In recent years, the costs of post-retirement benefits have been a growing concern for corporations. According to a 2008 Mercer survey, one-third of respondents had reduced the level of their post-retirement benefits, while 21% were planning to do so in the next three years.
Reductions to post-retirement benefits will invariably cause dissatisfaction among retirees. Not surprisingly, various class action suits have been filed across Canada to contest such changes. However, most of these suits have been settled out of court without a ruling on their merits.
The legal issues with respect to changes to post-retirement benefits have recently resurfaced. In Quebec, a retiree of the former Seagram Company is seeking leave to bring a class action on behalf of the former non-unionized employees, contesting changes made to the company’s post-retirement benefits. The changes include an increase in the annual deductible and the introduction of a $15,000 lifetime maximum for all coverage. The retiree is arguing that the employer’s right to amend the benefits is limited to adapting them to legislative changes and does not entitle the employer to unilaterally reduce the retirees’ benefits. The hearing on this motion was held in February, and the matter was taken under advisement.
Outside of Quebec, the Supreme Court of Newfoundland and Labrador and the Ontario Superior Court of Justice recently handed down decisions on motions for class actions that involved changes to post-retirement benefits.
In the case of Acreman v. Memorial University of Newfoundland, the Supreme Court of Newfoundland and Labrador allowed a class action contesting an amendment to post-retirement benefits. The cost of the plan was initially shared 50/50 between the employer and the retirees. Starting in 1978, the plan was offered to retirees at no cost to them—their portion was subsidized with payments from a trust fund originating from refunds made by the former insurance carrier. Upon depletion of the trust funds, the employer decided to gradually reinstate the original 50/50 cost-sharing formula.
The Court allowed the retirees to institute a class action against the employer. The fact that there were likely four subgroups of retirees within the class (based on different representations made to them by the employer) was not a sufficient obstacle to proceeding with the suit. According to the court, the members of the group are “bound by one common bond; that is, they did receive benefits at no cost to them.”