
In particular, at clause 7g. of the local agreement, the parties provide for as follows:
' I '
7g. Where the Association voluntarily foregoes or suspends any compensation or benefits
under the collective agreement, the savings derived shall be applied directly against the
Association members' expenditure reduction target. Where savings are achieved
through means other than those contained in the collective agreement, the rate of gain
shall be fully applied towards the target for the Police Services.
The salary freeze for 1994 resulted in a savings of 15,380 dollars. Also, a police sergeant retired,
and a pro-rated amount of 13,317 dollars was applied as an attributable savings through attrition
to the expenditure reduction target of 28,697 dollars. In the result, none of the other agreed-upon
methods for achieving this target had to be applied for the 1994 year of the Social Contract.
Also in 1994, two members of the Association were off work and in receipt of weekly income
insurance benefits payments, pursuant to Article 12 (2) of the collective agreement which states,
in part, as follows: "Whenever a member reverts to short-term disability [i.e., weekly income]
insurance, helshe shall receive 75% of hisfher normal hourly rate of pay from the Municipality."
The weekly income insurance plan provides for a reimbursement of "66.7% of your weekly
earnings." The Board pays the difference between the level of insured benefits and the specified
collective agreement amount of 75% of the normal hourly rate of pay. In the result, the Board
realized a savings in salaries of 8,258.76 dollars below the budgeted wages and salaries for 1994.
This amount was applied to the "revenues" line of the budget for that year. In addition, an
amount of 1,083.77 dollars was garnered from a training program, and, an amount of 97.82
dollars, "transfer from reserve", were also applied to 1994 revenues, for a total of 9,440.35
dollars over the 1994 "estimated revenues" of 194,494 dollars. The 9,440.35 dollars were placed
in a reserve fund by the Board. The wage expenditure for 1994 was the budgeted amount of
908,623 dollars, in that two part-time employees were hired and no replacement for the sergeant
who had retired was undertaken by the Board. Chief Major's undisputed testimony is that these
decisions resulted in a more efficient use of Police Services operations.
The Association argued that the wage recovery, in the amount of 8,258.76 dollars, which the
Board received in 1994 from the insurer of the weekly income benefit plan can properly be
applied against the 1994 expenditure reduction target of 28,697 dollars, since that target had
already been achieved by way of salary increase freezes or deferrals and attrition savings, both
attributable to the expenditure reduction target. The Association submitted that clause 12 of the
local agreement properly applies in that it provides, as follows:
12. Overpayment of the target:
Any and all overpayment of the Association's portion of the target shall be reimbursed
to the Association if the overpayment was attributable to benefit or compensation
reductions beyond what would be necessary to meet the target.
That is, the Association argued that the 8,250.76 dollars is properly an overpayment to the
expenditure reduction target and, therefore, pursuant to clause 12, "shall be reimbursed to the
Association." Further, the Association argued that article 7g. of the local agreement applies in
the instant case to prohibit the attribution of the wage savings to a reserve fund, but, rather, that
clause requires those savings to be applied against the expenditure reduction target.
The Board argued that, since the 1994 expenditure reduction target was met through wage
freezes and attrition, none of the other measures agreed to by the parties had to be utilized for
purposes of meeting that target, and thus, there are no savings attributable to those other
measures that were to be employed by the parties in 1994 in order to meet the target. Rather, the
Board submitted that the non-replacement of the sergeant who had retired, coupled with the
hiring of two part-time employees in 1994, resulted in a more efficient use of Police Services'
resources, pursuant to the intent and objectives of the parties' local agreement under the
provisions of the Sectoral Framework and Social Contract Act.
It was also submitted by the Board that the recovered wages of 8,258.76 dollars is not a "savings"
as contemplated by the parties in their local agreement, but, rather, resulted from a wage recovery
through the operation of the weekly income insurance plan, which in any event, requires the
Board to contribute 8.3% of an employee's wages in order to provide the level of coverage
specified in art. 12 (2) of the collective agreement. Thus, it was argued that the recovered wages
did not result from savings by way of productivity increases as contemplated in the local
agreement, and there is no evidence of contributions by the Association members beyond those
necessary to meet the expenditure reduction target.
