Canada: Ontario’s New Health Premium: Robbing Peter to Pay Dalton?

Last Updated: December 1 2004
Article by David Elenbaas and Ivan Luksic

The Ontario Health Premium ("Health Premium"), introduced this past summer by Premier Dalton McGuinty’s government, continues to cause a stir among unionized employers. Many unions argue that left-over references in collective agreements to an employer’s obligation to pay "OHIP premiums", which were payable by individuals several years ago, require employers to pay the new Health Premium. The Health Premium, which is a statutory deduction from wages, is already being deducted pursuant to provisions under the Income Tax Act even though the legislation authorizing the government to collect this income-based Health Premium has not yet been passed into law. Recently a number of arbitral decisions have added to the debate on who should pay the Health Premium.

Lapointe Fisher Decision

The first of these decisions which became a lightening rod for this issue was Lapointe Fisher Nursing Home and U.F.C.W. In considering collective agreement language which stated that "the Employer agrees to pay 100% of the OHIP Premium" under certain conditions, the arbitrator determined that the employer should pay the Health Premium because it is fundamentally a premium, despite being characterized as a tax and collected through the income tax system. She held that any difficulty in calculating each employee’s Health Premium, which is calculated on all taxable, not solely income paid by the unionized employer, did not absolve the employer from paying the Health Premium. The arbitrator also indicated that the Health Premium directly funds OHIP. In reality this is not the case as the Health Premium will be funding health care in general – not just OHIP expenditures.

The government reacted swiftly to Lapointe Fisher. Premier McGuinty and Finance Minister Sorbara emphasized that the Health Premium is a tax to be paid by individuals and that collective agreement references to OHIP premiums do not include the Health Premium. Of course, the government’s opinion is not at all binding on a labour arbitrator. While the employer in Lapointe Fisher intends to seek judicial review of the award, other decisions taking a different view have emerged.

Employer Friendly Arbitral Awards

Since Lapointe Fisher, three decisions confirming that the employer is not required to pay the Health Premium, have been released: Jazz Air Inc. and A.L.P.A. International ("Jazz"), College Compensation and Appointments Council and O.P.S.E.U. ("College") and Goodyear Canada Inc. Collingwood Plant and U.S.W.A. ("Goodyear"). No doubt other awards will emerge. There are no common themes or findings to these decisions. In Jazz, the arbitrator reviewed the collective agreement which read "the Company shall pay the premiums for Provincial Health Care". He noted the Health Premium fluctuates with income and is not calculated solely on income earned from the employer and concluded that no employer would agree to pay a tax earned in outside employment. The arbitrator also stated that benefits are always specifically bargained and identified and that the tax is not a benefit. In College the arbitrator quoted the decision in Jazz, which found that the parties "could not have contemplated this new tax which did not exist" at the time the collective agreement was entered into. As determined in Jazz, he held that increases in compensation, of up to $900.00 per year, cannot usually be achieved in a "rights" arbitration. The College and Jazz arbitrators emphasized that there is no nexus between the Health Premium and accessibility to OHIP benefits. Furthermore, the intent of the Health Premium is to fund health care generally. This general intent is not sufficient to find a correlation between the Health Premium and the OHIP language in collective agreements. Finally the arbitrator in the Goodyear decision also focused on the language of the collective agreement under which the Company was to "pay the whole of the monthly premium to the Ontario Health Insurance Commission…so as to qualify the employee for entitlement to receive the insured benefits provided by the Ontario Health Insurance Plan". He noted that the Health Premium is not a prerequisite for OHIP coverage and accordingly denied the union’s grievance.

The Road Ahead

While the government has stated that employers should not pay the Health Premium, the legislation enacting the Health Premium will continue to create uncertainty. Some employers have decided to subsidize the Health Premium but most have chosen not to do so. Hopefully the government will realise that legislative amendments are needed to clarify its original intent. Meanwhile, the arbitration process will continue. With conflicting decisions to date, it is difficult to determine how a collective agreement reference to OHIP premiums will be interpreted. An employer should seek legal advice on the particular terms of its collective agreement in order to determine its obligations.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2004 McMillan Binch LLP

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