Canadian HR Reporter

CANADIAN HR REPORTER DECEMBER 2019 14 NEWS Vague definition of 'payroll' leads to dispute between Saskatoon, transit union Uncertainty over calculation of funding for sick bank and health benefits leads to split decision by arbitraton panel in Saskatchewan BY JEFFREY R. SMITH A vague definition of what constitutes "payroll" led to a dispute between the City of Saskatoon and its tran- sit union over how to calculate funding based on the size of the city's payroll. Although it ended up being somewhat of a split decision, an arbitration panel made it clear that amounts re- lated to compensation for work done should be considered part of an employer's payroll. e collective agreement be- tween the City of Saskatoon and its union, Amalgamated Transit Union (ATU), included two ben- efit provisions for a sick bank and a medical/dental plan. The sick bank allowed em- ployees who had used up their personal sick leave credits to take more time off if they continued to be sick, while the medical/dental plan allowed for payment of pre- miums to a third-party medical insurance carrier. e collective agreement re- quired the city to fund both the sick bank and medical/dental plan based on a certain percentage of its payroll — 1.07 per cent for the sick bank and 3.5 per cent for the medical/dental benefits. e sick bank provision also includ- ed a stipulation that if the fund dropped below a certain thresh- old, employees must contribute to it until it reached the threshold again. e medical/dental plan provi- sion required employees to pay any premiums above the flat rate of the 3.5 per cent of payroll con- tributed by the city. In 2015, the sick bank fund dropped close to the threshold in which employees would have to start contributing to it. e union was concerned and asked the city to provide information on how the funding of both benefits was calculated. When the city provided lists of pay items that were included as part of the payroll calculation, there were discrepancies between the lists for the sick bank and the medical/dental plan, likely be- cause different people were ad- ministering the two plans. In addition, there were several items that were excluded from the calculations that the union believed should be considered part of the city's payroll — if these items were included, it would in- crease the size of the payroll and the amount the city was contrib- uting to the sick bank and medi- cal/dental plan. e union filed a grievance over the items that weren't included in the payroll calculations. e items that the union be- lieved should be included were: • a "transit coffee fund" that the city paid to employees for fore- going rest breaks when they worked a continuous six-hour shift, added to employee salaries • a tool allowance paid as a per- centage of salary and for which employees weren't accountable as to how it was spent • a $175-per-year allowance for dry-cleaning uniforms where no receipts were required • payouts of unused vacation pay when employees resigned or retired • credit received each year for not using sick leave, amounting to one-third of the annual sick- leave allotment that wasn't used — the balance was paid upon resignation or retirement • regular salary paid to employees while away on union business, for which the city then invoiced the union for reimbursement • workers' compensation ben- efits that the city processed di- rectly through its payroll system and later recovered from the Workers' Compensation Board, as outlined in the collective agreement. e city disagreed with some of the items, as it felt "payroll" meant payments directly related to the work of employees. Some of the items the union contended should be included didn't fall into that category and shouldn't be in- cluded in the payroll calculation, said the city. In addition, back in 1997, the city's labour relations manager sent a letter to the union that stat- ed: "e associated payroll is thus to be based upon items having a direct salary-related (replace- ment) function." Collective agreement vague on payroll The dispute over what should be included in the city's pay- roll stemmed from the fact that while the collective agreement stated that the city should "con- tribute 1.07 per cent of payroll" to the sick bank and "3.5 per cent of payroll" to the medical/dental plan premiums, the term "pay- roll" itself was not defined in the agreement. e union noted that "payroll" also wasn't defined in Saskatche- wan employment legislation and should have a broad definition because the word usually doesn't refer to "the type of payment (such as wages, salary, income, base pay, overtime or bonuses) but instead to the source of payment." As an example, it pointed to examples where "payroll" was de- fined as a job and someone who was laid off and not being paid could still be considered to be "on the payroll." The union also argued that "payroll" must include total wages paid by an employer. e Saskatchewan Employment Act (SEA) defines "total wages" as meaning "all remuneration that an employee is entitled to be paid other than bonuses paid at the dis- cretion of the employer or tips or gratuities." As a result, the only payments that shouldn't be included were reimbursements for receipted expenses because that was repay- ment of a debt incurred by the em- ployee, not wages or a bargained benefit, said the union. e city countered that even though the collective agreement didn't specifically define "payroll," the word "pay" was used exten- sively throughout and was tied to salary schedules and it was the intent of the parties for "payroll" to mean "the total of all payments based on wages." e city also pointed out that the Saskatchewan Workers' Com- pensation Act required employ- ers to provide payroll statements annually that include earnings and wages. In addition, the SEA defined "wages" as "salary, com- mission and any other monetary compensation for work or ser- vices or for being at the disposal of an employer." Since legislation limited payroll to "actual earnings of the employ- ees," the same limitation should apply in the collective agreement, said the city, noting that diction- ary definitions also limited "pay- roll" to wages or an "actual money equivalent." Value exchange between employer and employee In City of Saskatoon and Amal- gamated Transit Union, Local 615 (Sept. 30, 2019), Daniel Ish – Chair (Sask. Arb.), the arbitration panel agreed that "any reasonable definition of 'payroll' must in- clude more than regular wages" and have a broad scope. However, it didn't agree that "any payment channeled through the city's payroll office and paid to employees falls within the mean- ing of 'payroll.'" Instead, it should relate to payments made by an employer to employees for value provided by the employees — usually labour, work or time. The panel found that any amount paid or transferred to employees that wasn't related to an "exchange of value between an employer and the employee" should not be included in payroll, particularly payments where the city was acting as "a vehicle or agent for another body." e panel determined that pay- ments included within the defini- tion of "payroll" in the collective agreement "must have a com- pensatory element representing a value received by both employer and employee" and any amounts paid by the city that were outside of compensation for work done should be excluded. As a result, the panel found some of the items the union pushed for should be included in the calculation for the sick bank and medical/dental plan and some shouldn't: • The transit coffee fund was "remuneration paid by the em- ployer to employees who have foregone the benefit of a coffee break or a rest break" and was therefore compensatory in na- ture. e panel found it should be included. • e tool allowance was paid re- gardless of what the employee spent on tools and no receipts were required. It was compen- satory in nature and a bargained benefit that should be included. • e dry-cleaning allowance was also paid regardless and had no accountability, so it was part of employee compensation and part of the payroll. • Vacation payouts were compen- satory, but they would only be part of the payroll calculation if vacation pay wasn't already in- cluded as part employees' sala- ries, so it wasn't double-counted, said the panel. • e credit employees received for not using sick leave was com- pensatory and should be includ- ed in payroll, as long as it wasn't double-counted annually and it was paid out upon resignation or retirement. • Salary paid by the city while employees were away on union business should not be counted, as the union reimbursed the city for this and it wasn't compensa- tion paid to the employee — it was only processed through the city's payroll system, said the panel. • For the same reason as union business pay, workers' compen- sation benefits were not part of the city's payroll, said the panel. e city processed such bene- fits through its payroll system, but it was able to recover them from the Workers' Compensa- tion Board. As a result, these benefits didn't qualify as pay- ments from the employer to the employee. e panel ordered the city to include three of the items — the transit coffee fund, tools allow- ance and dry-cleaning allowance — as part of its payroll for the purpose of calculating the city's contribution to the sick bank and medical/dental plan. Two items — salary paid for union business and workers' com- pensation benefits — should not be included. e remaining two — vacation payout and the credit for not using sick leave — were subject to determination depend- ing on whether they were already included. Credit: EB Adventure Photography (shutterstock) e union argued that "payroll" must include total wages paid by an employer.

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