Windup joys

In the Hydro One decision, the Court recognized that deference should be extended to the FST in cases where the FST is interpreting a pension plan document. In its interpretation of plan documents, the FST is generally held to a “reasonableness” standard, recognizing that there may be a small variation in reasonable interpretations of a provision, and provides that it will be upheld so long as the decision falls within that reasonable range. But the Court declined to extend deference to the FST’s interpretation of the Pension Benefits Act (PBA), meaning that the FST has to be “correct” in its interpretation of the PBA.

The subset approach
Under Section 69 of the PBA, a partial windup may be ordered when a significant number of plan members cease to be employed due to a business reorganization. The question in the Hydro One case was how to interpret the word “significant.” In most previous cases, it was interpreted to mean either a large absolute number or a number in relation to the total plan membership.

Non-union members of Hydro One argued that significance should be assessed with reference to the size of the non-unionized group, not the total plan membership. The FST agreed, arguing that the non-unionized employees were not covered by a collective agreement and were not able to negotiate the reorganization terms. The FST held that it ought to defer to the results of collective bargaining for the unionized workers but that its protective mandate required that it consider the status of the non-unionized members affected by the reorganization.

While the Court held that the subset approach to interpreting the PBA had to be tested against the standard of correctness, overall, it endorsed the FST’s decision and reiterated that the partial windup provisions are “concerned with protecting the retirement income security of those members of the pension plan whose employment ceases….”

For your consideration
In applying the subset analysis to any case, the Court should consider the following:
• whether the pension plan distinguishes between different groups of employees;
• whether the plan members whose employment ceased represent an identifiable subset of the employer’s workforce;
• the size of the suggested subset of members in relation to the employer’s overall workforce;
• whether the applicable reorganization affected only specific targeted employees (and if they are a material portion of the membership);
• whether the terminated members represent proportionately older pension plan members nearing retirement;
• whether the terminated members ceased their employment voluntarily or involuntarily;
• whether a partial plan windup in respect of the identified subset of plan members would threaten the continued viability of the employer’s entire pension plan; and
• other circumstances indicating that the pro-posed windup could jeopardize the security of pension benefits for continuing plan members.

In its decision, the Court recognized that Hydro One could have had a separate plan for its non-union members. It also considered that the affected non-unionized employees were generally older members who would benefit from the PBA protections.

While the partial windup provisions of the PBA may be phased out, as per Ontario’s Bill 236, the Hydro One decision will continue to stand as an important precedent confirming the Court’s protective approach toward older, more vulnerable plan members. BC

Murray Gold is a partner with Koskie Minsky LLP in Toronto.
mgold@kmlaw.ca

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© Copyright 2010 Rogers Publishing Ltd. This article first appeared in the March 2010 edition of BENEFITS CANADA magazine.