FPSLREB Decisions

File: 166-2-28685 Public Service Staff Before the Public Service Relations Act Staff Relations Board BETWEEN DAVID GRAY Grievor and TREASURY BOARD (Revenue Canada - Customs, Excise and Taxation)

Employer Before: Guy Giguère, Board Member For the Grievor: Alan H. Phillips, The Professional Institute of the Public Service of Canada

For the Employer: Jock Climie, Counsel

Written submissions filed on July 28, August 27, and September 9, 1999

Heard at Victoria, B.C., June 3 and 4, 1999.

Decision Page 1 DECISION David Gray, an AU-1 Auditor employed at the Victoria office of Revenue Canada, was assigned an amalgamation file in January 1995 and worked on it for over 200 hours until January, 1997. He grieved on May 23, 1997 that he had performed duties at the AU-3 level for this file but was denied acting pay by his employer. He asked in his grievance, as a corrective measure, to receive 150 hours of acting pay at the AU-3 level. Mr. Gray had explained to his supervisor that he did not consider the first 50 hours to be at the AU-3 level and consequently did not grieve on this. On June 30, 1997, Bruce Donaldson, Assistant Director, Verification and Enforcement in the Victoria office of Revenue Canada, denied his grievance at the first level. He explained that based on prior agreement, this request for acting pay related to a single file requested and assigned to Mr. Gray for development. The number of hours worked on this file was not significant enough to indicate that Mr. Gray was substantially performing the duties at the AU-3 level at that time. Mr. Donaldson also noted that Mr. Gray was always aware of the circumstances surrounding his assignment of the file and had delayed filing any request for acting pay until contacted regarding the appeal. Attached to the reply at the first level was the following statement of facts: My review of the file indicates the following: 1. The file was assigned to you in January 1995 in response to your specific request for development of technical knowledge at a higher level of complexity than your substantive classification.

2. The supervisor discussed this with you at the file assignment stage and monitored your progress throughout the audit. Additional complexities were encountered as the audit progressed, resulting in over 250 [sic] hours of applied time over a 12 month period.

3. The file was completed in December 1995 with the reassessment of a principal file (1992 year) and secondary file (1992 and 1993 year).

4. The taxpayer subsequently filed a notice of objection, eventually leading to an appeal referral to the tax court. You were subsequently contacted by the Department of Justice in March 1997 and asked to provide assistance. Based on discussions with your supervisor, a complexity analysis was then prepared and agreement was made to recognize acting pay at the AU3 level for any subsequent time applied by you to resolve the appeal.

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Decision Page 2 The grievance was also denied at the second, third and final levels of the grievance process. In the final level reply to the grievance on September 9, 1998, Robin D. Glass, Assistant Deputy Minister, Human Resources Branch, Revenue Canada, denied the grievance because it was untimely but he explained that, even if it had been timely, it would have been denied: … In accordance with clause 38.10 of the Auditing (AU) Group collective agreement, an employee may present a grievance not later than the twenty-fifth (25 th ) day after the date he or she becomes aware of the action or circumstances giving rise to the grievance. I note that you filed your grievance on May 27, 1997, claiming acting pay for a file you completed in March 1996, some 14 months prior. Thus, your grievance is untimely and on that basis, it is denied.

Notwithstanding the foregoing, had your grievance been timely, I would have concurred with the response you were given at the third level of the grievance procedure, which response appropriately concluded that you did not substantially perform the duties of a higher level position for at least 15 consecutive days in accordance with clause 27.07 of the AU collective agreement. Therefore, you are not entitled to acting pay.

… Clauses 38.10 and 27.07 of the Auditing Group (AU) collective agreement (Code: 204/88) read as follows: 38.10 An employee may present a grievance to the First Level of the procedure in the manner prescribed in clause 38.05, not later than the twenty-fifth (25 th ) day after the date on which he is notified orally or in writing or on which he first becomes aware of the action or circumstances giving rise to grievance.

27.07 When an employee is required by the Employer to substantially perform the duties of a higher classification level in an acting capacity and performs those duties for at least fifteen (15) consecutive working days, he shall be paid acting pay calculated from the date on which he commenced to act as if he had been appointed to that higher classification level for the period in which he acts.

