Stephen Bernardo’s Toronto law office has been fielding calls from employers across Ontario as a result of the dismissal of a union grievance against St. Mary’s Cement. The decision allows the company to unilaterally change its pension structure from a defined-benefit plan to a defined-contribution plan.
Bernardo, a labour relations lawyer with Mathews, Dinsdale and Clark LLP, calls it a precedent- setting case.
“It's amazing, really, when you think of the potential consequences of this decision,” he said, “especially in a depressed economy where employers are looking for savings and predictability.”
At issue was a decision by St. Mary’s in the fall of 2008 to switch to a defined-contribution plan, effective January 2009. The defined benefit plan had been in place since the late 1960s.
United Steelworkers Local 9235 argued the pension plan forms part of the collective agreement, thus securing a “defined-benefit promise,” which St. Mary’s could not change without the union’s consent.
The company’s counter-argument hinged on Section 15.0 of the pension plan which states: “The Company … reserves the right to amend the Plan or discontinue the Plan either in whole or in part at any time,” according to the decision.
“The unions never read the fine print,” said Bernardo. “In the broader significance, many pension plans across Canada are older plans and virtually all have a clause allowing the employer the right to amend or even cancel the plan.”
Arbitrator Ian Hunter concluded that since the pension plan formed part of the collective agreement, the amendment power contained within the pension plan — Section 15.0 — also formed part of the collective agreement. In his decision, Hunter found “there is no ambiguity, latent or patent” in the collective agreement, and no language restricting this right.
Bernardo said unions have traditionally fought to incorporate pension plans into collective agreements so that if an issue arose — such as the one with St. Mary’s Cement — it could be referred to binding arbitration.
He said this decision proves that assumption wrong.
“When incorporating the pension plan into the collective agreement, everything is incorporated into the pension plan — including the clause that gives the company the right to unilaterally change the pension plan,” he said.
Bernardo expects this decision to have far-reaching consequences.
“The natural assumption has been that employers couldn’t unilaterally amend the pension structure from a defined-benefit to a defined-contribution,” he said. “It took an employer who was determined to regulate its costs to take a hard look at the plan and get legal advice.”
Bernardo said he has been contacted by lawyers representing several companies in a similar situation. He said many have held back from challenging the decision in recent years because they felt the cost of challenging the pension plan was too much, both financially and emotionally in terms of harmed relationships.
He calls St. Mary’s recently introduced defined-contribution plan “generous” and more manageable for the company.
“Their goal was to be able to predict their costs on an on-going basis,” he said. “You can only do that with a defined-contribution plan.”
No one from the United Steelworkers was available to comment. However, at the hearing, the union expressed displeasure with the way St. Mary’s introduced the change.
In July 2008, immediately prior to collective bargaining, the company advised the union of its intentions to convert the plan from defined-benefit to defined-contribution. The union voted 98 per cent in favour of a strike.
A month later, a new collective agreement was ratified with the provisions dealing with the pension plan remaining unchanged from the previous agreement but the union failed to get St. Mary’s to agree to maintain a defined-benefit plan. The union filed the grievance shortly thereafter.
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