Many Canadians imagine their retirement to be a time for relaxation. The Pension Coalition NB, however, is heading into the courtroom to fight for the golden years.
The grassroots group — representing 13,000 public service retirees in New Brunswick — is taking the province to court in a fight for their cost of living benefits.
In December 2013, the government voted to pass pension reforms in an effort to address a $1-billion deficit. The legislation — tabled by finance minister Blaine Higgs — brings about 30,000 current and former public service employees under a new shared-risk model.
Previously, cost of living increases were automatic after retirement. But under the new model, they are conditional on plan performance. Moving forward, if the funding level of the shared-risk pension plan does not allow for full or partial cost of living increases to be granted in a given year, the increases are carried forward to future years and will be paid when the plan is in surplus.
According to Herb John, president of the National Pensioners Federation, the move could set a dangerous precedent.
"To take pensions or benefits away from people who have already retired is an absolute breach of public trust," John said. "When somebody retires it’s totally unfair to change the rules of the game after the fact. After people retire their ability to generate income is either non-existent or minimal, at best, so the only protection they have against inflation is a cost of living increase."
Thousands of pensioners felt the same way, organizing protests and eventually forming Pension Coalition NB.
On June 30, Ari Kaplan — a partner at the Toronto-based Koskie Minsky LLP and the lawyer representing the pension coalition — filed an application against the province.
"Any employer that revokes a contract is subject to a lawsuit for damages," Kaplan said. "In this case, the employer is the government. A private employer does not have the right to reduce pensions, whereas a government can pass legislation. So the legislation did what no private employer can do contractually."
The Pension Plan for Certain Bargaining Employees of New Brunswick Hospitals, the Pension Plan for Canadian Union of Public Employees of N.B. Hospitals, the Members’ Pension Act, the Members’ Superannuation Act and the New Brunswick Pipes Trades
Pension Plan were all affected by the changes.
Constitutional right to collective bargaining
In addition to revoking the cost of living increase, Kaplan said, the government simultaneously insulated itself from any lawsuit to seek damages for the unlawful breach of contract.
"The Canadian constitution recognizes a constitutional right to collective bargaining, and in this case the government excluded all collective bargaining on this subject and legislated away the benefit," Kaplan said.
"We’re asking for the court to recognize there’s a constitutional right of an older person to a security for their livelihood as they plan and budget for the end of their lives by preventing an arbitrary and unilateral reduction in their benefits."
The case was heard in a Fredericton courtroom on Sept. 29, where the province’s lawyer Steve Hutchinson argued the pensioners launched inappropriate legal action by filing an application. Unlike a legal action, an application relies solely on affidavits and an agreed statement of facts.
According to Hutchinson, there is no agreement between the two parties on a statement of facts. The judge was asked to dismiss the case.
Instead, the judge reserved his decision and a ruling is expected within the next few months.
In the interim, many pensioners and current public service employees hope the newly elected Liberal government will take a different approach.
"I think what the government’s trying to do is eliminate the case entirely or drag it out even longer" said Steve Hindle, vice-president for the Professional Institute of the Public Service of Canada (PIPSC). "The Liberals, under Brian Gallant, did say during the campaign that they think people got a raw deal and they would like to invite people back to the table to have a discussion about what would be appropriate in terms of changes to the pension plan."
PIPSC represents approximately 1,300 provincial and federal employees in the province. And with some 55,000 members across Canada’s public sector, the union is very aware that many outside New Brunswick are keeping just as close an eye on the case.
For instance, the government of Quebec is considering changing its municipal defined benefit pension plans to a shared-risk structure while the federal government has also shown an interest in a shared-risk pension plan.
The shared-risk model in New Brunswick falls under the broader category of pension reform called a Target Benefit Plan. A modified form of the defined benefit plan, the target benefit plan allows reductions in earned benefits that are applied retroactively.
"This case could be helpful for other governments to know what the constitutional limits are on passing legislation that would allow a private employer or a public employer to revoke an earned pension benefit, especially when the pension is in the process of being paid," Kaplan said. "We’re not talking about active employees here. We’re talking about people that have already finished their employment and are retired."
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