Collective Agreement – Life Insurance

22 L.A.C. (4th) 241, 24 C.L.A.S. 551

Pacific Press Ltd. and Communication Workers of America, Loc. 226, Re

Fraser Arb.

Judgment: May 17, 1991

Docket: None given.

122 L.A.C. (4th) 241, 24 C.L.A.S. 551

Counsel: F.A. Schroeder, for the union

W.E. MacDonald, I.S. Petersen, for the employer

Subject: Labour; Employment

Fraser Arb.:

In these proceedings the grievor, Gladys Slater, claims the maximum life insurance benefit of $50,000 as set out in the 1987-1990 collective agreement between the parties. The grievor (who has since remarried and is now Gladys Calbeck) is the widow of Arthur Slater. The issue raised in this grievance requires an interpretation of the provision of the collective agreement and related documents.

The parties agree that the grievance is properly brought and that I have jurisdiction.

The facts

This grievance proceeded by way of the following agreed facts:

Mr. Arthur Slater was an employee of the company covered by the collective agreement between the company (”Pacific Press”) and the union.
Mr. Slater commenced employment with the company in February, 1965.
Mr. Slater went on sick benefits in August of 1969, proceeding to Long Term Disability benefits (”LTD”) in November of 1970.
As of August, 1969, Mr. Slater’s wages were $9,100 per year.
Mr. Slater died on May 13, 1988, at the age of 63.
At the time of his death, Mr. Slater’s LTD benefit was $7,700 per year.
The grievor was paid $12,000 life insurance benefit under the London Life Insurance Company (”London Life”) policy with the company.
Life insurance for Mr. Slater, at the time he went on LTD benefits, was $12,000. This amount of life insurance is provided for in the company’s policy with London Life, which became effective July 1, 1970. The company has paid premiums to London Life on the basis of that amount of life insurance.
When the policy described in para. 8 became effective, Mr. Slater had not been actively employed for full pay since August of 1969.
Where employees of the company have gone on LTD benefits, life insurance has been maintained in the amount in effect at the time of going on LTD. In one case, an employee died while on LTD benefits and was paid $12,000. None of those cases involved the union.

The issue

The union stated the grievance as follows:

The company breached the Collective Agreement by failing to provide life insurance coverage for Arthur Slater in accordance with Section 24(a)(3) of the Agreement.

The company preferred to state the issue as follows:

Is the Company in breach of the collective agreement by failing to pay or cause to be paid more than the sum of $12,000.00 as a life insurance benefit for Arthur Slater?

Relevant documents

Because so much in this arbitration turns on construction of language used in documents, I propose to set out, at length, relevant portions of various documents.

The 1987-1990 collective agreement between the company and the union sets out Health and Welfare Plans in art. 24, as follows (with emphasis added):

Health and Welfare Plan

(a) The Company shall pay the total cost of providing benefits as follows:

. . . . .

(3) Group Life Insurance for employees less than age 65 in the amount of twice the employee’s annual salary to a maximum of $50,000.00 and for employees over age 65 in the amount equal to the employee’s annual salary, to a maximum of $12,500.00. The above shall commence on the first day of the month following three (3) complete months of service and shall be convertible to an individual policy within 30 days of ceasing employment with the Company.

Employees who go on a leave of absence in excess of one month may retain membership in the above three plans by paying premiums for each month’s absence following a complete month’s absence.

(4) Short term disability benefits for the second through the fifteenth week of any disability payable at the rate of 80% of an employee’s weekly salary.

(5) Long term disability coverage for employees who qualified for short term disability benefits:

(i) 16th week through the 27th week — 70% of employee’s wages on the first day of disability.

(ii) 28th week through to age 65 — 60% of employee’s wages on the first day of liability.

All active Long Term Disability claimants shall have their monthly payment increased by 5% on March 1st of each contract year.

(b) The Company shall continue to pay for benefit plans during absences due to illness or accident when covered by a Company, Company-Union Trust or Benefit Society policy or by Workers’ Compensation. Similarly, benefits will continue to be covered while serving on a jury.

It will be noticed that these provisions make reference to “annual salary” (art. 24(a)(3)), “weekly salary” (art. 24(4)), and “wages” (art. 24(5)).

