Arbitrator rules different benefits for different sick leaves not discriminatory

Some readers may recall the case we reported in the April 1999 issue of FOCUS dealing with the question of whether it is permissible under human rights law for a collective agreement to restrict certain forms of benefits to employees absent from work due to disability. (See “A question of comparison: Appeal Court rules on restrictions to benefits, seniority and service accumulation of disabled employees” on our Publications page.) In Ontario Nurses’ Association v. Orillia Soldiers Memorial Hospital and Sault Ste. Marie General Hospital (January 12, 1999), a decision of the Ontario Court of Appeal, it was held that, where the benefit is a form of compensation provided in exchange for work performed, it is legitimate to restrict the benefit to those able to work. Now, a recent decision applying Orillia has had to deal with a related, but distinct issue: whether it is discriminatory to provide a lower level of vacation pay to workers absent due to workplace injuries than to those absent due to other types of injuries or illnesses.


At issue in Re: Messier-Dowty Inc. and International Assn. of Machinists and Aerospace Workers, Local 905 (March 8, 1999) was the grievor’s accrual of vacation pay for the period he was off work due to a workplace injury. The collective agreement provided that employees were to receive vacation pay of six percent of their “total pay”, a sum which was to be calculated in a manner that did not include the grievor’s Workers’ Compensation benefits.

For workers receiving other sick benefits, the collective agreement provided a formula under which they would receive vacation pay based on a percentage of the pay they would have received, had they been working, from the second to the twenty-fourth week of their absence. The union pointed to this preferential treatment in the provision of vacation pay, claiming it created an “anomaly” where an employee off work due to a snowmobiling accident received a fully paid vacation, while one injured at work did not.

The employer countered that accepting the union’s argument would mean that a disabled employee was entitled to the same vacation pay as one who is working. Turning to the claim that the agreement discriminated between classes of disabled employees, the employer asserted that the two insurance schemes had different purposes and should not be compared in the way the union suggested.


Applying the decision in Orillia, the arbitrator held that, because the purpose of the vacation pay provision was to provide compensation in exchange for work, it was permissible to distinguish between those who worked and those who did not. However, this left the issue of whether it was significant that workers off with non-compensable injuries received vacation pay while those receiving Workers’ Compensation benefits did not.

The arbitrator noted that, while this issue was not squarely dealt with in Orillia, the Court did provide some guidance. Whether there was discrimination depended on the purpose of the plan in question. The Court cited in support this extract from the 1996 Supreme Court of Canada decision in Briggs v. Battlefords and District Co-operative Ltd.:

“The first step is to determine … the purpose of the disability plan. Comparing the benefits allocated to employees pursuant to a different purpose is not helpful in determining discrimination — it is understandable that insurance benefits designed for disparate purposes will differ. If, however, benefits are allocated pursuant to the same purpose, yet benefits differ as the result of characteristics that are not relevant to this purpose, discrimination may well exist.”

This direction from the courts meant that the grievance could not succeed, the arbitrator stated, for, while the vacation pay to both groups of disabled employees was for the purpose of income replacement, the purpose of the two plans was different:

“The Workers’ Compensation scheme provides unlimited and greater benefits to employees suffering industrial injuries and it is statutorily mandated. It is funded by pooled employer contributions. … The sickness/accident insurance scheme under Article 18.04 is a much more limited form of income replacement, privately funded, designed only to cover non-work place related incapacities. Both the Supreme Court of Canada and the Court of Appeal have directed us that a comparison of the benefits allocated for different purposes does not in itself determine discrimination.”

Given that Workers’ Compensation provided potentially greater benefits than the private insurance scheme, it was reasonable for the parties to agree to “top up” the private plan through vacation pay. In dismissing the grievance, the arbitrator noted also that the evidence showed there was no disadvantage to the employees receiving Workers’ Compensation as opposed to other disabled employees; on the contrary, those on Workers’ Compensation receive 85 percent of their wages for a potentially unlimited time, while those covered by the private scheme receive 66-2/3 percent of their income for a fixed period of time.

In Our View

In Orillia, the appropriate comparison group was an issue between the parties. In Messier-Dowty, the union was alleging discrimination both as compared to working employees and to other non-working disabled employees. As against working employees, the arbitrator relied on the same rationale as that in Orillia: where a benefit is provided for the purpose of compensation in exchange for work, it is permissible to restrict it to those who are able to work.

However, when the focus shifts to the alleged discrimination between groups of non-working employees, the issues are less clear. The discussion of the purpose of the benefit no longer refers to the contested vacation pay provisions, but to the insurance plans that apply to the two groups of employees. Perhaps the deciding factors in this case were the relative advantage in the overall income level of workers with compensable injuries compared to those on disability and, as the arbitrator noted, the fact that there was no legally significant difference between the two groups, i.e., both sets of employees were disabled.

For further information, please contact Lynn Harnden at (613) 563-7660, Extension 226.

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