T-4028-73
Wolf W. Gruber (Plaintiff)
v.
The Queen in right of Canada, as represented by
the President of the Treasury Board (Defendant)
Trial Division, Walsh J.—Ottawa, May 17, July
5, 1974.
Public Service—Settlement bonus paid to public servant
under collective agreement—Excluded from salary in com
puting amount of superannuation annuity—Public Service
Staff Relations Act, R.S.C. 1970, c. P-35, s. 58—Public
Service Superannuation Act, R.S.C. 1970, c. P-36, ss. 2(1),
10.
In a collective agreement, reached under the Public Ser
vice Staff Relations Act, between the Treasury Board and
the Professional Institute of the Public Service of Canada,
bargaining agent for a group of professional employees,
provision was made for a settlement bonus relating to duties
and pay. As a member of the group, the plaintiff received
$3,600. No deductions were made for contribution to the
superannuation account. On his retirement in 1972, the
plaintiff was entitled to an annuity under the Public Service
Superannuation Act, based on his average salary for a
six-year period of pensionable service chosen by him. The
plaintiff selected the period 1966-1972 and claimed that the
amount of the settlement bonus paid him in 1970 should be
included in computing his salary for the purpose of the
superannuation annuity.
Held, the claim for inclusion of the settlement bonus is
dismissed. In the definition of "salary" laid down in section
2(1) of the Public Service Superannuation Act, the wide
meaning of the word "compensation", considered by itself,
was limited by the further words, "for the performance of
the regular duties of a position or office." This excluded
special pay resulting from special situations which have
arisen in the course of the employment.
Chisholm v. Chisholm (1915) 24 D.L.R. 679; Waterloo
Motors Ltd. v. Flood [1931] 1 D.L.R. 762 and Canadi-
an Lift Truck Co. Ltd. v. D.M.N.R. for Customs and
Excise (1956) 1 D.L.R. (2d) 497, applied.
ACTION.
COUNSEL:
M. Wright, Q.C., and L. Gilbert for
plaintiff.
R. Vincent and R. Côté for defendant.
SOLICITORS:
Soloway, Wright & Co., Ottawa, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
delivered in English by
WALSH J.: Plaintiff in the present proceedings
is a retired public servant, having worked from
June 1938 to October 1941 and again from June
1950 until his 65th birthday on June 7, 1972, as
an engineer employed in the Engineering and
Land Survey Group, Scientific and Professional
Category. On March 19, 1969 the Public Ser
vice Staff Relations Board, pursuant to the
Public Service Staff Relations Act', certified the
Professional Institute of the Public Service of
Canada as the bargaining agent for the said
group of employees, and on November 4, 1969
a collective agreement was entered into between
the Treasury Board of Canada and the said
Institute, although negotiations leading to the
said agreement had commenced as far back as
1967, before the said Institute had been certi
fied as the bargaining unit.
The present litigation arises out of two
clauses in the said agreement, both of which
were applicable to plaintiff. Article 20.02 pro
vided as follows:
20.02. An employee shall be granted a settlement bonus of
seven per cent (7%) of his rate or rates of pay during the
period July 1, 1967 to June 30, 1968 and fourteen and
forty-nine one hundredths per cent (14.49%) of his rate or
rates of pay during the period July 1, 1968 to June 30, 1969
for each pay period during any time he was allocated to the
Group in the period July 1, 1967 to June 30, 1969, provided
that during any such pay period he received at least ten (10)
days' pay. For this purpose the rate of pay shall be the rate
in effect as of the first day of each pay period concerned. A
pay period is one month up to March 31, 1969 after which it
is twenty-eight (28) days and the settlement bonus for the
period June 23, 1969 to June 30, 1969 will be pro-rated
according to the number of working days in the pay period.
' R.S.C. 1970, c. P-35.
As a result of this, plaintiff became entitled to
an amount of $3,231.08 which amount was paid
to him on or about January 15, 1970. Article
20.08(a) provided:
When as a result of conversion on July 1, 1969 an employee
is paid in a holding scale of rates and continues to be paid in
that holding scale of rates for the period ending June 30,
1970, he shall be paid in a lump sum an amount equal to two
and three-quarter per cent (21%) of the rate he was receiv
ing on July 1, 1969.