Letter of agreement No. 7 between the company and the union concerns the “Pacific Press Short Term Disability Benefits and Life and Long-Term Disability Benefits”. It states that:

It is agreed that the coverage provided by the Collective Agreements is governed by the rules and conditions outlined by the attached Benefit Plan Appendices “A” and “B” as applicable and no changes will be made to these appendices during the life of the Collective Agreements except as mutually agreed to by the above parties.

Appendix “A” covers short-term disability benefits and defines the term “Weekly Earnings”. The definition is as follows:

DEFINITIONS

. . . . .

(15) “Weekly Earnings” means: —

(a) for an Employee compensated on an hourly basis, his regular weekly rate of pay for his regular job category based on his basic hourly rate of earnings plus applicable premiums which he would have been receiving had he been actively at work at the time;

(b) for an Employee compensated by salary only, his regular weekly rate of salary for his regular job category based on his basic rate of salary which he would have been receiving had he been actively at work at the time;

(c) for an Employee compensated partly by salary and partly by commissions, his regular weekly rate of salary as defined in (ii) [sic] above plus the average weekly commissions paid to the Employee during three (3) months immediately preceding the date he became Disabled;

provided however Weekly Earnings shall not include overtime which might have been worked.

Appendix “B” covers life and long-term disability benefits. It defines “Annual Earnings” to mean, an “Employee’s Weekly Earnings calculated as in the definition of Weekly Earnings at the earlier of (a) the date the Employee became Disabled or (b) the date of the death of the Employee.”

”Weekly Earnings” is defined in the same way as in app. “A” except that the words “which he would have been receiving had he been actively at work at the time” in paras. (a) and (b) are replaced by “at the date he became Disabled”. Appendix “B” states that the following amount shall be paid in the event of the death of an employee: “as provided under the Collective Agreements ‘Health and Welfare Plans’”.

At the time of Mr. Slater’s death, the London Life policy in effect stated that: “The persons indicated under eligible class on the data pages who are actively at work full-time and for full pay with the employer and have been in continuous active full-time employment for full pay with the employer for the eligibility period shown on the data page are eligible to become insured.” The policy stated that certain situations could lead to an increase in the amount of insurance, but it went on to state: “In each case the increase will be effective only if the insured person is actively at work full-time and for full pay on the effective date of the increase.”

The health and welfare plans provision in the 1987-1990 collective agreement is significantly different from that which was in effect in 1969 and 1970, when Mr. Slater fell ill and went on LTD. At that time, art. 68 of the collective agreement between the company and the Vancouver Typographical Union, No. 226, 1969-1972, simply stated:

The Company agrees to share equally with journeymen and apprentice members of the Union the cost of the following health and welfare plans; C.U. & C. Health Services Society, London Life Group Insurance, Pacific Press Sick Benefit Fund Society.

The 1969-1972 collective agreement, thus, did not set out details of the health and welfare plans, but merely incorporated them by reference.

The London Life group insurance plan in effect in 1970 provided that those eligible for insurance were those employees “who are in the active full-time employment of the Employer for full pay on [the Effective Date of This Policy]”. The 1969 policy contained a provision to similar effect.

The 1970 life insurance policy provided that for male employees covered by union certificate other than general and shift foremen (including men in the position of Mr. Slater) whose income range was $7,000 or over per year and who were less than 65 years old, the amount of insurance was $12,000.

The 1972-1974 collective agreement contained a similar provision to art. 68 in the 1968-1972 collective agreement. The 1974-1975, 1975-1977, 1977-1978 collective agreements retained the general reference to a group life plan, but pursuant to those agreements, the company was to pay 100% for the cost.

The 1978-1982 collective agreement began the practice, continued in the 1984-1987 and 1987-1990 agreements, of setting out the details of the health and welfare plans in the collective agreement itself, rather than simply making a reference to a plan.

The company continued to pay premiums for life insurance for Mr. Slater. A statement by London Life, prepared on May 26, 1988, listed Mr. Slater as having life insurance coverage of $12,000.

