Link to CROA&DR 3891.doc
Link to CROA&DR 3891.txt
Link to CROA&DR 3891.pdf
Link to SUPPLEMENTARY AWARD
CANADIAN
RAILWAY OFFICE OF ARBITRATION
& DISPUTE RESOLUTION
Heard in
Concerning
CANADIAN PACIFIC RAILWAY COMPANY
and
TEAMSTERS
EX PARTE
DISPUTE:
The Union
contests CP’s new policy that will cease providing
UNION’S STATEMENT OF ISSUE:
On
The Union
contests the Company’s position of applying the HSA to all employees retiring
after
CP denies
the
COMPANY’S STATEMENT OF ISSUE:
In
concluding the last round of bargaining, the parties signed a memorandum of
settlement dated December 5th, 2007, which included Letter of Understanding #6
that stated the Company and Union would meet within 6 months of the ratification
date, being
On
The
The Union
requests that the arbitrator: sustain the grievance and declare that the
Company has violated the collective agreement and Letter of Understanding #6
and declare the Company’s decision to impose the HSA option on all bargaining
unit employees retiring after
The Company
disagrees with the
FOR THE
(SGD.) D. GÉNÉREUX (SGD.)
A. AZIM GARCIA
GENERAL CHAIRMAN FOR: VICE-PRESIDENT, OPERATIONS
(SGD.) T. BEAVER
GENERAL CHAIRMAN
There appeared on behalf of the Company:
R. Hampel –
Counsel,
J. Cuddihy –
Counsel,
And on behalf of the
D. Lavoie –
Counsel,
D. Généreux –
General Chairman,
T. Beaver –
General Chairman,
AWARD OF THE ARBITRATOR
The Union objects to the decision of the Company to cease providing to retirees in Quebec, between the ages of fifty-five and sixty-five years, prescription drug protection at least equivalent to the protection provided under Quebec’s Act Respecting Prescription Drug Insurance, R.S.Q., c. A-29.01 (“the Drug Act”).
The background facts to this dispute are not contested. It seems that historically the Company provided to retirees a traditional form of fixed program health benefits, the purpose of which was to provide protection for such things as prescription drugs, eye glasses, physiotherapy and other services not covered under provincial health insurance plans. In the early years of the current decade the Company experienced rising costs under the traditional plan. With a view to restricting the risk of open-ended costs for itself and providing a new measure of flexibility for employees, the Company proposed to establish a system of health spending accounts (HSA). The concept of the Health Spending Account is to create a monetary account for each individual employee. The money placed in the account, on an annual basis, is calculated on the basis of $33 for each year of an employee’s service. For example, a retiree of thirty-five years of service would receive an HSA of $1,155 per year. However, the accumulation of the account only extends for a period of two years and, it does not appear disputed, any monies not utilized within the two year period are returned to the Company, albeit the cycle then starts again for the ensuing two year period.
In addition to
the flexibility which the HSA provides, it allows employees to have an
alternative to limiting factors such as life-time caps on coverage that are
found in traditional plans. It appears that the Company first introduced the
HSA system for its non-unionized employees in July of 2002, to have effect for
non-unionized employees who retired after
When the
program came on stream effective January 2007, problems were encountered with
its implementation in
During the 2006-07 negotiations for the renewal of the collective agreement the parties agreed to the terms of a letter of understanding, referred to as LOU No. 6. That letter of understanding reads as follows:
Dear Sirs,
This refers to our discussions surrounding your
concerns regarding the inability to provide Health Spending Account (HSA)
benefits to retirees in
To address this concern, it was agreed that within 6
months of ratification, the parties would explore either modifying the current
Blue Cross plan or designing a new plan to be offered to
– Greater flexibility will be provided regarding choice of benefits.
– The plan must meet the minimum applicable regulatory requirements.
– The cost of the plan will not exceed the cost associated with the provisions of HSA benefits under the current collective agreement provisions.
It is further recognized that should the regulations
in
If this accurately reflects our conversation, please indicate your concurrence by signing below.
