The City of Saskatoon’s failed attempt to unilaterally change the terms of its pension plan has produced an arbitration ruling that will likely make it more difficult for employers to do so going forward.

“The decision expands the law to suggest that past conduct can operate to make a pension plan part of a collective agreement, even when the plan has not been clearly incorporated in the agreement,” says Mitch Frazer, a pensions lawyer with Torys LLP in Toronto.

“And if a plan is part of a collective agreement, it’s a dead stop so far as unilateral action goes.”

Among other things, the changes at issue in Saskatoon (City) v. The Amalgamated Transit Union, Local No. 615 permitted the municipal government to recover its pension administration costs — where were about $250,000 annually — from the plan itself.

Read: Saskatoon transit workers sign new agreement to accept DB pension changes

 The city claimed it could take the unilateral action because the plan wasn’t part of the agreement. The union countered that the plan was indeed part of the collective agreement and that the city was therefore bound to negotiate any changes.

The arbitration panel, in a 2-1 decision, sided with the union earlier this month. William Hood, the panel’s chair, found in his majority decision that the city had violated the collective agreement when it changed the plan.

But whether or not a plan is part of the collective agreement can be a grey area.

“What can happen, for example, is that the pension plan will be part of a side letter to the collective agreement,” says Frazer.

In this case, the enactment of a bylaw in 1964 codified the defined benefit plan at issue. The collective agreement referred to negotiations in Article A21: “Superannuation plan negotiations shall take place from time to time which may be separate from negotiations for the collective agreement.”

Until this grievance arose, there had never been any changes to the plan without the union’s consent. A 1995 report from the city solicitor opined that changes to the plan’s administration required such consent. Throughout, the parties’ pattern of conduct indicated that they understood changes to the plan would be subject to negotiation. By way of example, the parties bargained over contribution rates and changes to the plan for the 2007-09 agreement.

Read: Employers urged to beware litigation risk in converting pension plans

Still, the city argued that absent clear and express language in the collective agreement restricting its right to make unilateral changes, it had every right to do what it did. As the city saw it, the language merely recognized that fact that negotiations over the plan, if they occurred, could take place at a time other than during collective bargaining.

The arbitrator disagreed. In his view, a reading of the collective agreement as a whole made it clear that the plan was part of the agreement and that it prohibited unilateral changes.

“The language is clear, without ambiguity, to the reference to pension plan in the collective agreement and incorporated by reference into the collective agreement,” he wrote. “In summary, the pension plan is intertwined with the collective agreement by this language and incorporated by reference into the collective agreement.”

But the arbitrator also ruled that even if the plan hadn’t been part of the agreement, the conduct of the parties prohibited the city from arguing otherwise.

“in this case, the evidence is sufficient to conclude that for decades the parties were of the mind the pension plan was intertwined with the collective agreement and the collective bargaining process,” he wrote.

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According to Frazer, the arbitrator’s conclusion that past conduct could serve to effectively incorporate a plan into a collective agreement expands the boundaries of the law on the subject.

“The decision pushes the boundaries of what has been a grey area a little bit further into the labour movement’s camp,” he said.

The latest ruling dealt only with the union’s grievance over the city’s move to recover costs from the plan. It also changed contribution rates paid by both it and union members, a matter the ruling noted is subject to another grievance.

Copyright © 2018 Transcontinental Media G.P. Originally published on benefitscanada.com

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