Submissions of the union

Counsel for the union submitted that the payment to which Mrs. Calbeck was entitled was governed by the 1987-1990 collective agreement. It was submitted that the issue was really one of the meaning of the words “annual salary” in art. 24(a)(3) of the collective agreement. It was submitted that the fact that, as set out in para. 10 of the agreed facts, there had been another employee who died while on LTD benefits and was paid $12,000, was not determinative of the present case. The union was not involved in that case and, therefore, could not be estopped from arguing for a benefit greater than $12,000 in the present case.

Counsel for the union acknowledged that app. “B” referred to “Annual Earnings” as being calculated as at the date the employee became disabled, but argued that for group term life benefits, app. “B” was not definitive. It simply referred the issue of entitlement back to the collective agreement. The words “annual salary” in art. 24(a)(3) meant the present salary that the employee would have been earning had he been actively employed by the company at the time of his death. Counsel pointed to the words “weekly salary,” used in art. 24(a)(4) dealing with short-term disability. These words, it was submitted, were defined under “Weekly Earnings” in app. “A” to mean the pay that an employee would have been receiving had he been actively engaged at work at the time. It was submitted, therefore, that wherever “salary” was used in the collective agreement it should be interpreted in this manner. On this interpretation, the benefit to Mrs. Calbeck should be the full $50,000.

The alternative submission of counsel for the union was that the only other “annual salary” that could be contemplated by art. 24(a)(3) was a reference to Mr. Slater’s level of LTD benefits in 1988, viz. $7,700. According to art. 24(a)(5)(ii), this figure represented 60% of the employee’s wages on the first day of disability — i.e., it was approximately 60% of $13,000. Therefore, that is the figure to be used to calculate the annual salary in art. 24(a)(3), giving a benefit of about $26,000.

Counsel for the union submitted that the figure of $12,000 paid to Mrs. Calbeck had no foundation in the collective agreement. The benefit to which Mrs. Calbeck was entitled was not governed by any life insurance policy, but by the collective agreement. If the life insurance policy did not provide the proper coverage as set out in the collective agreement, then the employees should not suffer. The obligation was that of the company to obtain insurance coverage to conform with the collective agreement.

Counsel for the union submitted that, had Mr. Slater died in 1970, then the $12,000 payment might have been appropriate. But, as it was, his right to benefit from the life insurance policy did not crystallize until his death. The crystallization of those benefits did not take place at the time of the LTD benefits. Had the parties negotiated an end to the group life insurance benefits between 1969 and 1988, then Mr. Slater would have lost the benefits.

Counsel for the union argued that the “three (3) complete months of service” qualification in art. 24(a)(3) was forward-looking, that is, it applied only to people just starting with the company.

Submissions of the company

Counsel for the company submitted that the basic question that has to be answered is: At what point did Mr. Slater become entitled to a benefit? There were, he submitted, three choices: at the time of his death; (2) at the time he first became disabled; or (3) some other time — i.e., when Mr. Slater went from short-term to long-term disability.

Counsel for the company developed only the first two of these choices. The company argued most strongly for the date of the disability saying that the insurance policy in effect at that time stipulated a benefit of $12,000. The basis of this argument was that the parties had agreed to be bound by the provisions of a particular insurance policy which was in effect when Mr. Slater ceased active employment. To be entitled to a higher benefit than the $12,000 specified in the 1970 agreement, there was a requirement of three months’ service, as stipulated in art. 24(a)(3) of the 1987-1990 collective agreement. Mr. Slater simply was not eligible for this increased coverage.

It was submitted that if the entitlement arose at the date of death, under the insurance scheme in effect at that time, the question raised was as to the meaning of the expression “annual salary” in art. 24(a)(3). This could be one of five figures:

(a) annual salary was nil because Mr. Slater was receiving no salary, just LTD benefits;

(b) annual salary should be equated with the LTD benefit;

(d) annual salary was what Mr. Slater would have been receiving had he been employed and actively working at the time of his death [the main submission of the union], or

(e) his annual salary was the figure, 60% of which is $7,700 [the alternative submission of the union].

The company would choose option (c) as the most appropriate of these five options, but counsel went on to address the union’s arguments for options (d) and (e).

As to option (d), it was submitted that the union’s position that “annual salary” in art. 24(a)(3) should be determined by reference to “weekly salary” in art. 24(a)(4) was flawed because it ignored the difference in the first words of those expressions. It was then argued that the two expressions “wages” and “salary” ought to be given the same meaning. The existence of the different expressions was explainable on the basis that the collective agreement was a “relational document” that had grown by stages over time such that the words were not always employed with the precision that would be desired.