Plaintiff was in a holding scale (red circled)
since, up to June 30, 1969, he had been classi
fied as Eng. 6 and was receiving the highest rate
of pay applicable to that category as of July 1,
1967 amounting to $15,005 per annum which
was the basis used for the calculation of the
settlement bonus provided in Article 20.02,
whereas following July 1, 1969 he was reclassi
fied as Eng. 4 for which the maximum rate of
pay for the purpose of converting employees to
the new classification structure as of July 1,
1969 was $14,076 increasing to $14,850 follow
ing conversion on July 1, 1969. As his salary
was already higher than that applicable under
his new classification, he was in a holding scale
and by the application of Article 20.08(a) was
entitled to a further sum of $412.64 which he
received on or about August 13, 1970. When
these two amounts were paid to him, deductions
were made for income tax and other deductions
normally applicable to salary payments except
that no deduction was made for any contribu
tion to the superannuation account as defendant
did not consider that these two amounts should
be taken into consideration for superannuation
purposes.
When plaintiff retired he became entitled
under the provisions of the Public Service
Superannuation Act 2 to an annuity based upon
the average salary received by him during any
six year period of pensionable service selected
2 R.S.C. 1970, c. P-36.
by him. The period he chose was the six year
period prior to his retirement on June 7, 1972
and included the time period covered by the
said collective agreement. The inclusion of the
said sums of $3,231.08 and $412.64 as salary
would have increased his total salary during the
six year period by some $3,600 or an average of
slightly in excess of $600 per annum, and as his
pension is over fifty per cent he loses some
$300 a year pension benefits in addition to
increases for cost of living applicable to pension
payments on this additional amount, as a result
of not including these sums and his action asks
that they be included and for an accounting to
give effect to this. Defendant contends that the
said payments do not constitute salary within
the meaning of the Public Service Superannua-
tion Act and that they therefore do not affect
the rate of pay on which the pension is based.
"Salary" is defined in section 2(1) of the
Public Service Superannuation Act as follows:
2. (1) In this Part
"salary", as applied to the Public Service, means the com
pensation received by the person in respect of whom the
expression is being applied for the performance of the
regular duties of a position or office, ... .
The collective agreement in question was
filed as an exhibit. Plaintiff's counsel objected
to the introduction of parole evidence which
defendant wished to introduce to assist in the
interpretation of the agreement and to aid in the
determination of what the intention of the par
ties was with respect to the settlement bonuses
which defendant contends were paid not as
compensation but as an inducement to settle the
conflict between the parties and obtain the sign
ing of the agreement. The term "settlement
bonus" used in Article 20.02 of the agreement is
not defined therein nor in the Public Service
Staff Relations Act nor in the Interpretation Act
to which reference is made in Article 2.02 of the
agreement for the definition of expressions used
in it, and is certainly somewhat ambiguous. I
was referred by counsel for defendant to the
cases of Chisholm v. Chisholm 3 , Waterloo
Motors Ltd. v. Flood 4 and Canadian Lift Truck
Co. Ltd. v. Deputy Minister of National Revenue
for Customs and Excises in all of which parole
evidence was admitted. After examining these
and other authorities I am satisfied that the
evidence of Gary Brooks, a professional engi
neer who was, on November 4, 1969, a supervi
sor in the Department of Communications and
helped negotiate the agreement, and Donald
Reid, civil engineer, who was at the time of the
agreement Chief of the Civil Engineering Divi
sion of the Department of Public Works and one
of the signatories of the agreement, should be
admitted as well as a letter written by Mr. J. T.
Carpenter, Section Manager, Department of
Supply and Services, on September 11, 1972 to
plaintiff in reference to the latter's telephone
call, a letter dated December 4, 1972 by J. B.
Dillon, Legal Officer of the Professional Insti
tute of the Public Service of Canada to W. M.
James, Director of the Superannuation Division,
Compensation Services Branch, a letter dated
January 16, 1973 from J. S. Lamont, Chief of
Policy Development, Advisory and Information
Services of the Compensation Services Branch
replying to Mr. Dillon, a memorandum signed
by Mr. Brooks dated September 4, 1969
addressed to all Institute members in the Engi
neering and Land Survey Bargaining Unit
reporting in detail on the progress of negotia
tions and enclosing a ratification ballot for the
acceptance or rejection of the proposed con
tract terms, and a series of extracts from the
Authorities Manual of defendant defining what
constitutes rate of salary for contribution pur
poses, allowances and extra pay which form
part of salary, allowances and extra pay which
do not form part of salary, and rate of salary for
benefit purposes. It should be stressed, how
ever, that the fact this evidence is admitted does
not mean that it is binding on the Court in the
determination of the issue. The interpretation to
be given to the Public Service Superannuation
Act and its application to the collective agree
3 (1915) 24 D.L.R. 679 at 683.
