A recent Ontario Divisional Court ruling serves as a caution that employers’ prior conduct may prohibit them from amending pension plans even when the collective agreement clearly allows them to do so.
“The takeaway from the decision is that employers’ discretion to amend plans will always be subject to labour law principles in cases that engage a collective agreement,” says Ari Kaplan, an arbitrator, mediator and counsel at Kaplan Law in Toronto who wasn’t involved in the case.
In this case, the parties were Nova Chemicals Canada Ltd. and Unifor Local 914. The union grieved when Nova announced it would freeze the defined benefit component of the pension plan from December 2021 to the expiry of the collective agreement in March 2023.
The arbitrator ruled the collective agreement gave Nova the authority to make the change, but the company was estopped from doing so until the current agreement expired because Nova had earlier represented to maintain the plan until the retirement of the members who decided to remain in the DB plan. The arbitrator also found the union detrimentally relied on Nova’s representations about the continuation of the plan. Nova sought judicial review from the divisional court, but it refused to interfere with the arbitrator’s decision.
“The arbitrator found that there was a clear representation by the applicant in September 1999 to employees, including two witnesses for the union, by a member of the applicant’s human resources staff,” stated the court. “This was made at the time that the employees were being asked to opt to continue in the DB component of the plan or to move to the defined contribution component. The union witnesses testified that they were told that if they chose the DB plan, they would stay in that plan until they retired.”
Equally significant was the fact that since the representation was made, the terms of the pension plan hadn’t been the subject of collective bargaining, which would’ve given the union an opportunity to negotiate protections around the plan.
“The fact is that [the union’s executive] made decisions on behalf of the union in the prior three rounds of collective bargaining and assumed, reasonably based on the promises made in the 1999 meeting as well as the continuation of the DB plan, that there were no pending changes to the DB plan in this current term of the collective agreement,” stated the court. “I accept [the union’s] evidence that had the company raised the issue, the union would have pursued the issue more forcefully in collective bargaining.”
Simon Archer, a pensions and labour law partner at Goldblatt Partners LLP who also wasn’t involved in the case, says not all remarks concerning the application or interpretation of an agreement amount to a “representation.”
“Mere casual remarks do not attract the doctrine of estoppel. The court made it clear that the representation must be clear and unequivocal, that it was intended to and did affect the parties’ legal relations, that the party receiving the communication relied on it by doing or not doing something and would have acted otherwise but for the representation and that the reliance is detrimental because the situation cannot be restored to what it was when the representation was made.”
However, it’s of some significance that the arbitrator prohibited the company from amending the plan only until expiry of the current collective agreement. “That’s the way it should be because collective bargaining is the place where these types of issues should be addressed,” says Archer.