The United Steelworkers (USW) union has won a landmark legal decision forcing an insolvent corporation to honour pension obligations to employees.

The Court of Appeal for Ontario ruled that Indalex Ltd. did not fulfill its fiduciary duties to employees—which include members of United Steelworkers—when the company filed for protection from creditors under the Companies’ Creditors Arrangement Act (CCAA) in 2009.

The ruling will benefit USW members who worked at a former Indalex operation in Quebec, creating a precedence for providing greater benefits to pension plan members in cases of corporate insolvency. In many past cases, employees and pensioners have suffered drastic reductions in their pensions  as corporate assets were distributed first to creditors ranked ahead of pension plans.

“This is a remarkable victory for these workers and pensioners,” said Ken Neumann, the USW’s National Director for Canada. “We hope this ruling sets a precedent to help protect the pensions of many other Canadians and convince our federal government to finally pass legislation to enhance the rights of pension plan members in bankruptcy cases.”

“This decision sends a message that companies must hear very clearly,” said Daniel Roy, United Steelworkers’ Quebec Director. “They cannot disregard or be indifferent to the commitments they have to their workers and pensioners.”

Toronto-based Indalex, an aluminum extrusions manufacturer, wound up its employee pension plan on Dec. 31, 2006. At that time, the plan was underfunded.

In 2009, Indalex filed for CCAA protection and obtained interim financing to continue operations while it sought to sell its assets. Indalex sold substantially all of its assets in a court-approved sale on July 20, 2009.

At the hearing that approved the 2009 sale, the United Steelworkers argued the company should use proceeds of the sale to satisfy pension plan deficiencies. The CCAA judge rejected those arguments, prompting the appeal by the USW and other pension plan members.

In a unanimous ruling issued on April 7, a three-judge panel of the Court of Appeal upheld the USW’s appeal.

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

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