4 [1931] 1 D.L.R. 762 at 769.
5 (1956) 1 D.L.R. (2d) 497.
ment in question cannot be conclusively deter
mined by the interpretation given by the Trea
sury Board in its Authorities Manual, by the
negotiators taking part in the negotiations lead
ing to the agreement, nor by the opinions given
to the parties by their legal advisers, but must
be interpreted by the Court itself after giving
appropriate weight to all admissible evidence.
There appears to be little doubt that not only
the Treasury Board but also the negotiators of
the agreement considered that the settlement
bonuses would not be included as part of the
employees' compensation for superannuation
purposes. Both Mr. Brooks and Mr. Reid testi
fied that this was not the main point in issue
during the negotiations, most of which related to
the effective date of conversion and whether
the employees should get a large retroactive
payment or a bonus. Mr. Brooks testified that
the employee representatives contended that
their salaries should have been adjusted but that
the Treasury Board refused to accept this so
instead they received a settlement bonus
equivalent to what would have been earned, as
an incentive for them to sign. Many of them
would have been red circled and would have
received very little retroactive pay had it been
calculated on this basis so they accepted the
conversion offer with a settlement bonus in lieu
of retroactive pay. It was not his understanding
that it was received as compensation for the
performance of regular duties but rather as a
bonus to enable the two parties to agree on a
settlement. He conceded, however, that what
the Professional Institute was trying to negotiate
on behalf of the employees in the group in
question was retroactive pay and that the bonus
was only payable in each pay period in which
the employee had received at least ten days'
pay. Had they been certified at the start of the
negotiations in 1967 rather than only on March
19, 1969, they would have been negotiating for
prospective pay rather than retroactive pay. Mr.
Reid, who was a member of the Treasury
Board's bargaining team, stated that most of the
discussion was directed to the conversion and
the time of same and that the payment was
designed to secure the signing of the collective
agreement, the question of whether it was for
compensation for regular duties never having
been raised. The payment was made in the form
of a settlement bonus rather than being included
in regular rates of pay as it had to do with the
conversion which, had it taken place in 1967,
would have been at a lower salary level so that
many of the engineers would have received little
or no back pay.
In the report issued by Mr. Brooks as Chair
man of the Engineering Land Survey Group to
all the Institute members in that bargaining unit,
together with the ratification ballot (Exhibit
D-7) it is specifically stated with respect to the
settlement bonus referred to in Article 20.02,
"such lump sum payment will not alter the
employee's rates of pay, neither will it add to
his superannuation, nor will it be paid in respect
of any period beyond June 30, 1969".
The position of the Treasury Board in refus
ing to consider these payments for superannua-
tion purposes is set out in the letter from Mr.
Lamont to Mr. Dillon (Exhibit P-6) in which he
states:
As many payments received by contributors under the
Public Service Superannuation Act are clearly not compen
sation for the performance of regular, continuing duties, the
Treasury Board has established guidelines indicating the
types of allowances and extra pay which can be considered
to form part of salary for superannuation purposes. Pay
ments that are identifiable as compensation for overtime,
unusual working conditions, isolated locations, travelling
time and so on are not considered to be related to the
performance of regular duties and, in accordance with Sec
tion 2(1) of the Public Service Superannuation Act, are
excluded from salary for superannuation purposes and nei
ther contributions nor benefits are based on such amounts.
The "guidelines" referred to are those set out in
the Authorities Manual (Exhibit P-8) which
states at 09.2.1:
On the other hand, the Treasury Board is of the view that
payments authorized on account of living conditions and
other circumstances not relating to duties or responsibilities
such as lump sum payments authorized for employees in
holding ranges or scales of rates, wage differentials paid
along the Northwest Staging Route, transportation, isolation,
cost of living, and local allowances being paid to prevailing
rate employees, should not be considered as salary for the
purposes of the Public Service Superannuation Act.