Yours truly,
J. Bairaktaris
Director, Labour Relations
The concurrence with the terms of the letter was executed by the
General Chairpersons of the Union representing both locomotive engineers and
trainmen in
The background
to the Company’s action with respect to providing Blue Cross coverage is well
explained in a memorandum which the Company prepared for the
Health Spending Account in
(Background Briefing Note)
Issue — Why
cannot the Health Spending Account (HSA) at CPR be offered to pensioners
residing in
Executive Summary
The Quebec provincial government implemented a universal drug program in the late 1990’s and legislated that companies which offer a private health plan to their employees or retirees must provide at least the same level of prescription drug coverage as is described in the Act. In addition, if a resident does not have coverage under a company plan they can apply to the province for coverage but failing this, application for coverage is only available at 65 years of age. CPR’s HSA is considered a private plan and in and of itself, does not provide for prescription drug coverage It is simply an account from which the retiree can extract eligible medical expenses Therefore, our retirees in Quebec both union and management are provided with the Blue Cross plan which has been in place for the past 25 years and is in compliance with the Quebec regulations. When pensioners reach 65 years of age they are automatically enrolled in the provincial plan and it is at that point in time that they are also eligible for the HSA plan.
Specific Issues
Quebec’s Universal Drug Program
The Public Prescription Drug Insurance Plan is a
government insurance plan offering basic prescription drug coverage
administered by the Régie de l’assurance maladie du Québec (RAMQ) It was established in
1997 primarily to cover all Quebecers who have no access to private group
insurance. However, the plan also stipulates that for private group insurance
plans must mirror the prescription drug coverage included within the provincial
plan. In summary, the coverage is as follows; include all the drugs on the
The following excerpts are provided as information from the RAMQ website (http://www.ramq.gouv.qc.ca/index_en.shtml)
“Coverage provided may vary from one private plan to another, depending on the agreement entered into between the group plan sponsor and the insurance company or plan administrator. However, in Québec, all private insurers offering prescription drug insurance must fulfill minimum conditions regarding the coverage they provide and the financial participation they require of the persons they insure”
“Everyone under age 65 who has access to a private plan is required to obtain at least the prescription drug coverage provided by that plan. Most private plans (often called health insurance plans) offer prescription drug coverage along with other healthcare coverage, but some offer prescription drug coverage only. Persons who turn 65 and who have access to a private plan that offers basic prescription drug coverage may either retain their private plan coverage or join the public plan, administered by the Régie de l’assurance maladie du Québec.”
Application to CPR
In 1996, prior to the legislation coming into force, CPR communicated with the provincial government and stated that although our opinion was that the legislation did not apply to the Company (as a federal employer), we agreed to voluntarily comply. However, we also stated that our decision was not binding.
That said, it should be noted that all federally
regulated employers in
Current Process — Union & Non-union
Given the regulations in Quebec, currently, employees applying for pension who have the HSA option (either by agreement or under the management plan) and are not yet 65 years of age are forwarded a letter prior to their retirement advising them of the benefits available to them under the Blue Cross plan upon retirement. This letter also indicates that upon age 65, such employees will be either be given the option of remaining in the Blue Cross plan (depending upon the agreement) or will be participating in the HSA at that time. At age 65, another letter is sent to the pensioner providing them with their options (where applicable) or outlining the details concerning the HSA plan.
The current
grievance arises because the Company unilaterally put an end to the adjusted
treatment of
Re: Revised
administration of HSAs for
Dear Sir/Madam:
As you are aware, notwithstanding that RAMQ is not applicable to Canadian Pacific, nor to its employees and pensioners, Canadian Pacific has, on a strictly voluntary basis, been extending to Quebec employees and pensioners certain benefits that are equivalent to coverage provided by RAMQ (Régie de l’assurance maladie du Québec to Quebec residents who are not covered by a private plan.
Please be advised that Canadian Pacific will no longer
provide
After that date, all employees retiring from the Company will be provided the same Health Spending Account (HSA) benefit on a consistent application that reflects the nationally negotiated arrangement.
No pensioner currently receiving Medavie/Blue Cross benefits will be impacted by this change. If you have any questions, please feel free to contact me.
Yours truly,
Rick Wilson
Assistant Vice President
Industrial Relations
It is common ground that the terms of LOU No. 6 were never fulfilled. No meaningful bargaining resulted from the letter and no “modification or new plan” was ever forthcoming.
The Union
alleges that the Company’s unilateral departure from the adjusted treatment of
In support of
its position the
REGISTERED MAIL
Mr. Robert V. Horte
Canadian Pacific Railway
Subject: Subjection of Canadian Pacific to the Prescription Drug Insurance Act
Our file: 1171.2009-08913
Dear Sir:
The Régie de l’assurance maladie du
Québec has
recently been informed of the changes that Canadian Pacific intends to bring to
the employee benefit plan applicable to its Quebec employees who will retire as
of
On the basis of information held by the Régie, Canadian Pacific has reportedly recently announced
to its employees that health care
coverage subsequent to retirement would be provided to all unionized employees
through a health spending account (HSA), and offered throughout
Specifically, section 39 of the Act Respecting Prescription Drug Insurance stipulates that no
person may establish or maintain in force an employee benefit plan including
coverage for accident, illness or disability for a group of persons referred to
in section 16 unless, for the period of
application of the plan, coverage at least equal to the coverage given under
the basic prescription drug insurance plan is provided to the group.
