May 7, 2008
41.4.18
Background
The employee grieved the department's decision not to reimburse the mortgage breaking penalties from the Core Fund, as per the NJC Integrated Relocation Directive paragraph 8.10 Mortgage Breaking Penalties.
Bargaining Agent Presentation
The Bargaining Agent representative stated that the employee and his family resided in City A at the time he accepted the offer of employment in City B. That as a result of his spouse securing an employment in City B in August 2005, he decided to move his family permanently to City B, enrol his children in schools in the same area and list his home in City A as per the Royal Lepage's Market Value appraisal provided on August 16, 2005.
She explained that the employee purchased his home in City B on September 23, 2005 and that in October 2005; an offer was received and rejected for the house in City A as the offered price was significantly lower than the asking price. As such, a document was produced by the employee's real estate agent on January 20, 2006, stipulating that, although the house was listed at the appropriate price, the market had simply taken a downturn. Another offer was accepted in January 2006 and the sale was closed on February 11, 2006. However, having disposed of his home prior to the agreed upon term of his mortgage, the employee was imposed a $1,725.00 penalty by his financial institution for which he requested reimbursement from his employer on February 14, 2006, in accordance with Article 8.10 of the (NJC) Integrated Relocation Directive.
The Bargaining Agent representative reported that the Treasury Board Secretariat's representative responsible for relocation advised on March 30, 2006 that, as the employee had the option of porting his mortgage once his home in City A had sold, the penalty would only be reimbursed from the employee's Personalized Funds. Therefore his request to have the penalty reimbursed as a Core Fund expense was turned down.
The Bargaining Agent representative based her argument mainly on Sections 1.2 (Purpose and Scope) as it states that the aim of the Relocation Program ”shall be to relocate an employee in the most efficient fashion, at the most reasonable cost to the public while having a minimum detrimental effect on the employee and family and on departmental operations.” and article 8.10 of the Directive.
The Bargaining Agent representative maintained that the grievor should have been reimbursed under the Core Fund in light of unforeseen circumstances. Such as, the unexpected downturn in the housing market in City A, his spouse's employment offer in City B, the necessity to find appropriate and permanent schooling for his three children and his start date not being negotiable. The representative claimed the grievor did not have any other option than to buy a house in City B and keep the house in City A on the market. Due to this situation, the grievor could not port his mortgage to his house in City B, since the financial institution only offered this option if the house in City A was sold and closed before he bought the home. She claimed that contrary to the stipulation in the Personalized Funds clause, the grievor did not intentionally decide not to port his existing mortgage to the new home in City A.
The representative maintained that it would be inappropriate to conclude that the grievor and his family ought to have settled in temporary accommodation pending the sale of the house in City A. This would have caused additional expenses to be incurred, such as costs for temporary accommodation, weekend travel home every two (2) weeks, storage of their belongings or commuting assistance; and other associated expenses. Furthermore, the grievor would not have had the benefit of enrolling his children in permanent schooling, and may have needed to move the children to another school in the middle of the school year, which, she claimed, would have been complicated, inconvenient, disruptive and therefore unfair and unreasonable. As such, this would not have met the principle of efficiency at the ”most reasonable cost” (Article 1.2.1).
In requesting the reimbursement of the mortgage penalty imposed by the financial institution, the grievor is not seeking to upgrade his financial position. The representative maintained that the grievor should not be penalized as a result of purchasing a home in City B, as at no time was he advised that this would cause him to incur additional expenses. She reiterated that the grievor acted reasonably, fairly and in good faith.
Departmental Presentation
The Departmental representative outlined that although the employee was informed by Royal Lepage that he could not port (transferral of a mortgage from one property to another) his mortgage to the new property until his existing residence was sold and closed, he chose to purchase a residence in City B. The grievor proceeded with the move prior to selling his home in City A, which obligated the grievor to obtain a new mortgage for the home in City B. As such, the employee was correctly deemed not to be entitled to the provisions of section 8.10 of the IRD as it specifies that payment from the Core Component is only permitted when a relocating employee purchasing at a new location cannot port his/her mortgage.
The Departmental representative stated that, in accordance with Section 8.6 of the IRD (Funding Overview), the employee's penalty payment for breaking his mortgage was funded from his Personalized Component. Although the grievor did not port the mortgage when this was an option, he was nevertheless entitled to fund this expense from the Personalized Funds in the amount of up to three months' interest, or $5,000, whichever is less. Accordingly, the employee has not, in fact, suffered any ‘'out of pocket'' expense as a result of his decision to not port the mortgage. The cost of the penalty was paid by funds provided by the employer.
The department confirmed with the Treasury Board Project Authority that it had properly interpreted the IRD in the matter of the employee's relocation. Further, the department's National Coordinator for the IRD reviewed the circumstances in this case in accordance with section 2.2.1.7 and determined that as the employee had chosen not to port his mortgage, the IRD could not provide for payment from the Core Fund as it is not the intent of the IRD to re-fund to relocating employees the cost of charges resulting from personal decisions they may make while fully aware of the financial consequences.
Section 3.2 of the IRD relates to the Core and Personalized Components and states that Core entitlements available to employees who are relocated include those basic provisions covering the reimbursement of eligible expenses, such as real estate commissions and legal fees, which are directly reimbursed by the employer via its Third Party Service Provider and includes some enhancements such as relocation planning and destination services. Core entitlements within described parameters are 100% funded by the department unless specifically stated otherwise. The Personalized Component funds items that can be reimbursed, up to the value calculated from "savings" or incentives generated/earned from the Core Component provisions, the relocation allowances (if applicable) and non-accountable allowances. The employer provides the funds for a relocating employee's Personalized Component. Once the relocating employee has these funds, they may or may not be used to enhance his/her move. Employees have the final decision on how Personalized Component funds are expended.
The Personalized Component can be supplemented from the Core Component, as employees who choose not to avail themselves of certain core provisions can use the ‘'savings'‘ to fund other items, such as the mortgage fees. In accordance with section 3.4.2.2 of the IRD (Core Benefit Transfer Savings), employees may increase their Personalized funding envelope by realizing savings in several ways, such as opting for not selling the former principal residence, reducing long-term storage costs, reducing the length and cost of a House Hunting Trip, or shipping below the threshold.
Executive Committee Decision
The Executive Committee considered and agreed with the report of the Relocation Committee which concluded that the grievor was not treated within the intent of the Integrated Relocation Directive (IRD) with respect to mortgage breaking penalties (8.10).
The Committee considered the circumstances in this case which included the non negotiable start date at new position and considerations for his childrens' schooling. The guiding principles of the Directive were also taken into account, particularly: flexibility, value and respect.
As such, the grievance was upheld and the grievor should be reimbursed under the core fund provisions.