Appendix “A”, it was submitted, had no relevance in determining the meaning of “annual salary” because (1) it used the word “earnings” and not “wages”, and (2) in any event the definition of “Weekly Earnings” in art. 1(15) of app. “A” set out three different meanings, two of which incorporated the term “salary”. Mr. Slater fell into the one category in that definition which did not use the term “salary”. Appendix “B” was, therefore, the only appendix that was appropriate to be used as an aid to construction, because it specifically dealt with life insurance benefits.

It was submitted that, in any event, caution should be exercised in using the appendices as interpretative devices because they were not negotiated at the same time as the collective agreement. The language was different and did not have the kind of uniform precision that lawyers would hope for. It was then postulated that a possible difference between “wages” and “salary” was that, if salary was to be equated with “Weekly Earnings” in app. “B”, then it did not include overtime. Arguably, in these circumstances, wages would include overtime.

As to the possibility that option (e) should be used — i.e., that “annual salary” meant the figure 60% of which was $7,700, counsel for the company submitted that there was no authority for the use of that approach at all. There was nothing in the collective agreement to justify it.

How did Mrs. Slater’s right arise?

The first question that I must address is how the right of Mr. Slater or his estate to receive life insurance benefits arose. I agree with the position that Mr. Slater was covered by the 1987-1990 collective agreement.

It is clear that Mr. Slater was treated as an “employee” for the purposes of the collective agreement. At no point in the relevant portions of that agreement is the term “employee” qualified by words such as “on active service”. The very inclusion of LTD coverage in the agreement supposes that individuals receiving such coverage are included in the scope of the agreement. In my view, art. 24(b) reinforces my conclusion when it says, “The Company shall continue to pay for benefit plans during absences due to illness or accident when covered by a Company…policy”.

I agree with counsel for the union that the qualifying words in art. 24(a)(3) to the effect that the life insurance benefits “shall commence on the first day of the month following three (3) complete months of service…”, apply to those just beginning service with the company. The sentence in art. 24(a)(3) that contains the three months’ provision ends by stipulating what happens upon ceasing employment. Thus, the provision is balanced by providing what happens at the beginning of employment and what happens at the end. It cannot be disputed that Mr. Slater gave the company three complete months of service. In any event, art. 24(b) stipulates that the company shall continue to pay for benefit plans during absences due to illness or accident. The group life insurance is such a plan and Mr. Slater was absent due to illness. Therefore, I conclude that the company was bound to pay for that benefit plan for Mr. Slater.

When Mr. Slater went on LTD there was a different life insurance policy in place. I accept, however, the argument that the right to a particular life insurance benefit did not crystallize until his death. Because Mr. Slater was still covered as an employee in the 1987-1990 collective agreement at the time of his death, his entitlement to life insurance arose pursuant to that agreement. The fact that, according to para. 10 of the agreed facts, another employee died while on LTD benefits and was paid $12,000 cannot preclude or estop the union from making the argument it does in the present case. Neither the union nor the grievor was involved in the earlier case.

I take comfort in my conclusion on this point from the decisions that were cited to me and particularly from the decision of the board in Re Somerville Belkin Industries Ltd. and E.C.W.U., Loc. 30 (1985), 21 L.A.C. (3d) 358 (Hinnegan), where the grievor, whose husband had been on LTD benefits, claimed entitlement to an increase in life insurance benefits that had been negotiated by the union during the husband’s LTD absence. The group life insurance policy, underwritten by London Life, stipulated that an increase in benefits would apply only to employees who were in the active full-time employment of the employer for full pay at the effective date of change. The insurance policy had the same wording as the policy with which we are concerned in this proceeding.

