Nortel Faces Lawsuit Over Changes to Pension Plan

In June of 2006, Nortel announced it would move employees that were in the defined benefit (DB) plans to defined contribution programs. The changes went into effect at the beginning of this year.

“The classes cover employees with 20 or more years of service,” says Steve Levitt, an associate with Nelligan O’Brien Payne. “And it’s our position that for individuals with that length of service or more are entitled to receive more notice than the notice that was given.”

Members of the DB plan would be eligible to stay in the plan and grandfathered if as of Dec. 31, 2007 they were at least age 55 with at least 70 points (age plus service), at least age 60 regardless of service, or have at least 30 years of service regardless of age.

“People who met those criteria were fine. It was individuals who did not meet those criteria that this class action is about and who also had lengthy service with Nortel,” he says. “There a lot of people who were in their late 40s or mid-50s who wouldn’t meet those criteria but still have lengthy service with Nortel and had made a lot of retirement planning decisions based upon being able to access that pension benefit.”

There are other issues in the class action as well, Levitt explains. For example, Nortel told employees it will not take into account future salary increases beyond Jan. 1, 2008 when calculating the value of the pension benefits. He says “we think that’s incorrect.”

However, the telecom equipment company says the “changes to the pension program were designed to bring the company in line with many other comparable companies, while ensuring we still offer a competitive pension plan and overall benefits program,” according to a statement from Nortel. “As we have just become aware of this action, we have no further comment at this time.”

Levitt says another issue in the lawsuit is that some employees were given short notice regarding the termination of retiree benefits. In a press release dated June 27, 2006, Nortel said that “current post-retirement healthcare benefits will be eliminated for employees who are not age 50 with five years of service on July 1, 2006.”

In order to proceed as a class action, the case must be certified by the Ontario Superior Court of Justice. The precise number of employees in the class and the procedure for handling claims by individual employees will be determined in the certification process.

To read the statement of claim on Nelligan O’Brien Payne’s website, click here.

To comment on this story, email craig.sebastiano@rci.rogers.com.