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Decision Page 3 Summary of Evidence In November 1994, Mr. Gray attended a course on amalgamation, dealing with the fiscal consequences of the merging of companies. In early 1995, Mr. Gray was assigned by his supervisor, John Hoogendoorn, a file that dealt with an amalgamation of companies; this file will be referred to in this decision as EB to maintain the confidentiality of tax information. Mr. Gray testified that his supervisor had approached him to work on this file because amalgamation files were generally considered to constitute work at the AU-2 level. Mr. Gray testified that he never requested an amalgamation file but his supervisor had approached him with this file which was AU-2 level work. He accepted it for the training experience it would give him and therefore he did not request acting pay.

Mr. Hoogendoorn’s testimony differed from Mr. Gray’s testimony in that he maintained that Mr. Gray requested the assignment of a file which would enable him to apply the knowledge he had gained from the training on amalgamation. Furthermore, even though it was an amalgamation file which he assigned to the grievor, it was still an AU-1 level file based on gross revenue since it was under three million dollars. In any case he could not ask an employee classified at the AU-1 level to perform work at the AU-2 level as a team leader.

On January 5, 1995, Mr. Gray proceeded with a desk review of the EB file and examined it to establish an audit plan. He then arranged to conduct the audit and proceeded to Nanaimo for a full week, starting on January 16, 1995. He was part of an audit group of about 10 auditors, plus their supervisor, Mr. Hoogendoorn, conducting different audits at the same time in Nanaimo.

Mr. Gray testified that, after a few days, it became obvious to him that the EB file involved more than an amalgamation issue; three corporations were involved in significant tax planning and he began to suspect tax avoidance. Therefore, he went to talk to his supervisor to relay his finding to him. Mr. Hoogendoorn then told him that he had confidence in his abilities to handle this case. Mr. Hoogendoorn also gave him a note from a colleague who had audited an affiliated corporation. Mr. Gray then continued to gather the evidence on the tax avoidance issue. The case, as it unfolded, required the grievor to look at the corporation that was the result of the

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Decision Page 4 amalgamation. Mr. Gray discovered that there were four individuals holding shares in the “EB” company, a holding company that owned four different businesses. Three of the four owners of EB wanted to get the money out of the EB company and get the capital gains exemption. These three individuals sold their shares in EB to the fourth owner of EB the day after they each bought one of the four businesses of the EB holding company. The then sole owner of EB was left with the fourth business. This case was complex and involved three different lawyers and four accountants. Mr. Gray believed that it was tax planning and gathered evidence to that effect and then went to the Tax Avoidance Group at the Victoria office of Revenue Canada. A referral was prepared and sent to the Ottawa Headquarters. The EB case was like an octopus and consisted in all of 10 files: four individual files, three corporation files, one amalgamated corporation and two ancillary corporations.

In reviewing the EB case, as Mr. Gray believed he was dealing with a tax planning issue, he took the case to the Tax Avoidance Group in the Victoria office of Revenue Canada in order that a referral could be prepared and sent to Revenue Canada Headquarters in Ottawa. What the Tax Avoidance Group prepared was essentially a report on this case. After September 1995, Mr. Gray continued to work on the case on different issues in regard to wages incorrectly reported, revenues and individuals claiming alimony, and the case was completed by December 1995. Mr. Gray testified in relation to Exhibit G-6 which consisted of copies of his desk calendar for January and March 1996 showing that he had spent several hours working on files related to the EB case. He was contacted by a lawyer who was involved with a taxpayer in the EB case. He had to research and reply to the lawyer and charged the time he spent to an indirect time code because the EB case was closed.

By March 1996, one party in the EB case filed an objection. In 1996, Mr. Gray testified that he was approached by colleagues responsible for appeals within Revenue Canada to discuss the EB case. Mr. Gray testified that he did a lot of research for this case and continued working on it in November 1996; the time he spent on it was charged as assistance to others.

In January 1997, a lawyer from the Department of Justice (DOJ) in Vancouver called Mr. Gray because the EB case was going to court. This call went on for three to four hours and, since the lawyer needed more information from Mr. Gray, he asked

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Decision Page 5 him to go to Vancouver to discuss the file. Mr. Gray testified that, when he went to Vancouver to meet with the DOJ lawyer, he looked at the EB file in its entirety and only then did he realize its complexity. The DOJ lawyer told him that he would have to testify as an expert on the file. Further to that visit, Mr. Gray went to see his supervisor, John Hoogendoorn, and discussed with him the EB case explaining that it was considerably more complex than he originally had envisioned; he asked his supervisor for acting pay retroactively for work he had already done in generating the tax avoidance file and for future work on this file.