It was decided by the board that the life insurance policy could not alter or negate a benefit which had been agreed to in the collective agreement. The collective agreement did not stipulate that it was effective only for active full-time employees. It was said at p. 363 of the report: “If he is a full-time seniority employee, he must be so for all the welfare plans set out in art. 139 [covering ‘welfare plans for all full-time seniority employees’] and there is no justification for isolating one only and insisting that he must be actively at work to be entitled to that one but not the others.” Furthermore, the panel decided (p. 364) that benefits under a disability insurance contract and those under a life insurance contract are separate and distinct:

One has nothing whatsoever to do with the other and there can be no question that life insurance benefits do not vest or crystallize until the point in time at which the employee in question dies. Certainly, those benefits do not vest at the time some disability arises triggering the disability benefits or on the employee’s last day of active employment. As stated, there is no connection between them.

I agree and accept these statements and apply them to the present proceedings.

Counsel for the company cited three cases for the proposition that the insurance policy should be used to help construe what the entitlement to life insurance was under the collective agreement. The cases were: Re National Grocers Co. and R.W.D.S.U., Loc. 414 (1978), 19 L.A.C. (2d) 345 (Kennedy); Re City of London and C.U.P.E., Loc. 107 (1972), 2 L.A.C. (2d) 325, and Re National Grocers Co. and Warehousemen & Miscellaneous Drivers, Loc. 419 and Other Local Unions (1973), 4 L.A.C. (2d) 400 (Weatherill). These decisions all stress that reference to extrinsic evidence is only necessary or permissible when the collective agreement is silent on a particular point. In Re London and C.U.P.E., it is made clear that (p. 328):

The basic source of employee rights must be the collective agreement to which its bargaining agent is a party. On the other hand, the interpretation of these rights may be clarified by looking at the policy which has been taken out by the employer keeping in mind that, in case of conflict, between the meaning of the collective agreement and the definitions in the policy, the former must govern.

In these proceedings the collective agreement covers employees such as Mr. Slater and the collective agreement sets out the life insurance coverage to be provided. There is no reason to turn to extrinsic evidence to decide this point.

Brown and Beatty, in Canadian Labour Arbitration, 3rd ed. (Canada Law Book Inc., Aurora), state at para. 4:1400 that:

Commonly, the relationship between…ancillary documents [such as life insurance plans] and the collective agreement will fall into one of four categories. In one, the plan or policy is not mentioned in the agreement. In the second situation the collective agreement specifically provides for certain benefits, while in the third it only provides for the payment of premiums. In the last, specific plans or policies are incorporated by reference into the agreement.

The present situation is of the second type and here resort is had to the plan only when the collective agreement cannot answer the question of interpretation. The collective agreement in effect when Mr. Slater went on LTD was of the fourth type. In that situation, it would be appropriate to refer to the life insurance policy to determine questions of eligibility or benefits. However, my view is that the 1987-1990 collective agreement was the agreement in effect when Mr. Slater’s right to life insurance benefits crystallized.

What benefits flow from the life insurance?

Having concluded that the 1987-1990 collective agreement governs the group life insurance benefit that will flow to Mrs. Calbeck, reference must be had to art. 24(a)(3) to find the scope of the benefit. The crucial question, it seems to me, is what is meant by “annual salary”.

I accept as useful the five choices of meaning as set out by counsel for the company. The first two choices, that there is no salary and that the salary is equivalent to the LTD benefits can be dismissed. There was no argument put forward on these two possibilities. The fifth choice, that the annual salary is the figure 60% of which is $7,700, can also be dismissed. There is nothing in the collective agreement or its appendices that justifies any link between the LTD benefit and the life insurance benefit to arrive at the conclusion that the fifth choice is the correct one.

The two choices that are left are (1) that annual salary means the salary Mr. Slater earned when he first went on disability, or (2) that annual salary means the salary Mr. Slater would be earning if he had been continuing to work actively at the time of death.

There is no definition of “salary” or “annual salary” in the collective agreement or its appendices. I agree with the submission of counsel for the company that the terminology in the collective agreement and its appendices is not used with the precision one would like. There is a presumption that the use of different expressions in an agreement is significant as implying a different meaning for each (see, e.g., Re Brewery Workers’ Local Union No. 173 and Carling Breweries Ltd. (1969), 20 L.A.C. 24 (Weatherill)). However, given the variety of terms used in the present collective agreement and its appendices, there is likely to be overlap.

