Quebec Court of Appeal Decision on Pension and Benefits Plans

This past May 27, the Quebec Court of Appeal rendered its judgment in the matter of Groupe Pages Jaunes Cie¹, a decision that is of interest for companies that offer their employees a benefits plan or a pension plan.

In that matter, because of various constraints, the employer was forced to implement a new benefits plan for its employees. A “defined contribution” category was also created with respect to the existing pension plan, for employees hired as of January 1, 2006. Employees hired before that date continued to be entitled to “defined benefits” under that plan.

The union filed two grievances contesting these changes. The union argued, inter alia, that the changes were in violation of an agreement letter concluded with the employer whereby certain benefits were to be maintained.

Two other arguments put forward by the union are worth noting.

First, the union argued that the changes made by the employer contravened sections 10, 16 and 19 of the Quebec Charter of Human Rights and Freedoms. It argued that the changes created a difference in treatment based on age as, in the union’s view, they had a negative impact on younger employees.

This argument was dismissed by grievance arbitrator, M^tre Harvey Frumkin. It was also dismissed on judicial review by the Quebec Superior Court, and subsequently by the Court of Appeal.

The union’s evidence in support of this argument was found to be clearly insufficient. The union had merely referred to an observation in an expert’s report to the effect that the more recently hired employees were generally younger. According to the Court of Appeal, the fact that the newer employees were potentially younger did not establish on a balance of probabilities that age-based discrimination had occurred².

The union also argued that the changes made by the employer to the pension and benefits plans contravened section 87.1 of the Labour Standards Act (the “LSA”) which prohibits what are commonly termed “orphan clauses”.

This argument was also dismissed by the arbitrator, by the Superior Court and, on May 27, by the Court of Appeal. It is important to remember that section 87.1 LSA only applies in certain specific circumstances where the criteria thereunder are met. In order for a difference in treatment to be prohibited, it must in particular be based solely on the date of hiring and concern certain specifically identified labour standards, rather than any given condition of employment.

The union argued that the pension and benefits plans should be considered “salary”, and would be one of the labour standards targeted by section 87.1 of the LSA. The arbitrator dismissed that argument.

The Court of Appeal, after reviewing the other provisions of the LSA in order to determine the scheme of the statute as a whole, and after taking into consideration the parliamentary debates on this very question, concurred with the arbitrator. According to the Court, it is reasonable to conclude that the labour standard pertaining to “salary” for the purposes of section 87.1 LSA concerns to remuneration paid in the form of money, and does not encompass other benefits that have monetary value, such as fringe benefits and pension plan entitlements.

Langlois Kronström Desjardins lawyers Nicola Di Iorio and Geneviève Beaudin successfully represented Groupe Pages Jaunes Cie in this matter.