Mr. Gray then went on to see Mr. Malette, an officer of Revenue Canada in the Victoria office, who assessed the complexity of the EB case as being at an AU-3 level using a Complexity Rating Schedule (Exhibit G-8). After seeing Mr. Malette, Mr. Gray wrote a memorandum (Exhibit G-7), dated January 24, 1997, to his supervisor, Mr. Hoogendoorn, requesting that he be paid at the AU-3 level for his work on the EB case. Exhibit G-7 reads as follows: … As you know, I worked on this case last year with the audit work completed in late March 1996. There have however been several follow up letters from the accountants and lawyers which I have responded to and am continuing to respond to. In addition I assisted Appeals in bringing them up to speed on the file and this resulted in them confirming the file. I recently assisted Justice in preparing a response to the preliminaries of Tax Court on part of this file and fully expect to appear in court on behalf of the crown to assist them in their case.

My issue is that at the time that I received this file it was an Amalgamation file and I took it as a training file as I had recently completed training on this. Under the attached guidelines this was an AU2 file when it was assigned. As the file progressed it became apparent that this was a complex reorganization involving some 7 + corporations as well as a change of control, crystallization of the capital gains exemption and what later turned out to be Tax Avoidance and an assessment by me using 84.1 and 84 (2). At this point this file became an AU3 file based on the attached guidelines. At all times during this file I was paid at my substantive level which is an AU1. It now appears that the knowledge and experience that I acquired on this file is going to be required for some time to answer the lawyers enquiries and assist Justice both at the Tax Court and I fully expect at the Federal Court of Appeal.

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Decision Page 6 I feel that since this knowledge was acquired by doing AU3 workload that it should be paid as such. In addition I feel it is appropriate that I receive some recompense for the time that I worked on this file at the acting AU3 level. The case and associated case have some 190 hours on them from me and a further 15hrs recently to answer enquiries and assist Justice and Appeals. I enclose a synopsis of the case prepared by GAAR last year for a submission to HO as well as a complexity rating from them, placing it at the AU3 level. I also enclose the general file guidelines which also place this at the AU3 level.

I await your timely response. … Mr. Gray met again with Mr. Hoogendoorn who requested that Mr. Gray identify specifically when he believed that the EB case had gone to the AU-3 level. On April 3, 1997, Mr. Gray responded to Mr. Hoogendoorn by memorandum (Exhibit G-9): … As requested, I have reviewed when this file went from an AU2 file to an AU3 file and in my opinion this was when 50 hours had been completed. This point was on the 4th day of the on site audit when I realised that this audit was going to require a thorough review of the sale of shares and resulting crystallization of the Capital Gains Exemption, the application of 84.1 on a S85 transfer, the change of control on sale of shares by the partners to a numbered corp controlled by one partner and the subsequent sale of the businesses in the parent corp back to the original partners.

… Mr. Hoogendoorn answered Mr. Gray by memorandum dated May 21, 1997 (Exhibit G-10) explaining how acting pay was granted in the Victoria office and that he was prepared to authorize acting pay for Mr. Gray at the AU-3 level for time spent at the objection and court level only. A copy of this memorandum was sent to Bruce Donaldson, Assistant Director, Verification and Enforcement of the Victoria office of Revenue Canada; however, Mr. Donaldson testified that Mr. Hoogendoorn could not on his own authorize acting pay for Mr. Gray. Mr. Hoogendoorn’s memorandum reads as follows:

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Decision Page 7 Acting pay will be granted in the following situations: 1. If a case is assigned at a higher then the substantive level, and the auditor accepts the assignment, then by mutual agreement acting pay will be authorized for the time spent on the case assigned.

2. If for training purposes, an auditor requests assignment of a case, in a range higher then the substantive level, no acting pay will be awarded as the benefit to the auditor is the additional experience at a more complex level.

3. If a file assigned at the substantive level develops, most of the time due to complexity, in to a higher level file then the substantive level, then at the time when this takes place the team leader should be made aware of this and two things can happen:

A. Acting pay can be granted if the auditor wants to continue the case or

B. The case will be assigned to an auditor at the appropriate level.

The scenario with (…) appears to fit item 2 above. After you completed a training course dealing with amalgamations you voluntarily accepted this case as you could apply your gained knowledge from the course recently completed. This was by mutual agreement.

The case was successfully completed in March 1996. During the audit never at any time was any acting pay mentioned or requested. Therefore acting pay at the AU-3 level can not be granted for the time utilized to audit this particular case.

However subsequent to the assessment being raised a notice of objection was filed and at present the case is before the courts.

