Ontario’s small claims court has ruled that an employer’s letter, which described the benefits coverage that would exist following a divestment as ‘comparable’ to prior levels of coverage, didn’t create a contractual obligation to preserve past service benefits.
“The decision makes a clear distinction between an informational announcement or other general information that is not an unequivocal promise,” says Randy Bauslaugh, a partner at Bauslaugh Pensions & Benefits Law and who wasn’t involved in the case. “That’s good news for plan administrators who are frequently concerned that statements in plan booklets and announcements could be taken as contractual commitments.”
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More particularly, Deputy Judge Dennis Ong’s reasons in Kreppner v. Ontario noted the absence of any collective or individual agreement dealing with the issue.
“The so-called ‘promise’ to provide a comparable plan didn’t reference the past or preserve the value of accrued [pension] benefits and seemed to be, on the facts of this case, merely predictions or possibilities,” says Bauslaugh.
The case originated with the Ontario government’s 1998 decision to divest the Ministry of Finance’s property assessment function, a move that created the independent Ontario Property Assessment Corp., which eventually became the Municipal Property Assessment Corp.
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Josef Kreppner was a former employee of the ministry and subsequently of MPAC. The divestment ended his membership in the Ontario Public Service Pension Plan when he accepted MPAC’s offer of employment that followed on the divestment, at which point he became a member of the Ontario Municipal Employees Retirement System Primary Pension Plan.
Correspondence from MPAC to employees that preceded the job offers stated that the offers “will entail benefit coverage which is comparable to that which exists today.” But it also stated that “the full details of the terms and conditions of employment will . . . be available to . . . employees in conjunction with the job offers.”
In 2016, following Kreppner’s retirement, the pension administrators advised Kreppner that the split pension resulted in a shortfall that amounted to roughly $220,000. However, Kreppner, who represented himself, wished to bring his case in the small claims court, which has a monetary limit of $35,000. Consequently, he claimed only about $13,500, representing his losses for a single year.
Ong ruled the document that predicted “comparable” benefits was “at best, an information sheet . . . advising employees of what could be happening in the near future,” and nothing more than “a sentiment made extremely early on in the divestment history.” Indeed, the evidence established that the Crown, which did “provide any and all information” regarding the divestment, “could not have possibly known at the time whether divestment would cause an adverse or non-adverse effect to the pensions.”
The upshot, Ong decided, was that no contract had been created and he dismissed Kreppner’s claim. Still, not all experts are convinced that Ong decided the case correctly.
“There’s a great deal of law in the pension context that states that an external misrepresentation in a benefits-related memorandum can rise to the level of a contractual promise,” says Ari Kaplan, an arbitrator, mediator and counsel at Kaplan Law and who wasn’t involved in the case. “And in this case, Judge Ong should not have treated ‘comparable’ as a general comparison of the pensions but should have asked himself what would happen to Kreppner if his pensions were split.”
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