In the alternative, the Board argued that, should it be found that the disputed amount of money
can properly be applied against the expenditure reduction target, reimbursement of those monies
to the Association would be tantamount to a wage increase and which increase is prohibited by
way of the Social Contract Act, Re Windsor v. O.N.A. (Aupust 4. 1995) unre~orteddecision
(Ont. Div. Ct.); Re The Regional Munici~alitvof York Police Services Board and The Regional
Municipalitv of York Police Association (Februarv 24, 1995) unre~orted(Burkett); Re The
G u e l ~ hPolice Services Board and The Guel~hPolice Association (SeDtember 26. 1993)
unre~orted(Jackson).
In reply, the Association submitted that the matter at hand is distinguishable from the issues in
the above cases in that it does not seek an increase in wages, but, rather, recovery of an
overpayment, which is a proper matter pursuant to clause 12 of the parties' local agreement.
The issue to be determined in this award, is whether or not the Association is entitled to 8,258.76
dollars by way of an overpayment to the 1994 expenditure reduction target of 28,697 dollars. I
find the merits of the grievance, on the evidence and submissions before me, require
determination of whether or not the amount of 8,258.76 dollars is properly a savings applicable
to the expenditure reduction target, pursuant to the provisions of the parties' local agreement. If I
find that it is not, then the grievance must be dismissed. If I find that the monies in question are
properly a savings applicable to the expenditure reduction target, then it must be determined
whether or not the provisions of the Social Contract Act prohibit their receipt by the Association.
Dealing with the latter issue first, the Association is correct in stating that the instant case is
distinguishable from the decisions submitted by the Board. In the G u e l ~ hPolice Services Board
and Windsor cases, the unions sought an increase in compensation for its members by way of
negotiated wage increases under the provisions of their collective agreements, not Social
Contract local agreements, and 'which collective agreement provisions are superceded by the
Social Contract Act, for the period from June 14, 1993 to March 31, 1996. In those two cases, it
was found that negotiated wage increases for collective agreement purposes can neither be
negotiated nor take effect, pursuant to the provisions of the Social Contract Act, from June 14,
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1993 to March 31, 1996. In the Municipalitv of York Region case, arbitrator Burkett states, at
p.1, as follows: "Under the Social Contract Act compensation for those earning more than
$30,000 per year is frozen from June 14, 1993 to March 31, 1996, with the result that the union is
prohibited by statute from bargaining improvements to the compensation package."
In the
instant case, however, the Association is not seeking an increase in compensation for 1994 for its
members, but rather, seeks reimbursement of monies which it says constitute an overpayment to
the expenditure reduction target.
The parties' local agreement states, on the second page, that "This agreement incorporates in its
entirety the Sector Framework Agreement" for the police services public sector, and which
Sectoral Framework, in turn, was properly executed under Part IV of the Social Contract Act, on
July 2, 1993. The local agreement, therefore, is properly executed under the provisions of the
Act and the Sectoral Framework. At clause 12 of the local agreement, the parties expressly
address the matter of an overpayment of the expenditure reduction target, to wit: "Any and all
overpayment of the Association's portion of the target shall be reimbursed to the Association..."
The parties' local agreement, in providing for reimbursement to the Association in the event of
an overpayment of contribution to its portion of the expenditure reduction target, must be found
to be consistent with the provisions of the Sectoral Framework and the Social Contract Act.
Thus, since the
and the Sectoral Framework provide for the parties to enter into local
agreements for purposes of implementing measures to achieve expenditure reduction targets, it is
proper for the parties to make provisions in their local agreement that address the matter of an
overpayment, as part of their agreement on ways of achieving savings in order to meet
expenditure reduction targets. And, since the monies sought by the Association did not result
from an increase in compensation (as "compensation" is defined in s.24(2) of the Social Contract
Act and paragraph 6(12) of the Sectoral Framework), recovery by way of reimbursement of an
overpayment does not constitute an increase in compensation for the Association members. I
find, therefore, that should it be found that an overpayment to the 1994 expenditure reduction
target exists, the Association is properly entitled to reimbursement of the amount of the
overpayment.