Considering the nature of the employee benefit plan
that Canadian Pacific will offer to its new retirees as of
In this respect, we wish to remind you that the
provisions of the Act Respecting Prescription Drug Insurance,
by the Health Insurance Act (R.S.Q.
c. A-29), are of public order and that Canadian
Pacific, although incorporated under the laws of
For the previously mentioned reasons, and considering the foreseeable and important consequences stemming from the modifications that Canadian Pacific intends to bring to the employees benefit plan provided to its new Quebec retirees, we invite Canadian Pacific to comply with the Act Respecting Prescription Drug Insurance by adding to its new employee benefit plan coverage that is at least equal to the coverage given under the basic prescription drug insurance plan. Otherwise, the cost of the services assumed by the Régie on behalf of the new retirees of Canadian Pacific who are eligible for coverage under the basic prescription drug insurance plan could be claimed from Canadian Pacific where applicable.
We hope this letter will provide sufficient grounds to
demonstrate the importance of offering your new
Yours truly,
Guy Simard
Actuarial
services and program analysis manager
[translation – emphasis in the original]
There can be
little doubt but that the Company’s unilateral decision to place all Quebec
retirees under the HSA system effective
Special Note
for Residents of
The Régie de l’assurance-maladie du
Québec (the Régie) introduced Its public
Prescription Drug Insurance Plan effective
As an Individual covered under a private group health care plan (the Canadian Pacific Pensioners Health Care Plan – the CP Plan), it is important that you understand what the new provisions mean for you, which will differ depending on your age. Please refer to the section that applies to you’
Section A –
Pensioners Under Age 65
I Q. How will the
A. In practice, the Quebec Prescription Drug Insurance Plan will not affect you. You are covered under the CP Pensioners Health Care Plan and so enjoy coverage equivalent to that provided by the Quebec Prescription Drug Insurance Plan. Therefore you do not need to enroll in the government plan.
…
Section B – Pensioners Age 65 or Older
1 Q. How will the
A. As a resident of
The Company
submits that it has not violated the collective agreement, LOU No. 6 or the
2389. A contract of insurance is a contract whereby the insurer undertakes, for a premium or assessment, to make a payment to the client or a third person if an event covered by the insurance occurs. …
The Company stresses that under the HSA system there is no risk assumed by the Company and that the HSA is not an employee benefit plan within the meaning of the Drug Act.
The Company
further argues that the
1 – Applicability of the Drug Act to a federal undertaking such as CPR
As explained before, CPR is a federal undertaking. The Drug Act has been adopted by the Parliament of Quebec and, for the purpose of this letter, we assume the Drug Act is within its constitutional jurisdiction. Provincial legislation may apply to a federal undertaking but not if it impairs a vital part of that undertaking. It has long been recognized by the courts that conditions of employment are a vital part of an undertaking.
The Drug Act, as stated in its Sections 1 to 3, has
been enacted to establish a basic drug insurance plan. The purpose of the basic
plan is to ensure that all persons in
However, the Drug Act imposes an obligation on all employers who maintain group health plans for their employees, whether insured or self-insured and whether administered by a third party or the employer itself, to provide the drug basic plan. Employers have an obligation to include such obligation in the contracts of employment (either individual or collective) with their employees. By requiring insurers and plan administrators not to maintain an insurance or benefit plan without providing the drug basic plan, and making non compliance with that obligation an offence subject to penal provisions, the Drug Act forces employers, whether directly or indirectly, to offer to their employees and retirees a specific drug insurance plan, notwithstanding any difference individual or collective agreement they may have entered into. By doing so the provincial legislator has entered into the field or working conditions and labour relations, a field that is of the exclusive jurisdiction of the Parliament of Canada as regards federal undertakings such as CPR.
Considering that the Drug Act imposes conditions of employment on CPR which impairs CPR’s labour relations and the management of its activities, it is consequently inapplicable to CPR.
The Company’s
letter also articulates for the RAMQ the employer’s view that the HSA is not a
“benefit plan” within the meaning of the Drug
Act, in any event. At the arbitration its representative advised the
Arbitrator that no response has been received from the RAMQ. The Company
submits to the Arbitrator that the
The Arbitrator
has some difficulty with that submission. Firstly, it should be noted that the
Company’s letter of
Please do not hesitate to contact the undersigned should you require any further information or should you wish to discuss this matter further.