Appendices “A” and “B” can be of assistance in construing the collective agreement. They are expressly incorporated into the agreement by letter of agreement No. 7. In Re Pacific Press Ltd. and Vancouver-New Westminster Newspaper Guild, Loc. 115, unreported, April 30, 1987, the arbitrator, Bruce H. McColl, Q.C., concluded at p. 9 of the award that, “There is a direct relationship between the contract and the letter of agreement which intends to clarify the contractual obligation.” With that statement I agree.

I agree with counsel for the company that there is nothing in app. “A” that directly assists the argument of the union. Appendix “A” has nothing to do with life insurance benefits and it does not use the expression “annual salary”.

Turning then to app. “B”, this appendix does relate to group life insurance benefits. It also relates to LTD benefits as set out in art. 24(a)(5) of the collective agreement. The definitions section of app. “B” contains definitions for “Annual Earnings” and “Weekly Earnings”. These terms are not used elsewhere in app. “B” (except that “Weekly Earnings” constitutes part of the definition of “Annual Earnings”). Therefore, it is logical to suppose that they must relate to equivalent expressions in the collective agreement. The definition of “Annual Earnings” refers to “the date of death of the Employee” and therefore must relate to life insurance benefits. “Annual Earnings” must be equivalent to “annual salary” in art. 24(a)(3). Otherwise the expression “Annual Earnings” would serve no purpose at all because (1) there is no provision other than art. 24(a)(3) to which it could relate (given its reference to “the date of the Death”), and (2) there is no expression other than “annual salary” in art. 24(a)(3) to which “Annual Earnings” could refer. Furthermore, there is no other definition of “annual salary” that is so obvious. The connection between the two terms is irresistible.

Counsel for both the union and the company submitted that the expression “Weekly Earnings” in app. “A” had the same meaning as “weekly salary” in art. 24(a)(4) of the collective agreement. I see no reason, therefore, in the absence of any other definition of “annual salary”, why its definition is not that of “Annual Earnings” in app. “B”. There is, evident in the collective agreement and its appendices, a parallel between the use of the word “Earnings” in the appendices and the use of the word “salary” in the collective agreement when those words are joined with the modifiers “annual” and “weekly”. There is one parallel between app. “A” and art. 24(a)(4) and another between app. “B” and art. 24(a)(3) and (5). It seems clear that the various documents were not drafted at the same time or, indeed, by the same person, given the unfortunate lack of uniformity in the language. Though there is this lack of uniformity, the conclusion I have reached does give the expressions in the collective agreement and the appendices a symmetry and a purpose. It leaves no expression unaccounted for. In my view, no other conclusion gives this result and reflects what must have been the intention of the parties to the agreement as recorded by their agreement.

I conclude, therefore, that the life insurance benefit that ought to have been paid to Mrs. Calbeck on the death of her husband was the amount twice his annual salary, as per art. 24(a)(3) of the collective agreement. I have found that annual salary has the same meaning as “Annual Earnings” in app. “B”. The definition of “Annual Earnings” states that it is the “Weekly Earnings” (calculated, logically, for an entire year) at the earlier of (a) the date the employee became disabled, or (b) the date of the death of the employee. For Mr. Slater, therefore, the relevant date is the date he became disabled. “Disabled” is defined in app. “B” as follows:

”Disabled” means an Employee’s inability as a result of bodily sickness or injury to engage in his normal occupation for the first 104 weeks of a Disability Period. After the first 104 weeks of a Disability Period, Disabled means the inability as a result of bodily sickness or injury, to engage in any occupation or employment for wages or compensation, for which he is reasonably qualified by education, training or experience or may reasonably become so qualified, subject always to the terms of the provisions of the Plan entitled LIMITATIONS AND EXCLUSIONS.

Mr. Slater, according to this definition, became disabled in August, 1969, because he met the requirements of the definition continuously from that date until his death. In the agreed facts, the parties stated that Mr. Slater’s “wages” as of August, 1969, were $9,100 per year. In the absence of any evidence to the contrary, I assume that that figure represents Mr. Slater’s weekly earnings (calculated for an entire year) at the date he became disabled. Article 24(a)(3) stipulates, therefore, that the life insurance benefits that should have been paid to Mrs. Calbeck were twice that figure, or $18,200.

I will retain jurisdiction in case the parties are unable to agree on how this award is to be implemented.

It is so awarded.