Canada: Who Pays the Ontario Health Premium? The Court Weighs In

Last Updated: December 12 2005
Article by Michael P. Fitzgibbon

Most Read Contributor in Canada, September 2016

On November 24, 2004, we provided our clients with a Legal Alert entitled "The Ontario Health Premium: Are Employers Liable?" which reviewed this important issue and the handful of cases that existed at the time. In the nearly 12 months since writing the Legal Alert over 20 arbitration decisions have been written and, as of October 17, 2005, one judicial opinion. The law is still in a state of flux, despite the judicial pronouncement, as so much depends upon the wording of the collective agreement in issue.

The Ontario Divisional Court released its much anticipated decision in Lapointe- Fisher Nursing Home v. United Food and Commercial Worker' International Union, Local 175/633 (October 17, 2005, Ont. Div Ct.) and upheld the arbitration award of Arbitrator Barrett which determined that the employer was required to pay the Ontario Health Premium ("OHP").


Prior to 1990, Ontario Health Insurance Act (1980) (the "HI Act (1980)") and Regulation 452 required Ontario residents to pay the Ontario Health Insurance Premium ("OHIP") in order to receive provincial health coverage. The premium was eliminated when the Employer Health Tax Act (1989) (the "EHT Act") came into force in 1990. The EHT Act imposed a payroll based tax on employers and made a number of amendments to the HI Act (1980) including deletion of certain provisions relating to payment of OHIP premiums. The EHT Act remains in effect today and continues to provide insured services for Ontario residents without payment of premiums.

Many collective agreements provided that the premium imposed on employees under the HI Act (1980) was required to be paid by the employer. This benefit provided to employees became irrelevant with the introduction of the EHT Act. However, many collective agreements still contain provisions with respect to OHIP premiums. In other cases, although the OHIP language was removed, it was replaced by language which provided that, if OHIP funding reverts to a premium payment system, the employer would fund up to 100% of the premium.

Lapointe-Fisher Nursing Home

Arbitration Award

At issue in the Lapointe Fisher Nursing Home and U.F.C.W. Local 175/633 (October 6, 2004) ("Lapointe") was whether the employer was required to pay the OHP under collective agreement language that required the employer to pay 100% of the OHIP premiums for full time employees and 50% of the OHIP premiums for part time employees. Specifically, the collective agreement provided that:

24.01 (a) The Employer agrees to pay 100% of the OHIP premiums for all full-time employees who are regularly scheduled to work seventy-five (75) hours in a bi-weekly pay period on a permanent base.

(b) The Employer agrees to pay 50% of the OHIP premiums for all employees who work in excess of forty-eight (48) hours but less than seventy-five (75) hours in a bi-weekly pay period on a permanent base. The employee shall pay 50% of the OHIP premiums through payroll deductions.

(c) To be eligible for (a) or (b) above, the employee must be the principle breadwinner in their family.

In finding that the OHP constituted a premium, Arbitrator Barrett considered the historical background of the old OHIP premium and the now dormant collective agreement provisions. After examining the purpose of the OHP, she concluded that the OHP is dedicated solely to funding OHIP and therefore can fairly fit within the wording of the collective agreement provision. While beyond the scope of this article it should be noted that most arbitrators have disagreed with this conclusion.

In her view, the fact that the OHP is collected through the tax system did not rob it of its character of a premium. In support of this view, Arbitrator Barrett cited the Kirby Report on "The Health of Canadians – The Federal Role", which suggested that premiums based on income were an equitable way to fund health care and that collecting premiums through the tax system made sound administrative sense.

As mentioned, the arbitrator found that Article 24.01 was sufficiently broad so as to encompass the OHP and, as such, the employer was required to pay the OHP. The employer filed an application to have this award judicially reviewed by the

Decision of the Divisional Court

By decision dated October 17, 2005, the Divisional Court upheld Arbitrator Barrett’s award.

The Court affirmed that the applicable standard of judicial review of an arbitrator’s award in Ontario remained "patently unreasonable" despite an earlier Supreme Court of Canada decision in Voice Construction Ltd. V. Construction & General Workers’ Union, Local 92 that appeared to relax the longstanding deferential standard. The Voice case arose under Alberta legislation and was distinguishable, in part, on that basis. The applicable standard of review had been earlier reviewed and re-affirmed by the Ontario Court of Appeal in Lakeport Beverages v. Teamsters Local Union 938 (August 19, 2005, Ont. C.A.).

The Court then went on to consider the more recent case of Ontario Power Generation decided by Arbitrator Swan. The collective agreement before Arbitrator Swan was similar to that before Arbitrator Barrett in Lapointe-Fisher Nursing Home in that it provided that the employer would pay "100 percent (100%) of OHIP premiums". Not surprisingly, Arbitrator Swan reviewed Lapointe-Fisher in some detail. Arbitrator Swan concluded that, while the OHP was a "tax" not a "premium", the distinction was not material. He stated:

"In my view, the correct way to look at this issue is to consider what reasonable parties in the position of the Employer and the Union must have intended when they renegotiated the language into the collective agreement. Obviously, that renegotiation took place in a universe where there was no existing OHIP premium and where OHIP was funded by the employer health tax. At the same time, however, the language chosen must have been informed by the fact that at one time there had been an OHIP premium. In my view reasonable parties in their position would have intended, should some government initiative in the future require that a payment for OHIP insured services be required of individual employees, the Employer would be responsible to pay that on behalf of the individual employees, provided that it was materially and reasonably similar to the OHIP premium payable prior to 1989."

Arbitrator Swan concluded that the OHP and OHIP were "materially and reasonably similar" and that, having regard to the language of the collective agreement, and the negotiating history, the employer was responsible for paying the OHP.

Having regard to this, the Court concluded that Arbitrator Barrett’s decision was not patently unreasonable and dismissed the application for judicial review. The Court also stated that, even if the standard was "reasonableness", as suggested by the Supreme Court of Canada in Voice Construction, that the Barrett award met this standard.

The Future

Lapointe-Fisher Nursing Home does not conclusively resolve the question of "who pays the OHP". As each case will come to be decided on the language in the particular collective agreement language and the negotiating history of the parties, there will, necessarily, be different, though equally reasonable, awards on this issue. This, of course, provides little comfort to employers who are dealing with this costly issue. That being said, this is the first judicial pronouncement on the issue but will not be the last as many other OHP arbitration awards are pending before the Divisional Court. This is one area where government assistance through a legislative amendment may be the only way to bring certainty to the question.

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