As to whether or not the monies in dispute properly constitute an overpayment to the 1994
expenditure reduction target, pursuant to clause 12 of the local agreement, an overpayment is said
by the parties to exist where "...the overpayment was attributable to benefit or compensation
reductions beyond what would be necessary to meet the target." In clause 7g. of the local
agreement the parties, in the first sentence state, "Where the Association voluntarily foregoes or
suspends any compensation or benefits under the collective agreement, the savings derived shall
be applied directly against the Association members' expenditure reduction target." As can be
seen from the above clear language, a condition precedent to the existence of an overpayment, as
defined in clause 12, is that the Association, pursuant to clause 7g., "voluntarily foregoes or
suspends any compensation or benefits under the collective agreement." The weekly income
insurance benefit, as previously indicated, is provided for in art. 12 (2) of the parties' collective
agreement. Thus, where that benefit is voluntarily foregone or suspended by the Association, any
savings derived from that foregoing or suspension can properly be attributed as savings for Social
Contract expenditure reduction target purposes.
In the instant case, however, it is undisputed that the weekly income insurance benefit was not
altered in any fashion, let alone reduced, for purposes of deriving savings for expenditure
reduction purposes. The undisputed evidence is that the two employees who received this benefit
did receive the amounts of monies to which they were entitled pursuant to art. 12 (2) of the
collective agreement. It is further not disputed that clause 7g. of the local agreement did not have
to be implemented for purposes of achieving the expenditure reduction target of 28,697 dollars
for 1994. Therefore, it cannot be said, and I do not find, that the 8,258.76 dollars resulted from a
foregoing or suspension of compensation or benefits, pursuant to the above first sentence of
clause 7g. of the local agreement.
The second sentence, and last part, of clause 7g. also addresses the matter of savings, as follows:
Where savings are achieved through means other than those contained in the collective
agreement, the rate of gain shall be fully applied towards the target for the Police
Services.
Relevant for our purposes, the critical language in this second sentence of clause 7g. is the
phrase, "Where savings are achieved through means other than those contained in the collective
agreement." Hence, where the first sentence addresses savings derived from compensation or
benefits under the collective agreement, the second sentence addresses savings that derive
"through means" not "contained in the collective agreement." Moreover, where the first sentence
restricts savings to compensation and benefits matters under the collective agreement, the second
sentence contains no such restriction in regard to savings achieved by means outside the scope of
the provisions of the collective agreement. The critical consideration, then, is determining
whether or not the 8,258.76 dollars at issue are savings "achieved through means other than those
contained in the collective agreement."
In regard to the disputed monies, the "means", or course of action, that led to the existence of this
amount, was the two occasions when Association members were in receipt of weekly insurance
income daring 1994. That is, the 8,258.76 dollars came to the Board through the utilization of an
insured benefit, by Association members, contained in the parties' collective agreement at art. 12
(2). Had this article not been contained in the collective agreement, the monies in question
would not have been available to the Board. Thus, it must be found that the means through
which the monies were generated is contained in the parties' collective agreement. Therefore, in
order for the monies to qualify as a savings for expenditure reduction target purposes, those
monies must conform with the provisions of the first sentence of clause 7g. of the local
agreement, not the second sentence of that article. However, I have found that the Association
did not voluntarily forego or suspend any compensation or benefits under the collective
agreement in order to generate savings that can be applied to the expenditure reduction target.
Rather, the monies in question were generated by utilization of a benefit provided to Association
members under the provisions of the collective agreement, and which benefit was not foregone or
suspended in order to produce savings that are applicable to the Association expenditure
reduction target. I find, therefore, that the 8,258.76 dollars, are not a savings as contemplated by
the parties in art. 7g. of their local agreement.
In the result, I find that the 8,258.76 dollars is not an overpayment to the Association's 1994
expenditure reduction target. Those monies are not a savings pursuant to clause 7g. of the local
agreement, in that the Association did not forego or suspend the weekly income insurance benefit
in order to produce savings directly applicable to its members' expenditure reduction target.
;
The grievance, therefore, is dismissed.
Dated at Toronto, this d 3
day of September, 1995.
'
Wm. A. Marcotte
Arbitrator