Different Pension and Benefit Plans Depending on Employees’ Hiring Date – a Convincing Victory for Langlois Lawyers at the Supreme Court of Canada!

In an article published in June 2015, we canvassed the decision rendered by the Quebec Court of Appeal in the matter of Yellow Pages Group Co.¹, which dealt with the possibility for an employer to offer its employees different pension and benefit plans depending on their date of hire.

That decision is now final, as in February the Supreme Court of Canada dismissed the application for leave to appeal filed by the union involved.

By way of background, when Yellow Pages Group was spun off from Bell Canada, it had to create its own new benefits plan. A “defined contribution” category was also created with respect to the existing pension plan, for new employees hired as of January 1, 2006. All employees hired before that date were allowed to remain in the existing “defined benefit” category of the pension plan.

These modifications were contested by the union, which filed grievances maintaining that the new plan contravened not only a letter of understanding between the union and the company, but also Quebec’s Charter of Human Rights and Freedoms (the “Charter”) and section 87.1 of the Labour Standards Act (the “LSA”), which prohibits differences in treatment based on an employee’s date of hire.

While the union’s arguments based on the letter of understanding are of little general interest, based as they are on the specific wording of that document, the opposite is true of its arguments involving the Charter and the LSA. Those arguments, and the reasons for rejecting them by the grievance arbitrator, the Quebec Superior Court and the Court of Appeal in their respective decisions, are of interest to any employer offering a pension and/or benefits plan to its employees.

Both of the union’s arguments were rejected at all decisional levels. The denial of leave to appeal by the Supreme Court puts a definitive end to the issues in question.

The union had argued before grievance arbitrator Harvey Frumkin that the new pension and benefit plan contravened sections 10, 16 and 19 of the Charter, as it effectively created a disparity based on age. The union maintained that the new plan had a negative impact on younger employees, which was contested by the employer on the basis of expert evidence.

The union’s Charter-based argument was rejected by the arbitrator, as the evidence led in support of it was patently insufficient. The union had merely referred to a sentence in an expert’s report to the effect that newer employees tended to be younger. The courts also rejected the union’s contention in this regard. In the Court of Appeal’s view, the fact that new employees tend to be younger is not preponderant proof of discrimination based on age (par. 78).

The union’s argument to the effect that the change made by the employer to the company pension and benefits plan contravened section 87.1 of the LSA, which prohibits discrimination based on date of hire, was also rejected at all decisional levels.

The prohibition in section 87.1 on differences in treatment based on an employee’s hiring date does not apply to all conditions of employment without exception. The prohibition only applies in certain specific circumstances, when all the criteria referred to in section 87.1 are met. In order for a difference in treatment to be prohibited, it must be based solely on the hiring date and pertain to certain specifically identified labour standards.

In this case the union maintained that pension and benefit plans should be considered “wages”, which is one of the labour standards referred to in section 87.1. This interpretation was rejected by both the arbitrator and the courts.

According to the Court of Appeal, it is reasonable to conclude that the labour standard of “wages” means, for the purposes of section 87.1, wages paid in currency, and does not include benefits having a pecuniary value, such as pensions and other benefits.

In reaching this conclusion, the Court of Appeal took into account all the provisions of the LSA in order to ensure coherence, as some of those provisions contradicted the argument made by the union.

In addition, the Court of Appeal took into account the parliamentary debates on section 87.1, during which the possibility of the provision applying to pension and benefit plans was debated. After considering the positions of various experts in this field, the Quebec legislature ultimately decided to exclude such plans from the ambit of section 87.1 LSA.

The Yellow Pages matter thus confirms the possibility for employers in Quebec to offer different pension and benefit plans to employees depending on their date of hire without contravening the Labour Standards Act. 

Nicola Di Iorio and Geneviève Beaudin of Langlois Lawyers LLP successfully represented Yellow Pages in this matter.