At 09.2.3.1, dealing with cash payments or
allowances not forming part of salary, we find
the following:
Lump sum to employees in a holding scale of rates
(Red Circle Bonus)
•
Settlement Bonus or Pay
if unrelated to duties or to hours worked
Plaintiff's counsel argued that the settlement
bonus in the present case could not be said to be
unrelated to duties or to hours worked since the
agreement specifically provides that to qualify
for same in any given pay period between June
1, 1967 and June 30, 1969, the employee must
have received at least ten days' pay. I believe it
is significant, however, that the words "received
at least ten days' pay" are used rather than the
words "worked at least ten days". If we were
dealing with employees paid by the hour or by
the day and the latter term had been used it
might perhaps be said that the settlement bonus
or pay was related to the duties or hours worked
but it does not appear to me that it could be held
that the settlement bonus or pay is related to the
duties or to the hours worked merely because
an employee has to have received ten days' pay
in any given month during the period in question
in order to qualify for it for that month.
As already indicated, however, the interpreta
tions given by the Treasury Board in its
Authorities Manual and the interpretations
given by the negotiators to the agreement are
not binding on the Court if they do not conform
to the interpretation which should be given to
the collective agreement and the Public Service
Superannuation Act based on the well defined
rules of interpretation of contracts and of stat
utes among which is the rule that, unless an
agreement cannot be interpreted without refer
ence to the intention of the parties, it must
actually be interpreted on the basis of what it
actually says rather than on the basis of what
the parties intended that it should say.
Plaintiff produced the stubs of the two
cheques issued for the bonus payments direct
ing attention to the fact that both of them are
headed "Statement of Your Earnings". In addi
tion to income tax deductions from both, the
settlement bonus cheque had a further deduc
tion made for the Canada Pension Plan. It was
explained that no similar deduction was made
from the other cheque because, by the time it
was issued in August, plaintiff's maximum
annual deductions for Canada Pension Plan con
tributions would already have been made. I do
not attribute any great significance to the form
used which is that adopted by the Department
of Supply and Services for all salary and similar
cheques, nor to the fact that a deduction was
made from one of the cheques for Canada Pen
sion Plan contributions. Certainly, the settle
ment bonuses represented a form of remunera
tion which would necessitate tax and Canada
Pension Plan deductions, but it does not follow
from this that of necessity deductions should
also have been made for pension contributions
within the meaning of the Public Service Super-
annuation Act. Plaintiff also contended that he
himself had voted against the ratification of the
collective agreement, but this is irrelevant since
section 58 of the Public Service Staff Relations
Act clearly states that a collective agreement is
binding on the employees in the bargaining unit
in respect of which the bargaining agent has
been certified. Plaintiff also testified that he
received severance pay on his retirement in
accordance with Article 27 of the agreement
and now feels that this also should have been
included in the calculation of his superannua-
tion. This is another item which is specifically
excluded by section 09.2.3.1 of the Authorities
Manual of defendant and, in any event, was not
claimed by plaintiff in the present proceedings
so this question is also irrelevant. It is of some
interest to note, however, that the said sever
ance pay results from a calculation based on the
"weekly rate of pay on termination of employ
ment" in accordance with Article 27.05 of the
collective agreement, and Article 20.08 (supra)
provides in subsection (c) that payments "made
as a result of this clause shall not change the
holding scale of rates to which an employee is
entitled". It is clearly spelled out, therefore, that
the bonus paid by virtue of Article 20.08 cannot
affect the rate of pay on which the severance
pay is calculated.
While conceding that the word "compensa-
tion" is a broad one and could, in one interpre
tation, include any source of remuneration
received by an employee for services rendered,
counsel for defendant nevertheless contended
that the settlement bonuses provided for in the
present agreement did not constitute compensa
tion within the meaning of the Public Service
Superannuation Act "for the performance of
regular duties". Counsel for plaintiff for his part
insisted that a distinction be made between
"rate of pay" and "salary", contending that
bonuses paid by an employer to an employee
such as, for example, Christmas bonuses paid in
a law office, may be considered as an induce-
ment by the employer to retain the employee's
services and may not form part of the
employee's rate of pay but that they are never
theless part of his salary, and are compensation
for the performance of regular duties even if
paid retroactively. It must be noted that section
10 of the Public Service Superannuation Act
dealing with the computing of the annuity bases
it in subsection (1)(b) on "the average annual
salary received by the contributor during any
six year period of pensionable service selected
by or on behalf of the contributor" and makes
no mention of "rate of pay". The definition of
"salary" in the Act brings into play the notion
of "compensation" 6 , with its wide connotation.