As it has been determined that the case has the complexity normally handled by an auditor at the AU-3 level, I am of the opinion that any time spent on the case at the objection and court level is eligible for acting pay at the AU-3 level and I am prepared to authorize acting pay for any time spent on the case at the objection and court level.

…

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Decision Page 8 Finding this response unsatisfactory, Mr. Gray filed his grievance on May 27, 1997.

I asked Mr. Gray if he had requested the employer to pay him for the hours he had worked on the EB file at the objection and court level. He answered that he did not bother with it because the amount involved was not significant enough to file a request for about 30 to 40 hours that he had worked at the objection and court level. He added that for the 150 hours that he is asking for in his grievance, the total amount would be about $423, which represents the difference in pay for him between the AU-1 level and the AU-3 level.

Mr. Gray testified that, in January 1997, when he approached his supervisor and asked him for acting pay for some of the hours he had spent on the EB case, he knew that this was contrary to the collective agreement which required that the duties be performed for at least 15 consecutive working days. However, Mr. Gray explained that he made this request because he knew of other colleagues who had received acting pay on a per hour basis for specific files. Karen Etches, George Logan and Wayne Todd testified for the grievor and explained how, being at the AU-2 level, they had been offered by management acting pay at the AU-3 level for handling some specific files on a per hour basis.

Bruce Donaldson testified that he had been approached by Ken Cormack, team leader in the Victoria office, who needed some AU-3 level files to be completed to reach his target for the fiscal year. Mr. Donaldson authorized Ken Cormack to ask AU-2’s to work and they would receive AU-3 acting pay on those files on a per hour basis. Mr. Donaldson testified that after honouring this agreement made in the Cormack files, such as Mr. Logan in January of 1998 (Exhibit G-4), this practice stopped in the Victoria office.

Arguments Jock Climie, counsel for the employer, by letter dated May 28, 1999, submitted to the Public Service Staff Relations Board that an adjudicator is without jurisdiction to adjudicate David Gray’s grievance because it is untimely since it had been presented later than the twenty-fifth day after the day on which the employee first had knowledge of the matter giving rise to his grievance.

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Decision Page 9 At the outset of the hearing, Mr. Climie, by way of preliminary objection, repeated his argument on timeliness of the grievance. Mr. Phillips responded that the incident which gave rise to the grievance did not become evident until the employer denied acting pay to the grievor in writing on May 21, 1997. I took note of the objection of Mr. Climie, but reserved my decision until I had heard all of the evidence in order to rule on the preliminary objection.

In his opening statement, Mr. Climie said that the issue starts with the collective agreement. Mr. Phillips replied that he agreed with Mr. Climie that Mr. Gray had not substantially performed the duties of an AU-3 on 15 consecutive days as required by clause 27.07 of the collective agreement for the Auditing Group. Nevertheless, Mr. Phillips maintained that the employer should be estopped from using the language of the collective agreement and that there was evidence of practice both past and current to the effect that the employer ignored the collective agreement. Mr. Climie responded that he would demonstrate that the requirements for either past practice or equitable estoppel were not present in Mr. Gray’s case.

Testimony of witnesses for this grievance took all the time scheduled for hearing of the grievance on June 3 and 4, 1999. Therefore, counsel for the employer requested that the parties present written submissions and the grievor’s representative agreed. Written submissions were sent both on the issue of time limits and on the merits of the grievance. Mr. Phillips specified in his argument on the merits that, if the grievance was not allowed in total, then the employer should be ordered to pay Mr. Gray 40 hours acting pay at the AU-3 level for time worked at the objection and court level as had been agreed by the employer.

The following is a summary of the written submissions of the parties on the issue of timeliness.

Argument on Behalf of the Grievor Mr. Phillips submits that the grievance is in fact timely as the grievor only became aware of the complete nature of the file when he saw it together in one place in January of 1997. Once he realized the amount of work and the possible complexity, he requested and received a rating from Mr. Malette for the work done by Mr. Gray on the EB file and was advised in writing (Exhibit G-8) that it was that of an AU-3 level.

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Decision Page 10 Only then did he seek out his supervisor and advise him to that effect. He formally requested acting pay in his memorandum to his supervisor who finally replied on May 21, 1997. Mr. Gray, once he had a decision of the employer in writing, filed his grievance on May 24, 1997.

Clause 38.10 of the AU collective agreement prescribes that an employee may present a grievance not later than the twenty-fifth day after the date on which he was notified orally or in writing or on which he first becomes aware of the action or circumstances giving rise to the grievance.