Laid off Employees Entitled to Partial Windup of Pension

Thomas Claridge for The Lawyers Weekly

January 22, 2010

The Ontario Court of Appeal has upheld decisions of a tribunal and Ontario's Divisional Court that 73 former middle-management Ontario Hydro employees who were laid off in 2002 following the utility's government-ordered breakup could obtain a partial windup of a pension plan covering all Hydro One employees.

At issue in the litigation was Section 69(1)(d) of Ontario's Pension Benefits Act, which allows the Superintendent of Financial Services to require a full or partial windup of a pension plan if "a significant number of members of the pension plan cease to be employed by the employer as a result of the discontinuance of all or part of the business of the employer or as a result of the re-organization of the business of the employer."

The 73 employees' bid for the partial windup was rejected by the superintendent, who found their number was not significant "in the context of an active Plan membership of approximately 4,000."

But in overturning his decision and directing the partial windup, the province's Financial Services Tribunal noted the 73 were among only 379 who were covered under a Management Compensation Plan and were "unprotected by [...] collective agreements."

The tribunal held that in such cases it was permissible "to segregate a category of employees from the total membership of a plan, and judge the significance of the number of employees within the segregated category who have ceased to be employed [...] by comparing that number to the total number of members in that category."

In rejecting Hydro One's appeal, three Divisional Court judges held last year that the tribunal's conclusion that s. 69(1)(d) permitted such a subset analysis was "correct in law" and "consistent with the context in which s. 69 appears, the language employed by the Legislature, and the scheme and purpose of the [Act]." They ruled that the tribunal's application of the Act to the facts of this case and its consideration of Hydro One's collective agreement with the Society of Energy Professionals were reasonable.

Writing for the appeal court, Justice Eleanore Cronk agreed with the Divisional Court both as to the applicable standards of review and its subset analysis, but cautioned that "resort to this type of analysis will not be reasonable in every case."

Noting that "significant" was not defined in the Act, she saw use of such an "inherently imprecise" term as "a strong indication of a legislative intent that the significance inquiry mandated by s. 69(1)(d) be a flexible and context-specific assessment," which gave the superintendent "considerable latitude to assess the materiality of the number of employee terminations, having regard to the full circumstances surrounding the reorganization and the pension plan at issue."

Justice Cronk also held that the purpose of the Act as a whole, and s. 69(1)(d) in particular, "are best fostered by an interpretation of s. 69(1)(d) that allows for flexibility in the means chosen to determine significance under that provision, based on the context in which the significance inquiry arises."

As for the Act's purpose, she noted the Supreme Court in Monsanto Canada Inc. v. Ontario (Superintendent of Financial Services), [2004] 3 S.C.R. 152 had cited GenCorp Canada Inc. v. Ontario (Superintendent, Pensions) (1998), 158 D.L.R. (4th) 497, in which the Ontario Court of Appeal termed it "clearly public policy legislation establishing a carefully calibrated legislative and regulatory scheme prescribing minimum standards for all pension plans in Ontario. It is intended to benefit and protect the interests of members and former members of pension plans, and 'evinces a special solicitude for employees affected by plant closures.' "

She said Monsanto "confirms that the Act has a 'protectionist aim' and that it embodies 'a complex administrative scheme, which strives to strike a delicate balance between the interests of employers and employees, while advancing the public interest in a thriving pension plan system."

Justice Cronk said a proper reading of s. 69(1) "requires that the trigger for a wind-up order be an event that endangers the continued availability of pension benefits for a material number of plan members, assessed in the context of the applicable pension plan."

She found that a partial wind-up may be ordered under s. 69(1)(f) "where part of an employer's business or assets is disposed of and the person who acquires the property fails to provide a pension plan for the members of the former employer's pension plan. In these circumstances, there is no requirement that the plan as a whole be at risk before a partial wind-up may be ordered."

The provision was "concerned with protecting the retirement income security of those members of a pension plan whose employment ceases in such circumstances, thus ending their participation in the pension plan. The materiality of the number of affected plan members is case-specific."

The 73 plan members were represented by Howard Goldblatt and Dona Campbell of Toronto's Sack Goldblatt Mitchell LLP.

Christopher Riggs and Lisa Mills of Hicks Morley represented the appellant, while Deborah McPhail of the Financial Services Commission of Ontario acted for the Superintendent of Financial Services, Andrew Larkin and Emily Lawrence of Toronto's Paliare Roland for the Power Workers' Union and Michael Wright and Jo-Anne Pickel of Cavalluzzo Hayes Shilton McIntyre & Cornish for the Society of Energy Professionals.

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