The Arbitrator
has some difficulty accepting that this arbitration should not be heard on the
basis that there may or may not be further discussions with RAMQ or a possible
settlement fashioned between the Company and the
What of the fundamental position of the Company that, as a federally regulated enterprise, it cannot be subject to the terms of the Drug Act? After careful review of that question the Arbitrator has some difficulty accepting the Company’s position. As a starting point, it is critical to recognize that health care, including health care insurance of various kinds, is manifestly within the jurisdictional competence of the provinces. The administration of provincial health care can, I am satisfied, occasionally touch upon the world of employment without necessarily encroaching improperly upon the field of federal employment law or industrial relations. For example, it would seem well settled that a province can implement a payroll contribution system whereby employers might deduct or contribute health care premiums under a provincial plan which covers their employees in a given province. The fact that the mechanics of health care protection might operate through the payroll system of a federally regulated enterprise does not remove the matter from proper provincial jurisdiction or encroach on the very distinct jurisdiction of the federal government to regulate industrial relations and collective bargaining in the federal sector. A parallel example of the involvement of federal enterprises within provincial programs which touch upon the workplace is the relatively large field of workers’ compensation protection.
The notion that
provinces can properly regulate, within their sphere of constitutional
competence, federally regulated enterprises was clearly confirmed by the
Supreme Court of Canada in Canadian
Western Bank v. Alberta [2007] 2. S.C.R. 3. That decision, which
exhaustively reviews the jurisprudence, confirmed that banks in
How can it be said that the establishing of minimal health insurance provisions within a province, including a provincial plan for prescription drugs, would undermine or offend the essential nature of an employer that is a federal undertaking which operates within that province? The argument of the Company, which is that the enhancement of the HSA by the effect of the Quebec Drug Act would amount to imposing terms and conditions of employment is, I think, less than responsive to the reality of what is occurring. In my view, just as the Company could not object to its employees in any given province being covered by the terms of a province’s laws governing health insurance, the same should logically be true for the extension of a province’s health care to encompass the cost of prescription drugs for residents of the province. It would appear to the Arbitrator that such programs are manifestly within the jurisdiction of the province over the administration of health care. To require federally regulated enterprises which act as employers within the province to respect provincial laws and regulations governing health care does not amount to an encroachment in an area of exclusive federal jurisdiction. In the Arbitrator’s view it would be no more open to the Company to object to provincial regulation of drug insurance plans than to the introduction of payroll deduction requirements by a province as a means of funding all or part of a provincial health insurance program. In the result, I am satisfied that the Company’s position with respect to its asserted immunity from the provisions of the Quebec Drug Act cannot be sustained.
Identifying that
the Company is subject to the provisions of the provincial legislation is, of
itself, an important finding for what can fairly be characterized as the scope
of the collective agreement. As enunciated by the Supreme Court of Canada in
its decision in Re Parry Sound (District) Social Services Administration Board v.
O.P.S.E.U. Local 324, [2003] S.C.R.
42, the minimum provisions of employment related statutes are to be
deemed to form a part of the terms of a collective agreement, and to be
enforceable through arbitration rather than through the courts. In the result,
the question then becomes whether the Company is, as the RAMQ has asserted, an
employer which has established an employee benefit plan through the
implementation of the HSA system. If it is, and that plan is inferior to the
protections of the Quebec Drug Act,
the Company is obliged to make such adjustments as are necessary to provide to
its
Section 4 of the Act provides a definition of what is an employee benefit plan. It provides as follows:
“Employee benefit plan” means a funded or unfunded uninsured employee benefit plan that provides coverage that may otherwise be obtained under an insurance contract of insurance of persons.
Sections 15 and 15.1 of the Act are pertinent to the issues before the Arbitrator. They provide, in part, as follows:
15. The Board shall provide coverage for the following eligible persons:
(1) persons 65 years of age or over who are not members of a group insurance contract or employee benefit plan that is applicable to a group with private coverage within the meaning of section 15.1 and that includes basic plan coverage, and who are not beneficiaries under such a contract or plan.
…
(4) all other eligible persons who are not required to become members of a group insurance contract or employee benefit plan applicable to a group with private coverage within the meaning of section 15.1, and in whose respect no person is required, in accordance with section 18, to ensure coverage as beneficiaries under such a contract or plan.