It is common ground that during the period in
question plaintiff performed his regular duties
and during each pay period received "at least
ten days' pay" and plaintiff contends that had
the agreement been reached earlier, then the
payments would not have been made retroac
tively, and there would have been no question
about them having been made as compensation
for the performance of the regular duties of his
position.
There is no doubt that in one sense of the
word any monetary payment made to an
employee or, as in the present case, to a group
of employees by way of compensation for ser
vices they have performed or will be perform
ing, is a form of incentive to retain their ser
vices and goodwill. On the other hand, from the
point of view of the employee, any such mone
tary payment which he receives, whatever it
may be called, will be looked on by him as part
of the compensation which he is receiving for
these services. To give this latter interpretation
6 It is of interest to note that the French text uses the
word "rémunération".
to the word "compensation" as used in the
definition of the word "salary" in the Public
Service Superannuation Act would have the
effect of including for superannuation purposes
amounts received for overtime pay, transporta
tion, isolation, cost of living allowances, night
school compensation, and other similar special
allowances, which I do not consider to be a
proper interpretation of the Act as the word
"compensation" is limited to that received "for
the performance of the regular duties of a posi
tion or office". The collective agreement must
be read in the light of this interpretation of the
provisions of the Public Service Superannuation
Act, and quite apart from the evidence of
Messrs. Brooks and Reid, the correspondence
between the legal advisers of the parties, the
memorandum by Mr. Brooks reporting on the
negotiations, and the Authorities Manual of
defendant, I do not find that the collective
agreement read as a whole permits the interpre
tation sought by plaintiff. Article 1 entitled
"Purpose of Agreement" sets out that it is:
... to set forth certain terms and conditions of employment
relating to remuneration, hours of work, employee benefits
and general working conditions affecting employees covered
by this Agreement.
Article 20 is entitled "Pay". Article 20.02
(supra) refers to the manner in which the "set-
tlement bonus" is to be calculated, and Article
20.08(a) (supra) provides for an additional
"lump sum" payment for an employee in a
holding scale of rates for the period between
July 1, 1969 and June 30, 1970. Article 20.04
reads as follows:
20.04 Effective July 1, 1969, the rates of pay set forth in
Appendix "Al" will become effective and shall be applied
in accordance with the Retroactive Remuneration Regula
tions. [Italics mine.]
Article 20.03 again refers to Appendix "Al" to
determine the pay which "an employee is en
titled to be paid for services rendered".
Although, as already stated, in one sense of the
word all payments received by the employees
might be considered as "compensation" for ser
vices rendered, it appears clear that the various
subsections of Article 20 make a clear distinc-
tion between "pay" and "rates of pay" referred
to in 20.03 and 20.04 and the "settlement
bonus" and "lump sum" for an employee in a
holding scale of rates referred to in 20.02 and
20.08 respectively and, as already pointed out,
Article 20.08(c) specifically states that "pay-
ments made as a result of this clause shall not
change the holding scale of rates to which an
employee is entitled".
It appears to me that the "compensation"
referred to in the definition of "salary" in the
Public Service Superannuation Act for the
performance of "regular duties" must be limited
to normal pay for a normal period of work and
exclude special pay resulting from special situa
tions which have arisen in the course of the
employment, even though this pay may result
from the performance of work. The collective
agreement before the Court in the present case
resulted from the first bargaining between the
Professional Institute of the Public Service of
Canada, representing the Engineering and Land
Survey Group, and the Treasury Board and, in
addition to establishing regular rates of pay
which were established after negotiation in
Appendix "Al ", also dealt with the problem
resulting from the "red circling" of certain
employees. The problem was compounded by
the lengthy delays before the agreement was
reached and signed resulting in retroactive pay
ments for two years under Article 20.02 and
partially retroactive payments for the year com
mencing July 1, 1969 under Article 20.08. Read
ing the agreement as a whole it appears that,
while the special payments may have been at
one and the same time incentives offered by the
defendant to obtain the signing of the agreement
and extra remuneration received by the plaintiff
and other members of the employee group
resulting from services, most of which had
already been rendered, they were clearly distin
guishable and kept separate and apart in the
agreement from the rates of pay set out in
Appendix "Al ". They were a once in a lifetime
payment and did not represent a change in regu
lar salary from the rates set out in the schedule
and, hence, I have concluded that they do not
come within the definition of the word "salary"
as used in the Public Service Superannuation
Act.
Plaintiff's action is accordingly dismissed,
with costs.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.