15.1 For the purpose of this Act, a “group with private coverage within the meaning of section 15.1” means a group formed for purposes other than contracting insurance coverage for its members and composed of persons eligible for the basic plan who
(1) are part of the group on the basis of current or former employment …
(emphasis added)
The requirement of “equivalence” under private benefit plans, in other words that they provide no less than the basic plan coverage of the provincial plan, is expressed in section 16 of the Act which reads:
16. All persons who are eligible for the basic plan, other than those referred to in paragraphs 1 to 3 of section 15, and who are part of a group with private coverage within the meaning of section 15.1 must become members under the group insurance contract or employee benefit plan applicable to the group for coverage at least equivalent to the basic plan coverage.
As noted above, the Company forcefully argues that the HSA system which it has established is not an “employee benefit plan within the meaning of the Quebec Drug Act”. With that assertion the Arbitrator has some difficulty. When regard is had to the fundamental nature of the HSA, it is obviously something more than a simple discretionary bank account. A retiree cannot draw funds from his or her HSA save for the express purpose of privately purchasing some form of drug protection plan or other extended health benefit plan, or to pay directly for drugs or other extended health benefit costs. The HSA is plainly not, in other words, an undifferentiated pool of money available to a retired employee at his or her discretion. It is expressly provided for the limited purpose of giving a form of coverage of the kind otherwise available under an insurance contract for extended health care benefits.
In the Arbitrator’s view the fact that the HSA provides benefits obviously does not answer the question as to whether it is a “plan”. In my view that question must also be answered in the affirmative. The HSA is established under very clear terms which plainly involve a number of objective factors. Those include the age and retirement status of the individual protected, the number of years he or she worked for the Company and the resulting formula which determines the sum of money which will be available to the retired employee within his or her HSA account. Additionally, the account, as noted above, must be exclusively devoted to the purchase of extended health care benefits, whether in the form of insurance or actual drugs and services. Finally, in accordance with the organization of the HSA system, any funds unused in the account after a period of two years are returned to the Company. How can such an arrangement be considered anything less than a “plan”? It clearly has a set of rules which govern an identified body of beneficiaries for whom the benefit of certain monies is made available in accordance with set of clearly established conditions. I am satisfied that, having regard to the essential nature of the HSA, it is an employee benefit plan as that concept is understood within the Quebec Drug Act. It is no surprise, therefore, that in LOU No. 6 the parties themselves refer to “the current HSA plan.”
For the purposes of this grievance, it should be stressed that there is no dispute before the Arbitrator that the HSA does not, in fact, provide to the Company’s Quebec retirees between the ages of fifty-five and sixty-five the same level of benefits as is available under the general terms of the Drug Act, meant to apply to all residents of Quebec. This is something which it cannot do, under the law properly applied.
In the result,
the Arbitrator is compelled to allow the grievance and to declare that the
Company’s HSA system is in fact an employee benefit plan within the meaning of
the Quebec Drug Act. As its
provisions do not provide protections equal to those available to all
While this award does not turn on it, in the Arbitrator’s view the foregoing conclusion and declaration does not amount to any substantial departure from what, in my view, is clearly shown within the evidence before me as the parties’ own understanding and general intention. While I would be prepared to conclude that LOU No. 6 is little more than an agreement to agree, and that it is arguably less than an enforceable recognition that the parties intended to import the standards of the Quebec Drug Act into their contractual arrangement, it is obviously clear from the language of the letter itself that the Company and the Union agreed in principle that their discussions during the closed period of the collective agreement should lead to an adjustment in the HSA benefits system which would satisfy the following statement drawn from the letter itself: “The plan must meet the minimum applicable regulatory requirements.” Additionally, as noted above, within the body of LOU No. 6 the parties openly refer to the HSA as: “the current HSA plan”, indicating that in their view it is in the nature of a benefit plan, even though there may be express statements to the contrary to be found in other documentation generated by the parties.
The Arbitrator
makes an alternative analysis. If I should be incorrect in my conclusion that
the HSA is a benefit plan within the meaning of the Quebec Drug Act, I would nevertheless be compelled, on the material
before me, to conclude that the Company is estopped, at least for the balance
of the term of the current collective agreement, from unilaterally imposing the
HSA on retirees within Quebec. The evidence would indicate that before and
through the negotiations of 2006-07 for the renewal of the collective
agreement, it was known to both parties that the HSA did not provide the
equivalent of protections available to
I am satisfied that the
In its request
for relief the
(signed)
MICHEL G. PICHER
ARBITRATOR