Quebec’s Bid to Reform Municipal Pension Plans Will Have to Wait for the Superior Court to Determine the Validity of Bill 15

On June 1, 2016, arbitrator Claude Martin rendered a highly anticipated decision in the area of municipal pension plans, in the matter of Ville de Montréal and Fraternité des policiers et policières de Montréal.¹

The arbitrator essentially concluded that a statutorily mandated arbitration between the City of Montreal and the union representing its police officers (the “Brotherhood”) should be suspended pending a decision by the Quebec Superior Court on the constitutionality of the Act to foster the financial health and sustainability of municipal defined benefit pension plans (“Bill 15”, formerly referred to as Bill 3).

Bill 15

One of the objectives of Bill 15 is to ensure the sharing in equal measure by plan participants and municipalities of costs and any deficits for service after December 31, 2013.

Following the adoption of Bill 15 on December 4, 2014, each municipality was required to negotiate an agreement on amendments to its pension plan with all active plan members. If no agreement is reached, Bill 15 provides that an arbitrator must be appointed to resolve the impasse, which proved to be necessary in the case of many municipalities.

Those were the circumstances in which lawyer Claude Martin was appointed as the arbitrator in the City of Montreal case. The Brotherhood thereupon petitioned the tribunal to suspend the arbitration pending the Superior Court’s ruling on a number of legal actions brought by several municipal unions regarding the validity of Bill 15 and whether or not their pension plans were even subject to it.

The parties’ positions

The arguments raised by the Brotherhood to suspend the arbitration included the following:

• there is an obvious connection between the actions pending before the Superior Court and the debate that would ensue before the arbitrator;
• failure to suspend the arbitration would result in a needless plurality of proceedings and unwarranted costs;
• failure to suspend the arbitration would increase the likelihood of contradictory judgments;
• the outcome of the arbitration depends to a great extent on the Superior Court’s decision on the actions brought by the various unions;
• suspending the arbitration would be in keeping with the proportionality rule and the objectives of the proper administration of justice.²

The Brotherhood also argued that the arbitrator’s jurisdiction was necessarily limited to examining the constitutional issues in the narrow context of a single dispute, whereas the Superior Court will have to decide on all the actions contesting Bill 15 that have been brought by several municipal unions.

The City’s arguments were essentially the following:

• the arbitrator does not have the power to stay the arbitration proceedings; 

• in the alternative, the grounds put forward by the Brotherhood are not those on which the arbitrator should base his decision.

In his decision, the arbitrator summarized the arguments of an intervenor in the proceedings, Quebec’s Attorney General, who essentially argued the following:

• the arbitration mandated by Bill 15 was not really a “dispute arbitration”, as its purpose was not to resolve a dispute between the parties but to find a solution if the parties are not able to agree on changes to a pension plan;
• the Brotherhood’s request was tantamount to a motion to suspend the application of Bill 15, which only the Superior Court can do;
• in the alternative, the criteria for ordering a stay have not been met.

In light of all the foregoing arguments, the arbitrator concluded that the following two fundamental questions first had to be answered: does an arbitrator appointed under Bill 15 have the power to order the suspension sought by the Brotherhood, and if so on what conditions?

How the arbitrator answered those questions

To answer those questions, the arbitrator followed these analytical steps:

• His role as a tribunal:   

He determined that he was acting as a statutory tribunal exercising an adjudicative function in order to resolve a dispute between the parties. A grievance arbitrator, a dispute arbitrator and a statutory arbitrator all have similar roles, but the structure of the provisions assigning the arbitrator his or her powers and jurisdiction under Bill 15 is distinct.

• His power to decide on a question of law:

The arbitrator reached the conclusion that Bill 15 did not expressly give him the power to decide a question of law, but rather gave him a specific and limited mission which he defined as being to decide on the restructuring of a pension plan so that it satisfies the legislative norms and requirements, given that the parties have been unable to reach an agreement to amend the plan, despite negotiations entered into and carried on pursuant to Division I of Chapter IV of the Act.³

• His jurisdiction over constitutional law questions:

He stated that Bill 15 does not allow him to decide constitutional law questions.⁴

• His jurisdiction over whether the union’s pension plan is subject to Bill 15 or whether Bill 15 is valid:

He agreed with the Attorney General’s argument to the effect that he does not have such jurisdiction.⁵

• His discretionary power to order the suspension of the arbitration until the Superior Court has determined whether or not the impugned provisions of Bill 15 are valid:

In this regard the arbitrator applied the test developed by the Supreme Court of Canada in Metropolitan Stores.⁶ It should be pointed out that for the purposes of rendering his decision the arbitrator had the benefit of only a limited number of exhibits filed by the Brotherhood. The parties called no witnesses and filed no affidavits in support of their arguments.⁷

The arbitrator first of all concluded that the matter before him raised serious issues directly related to the actions before the Superior Court. He was of the view however that the Brotherhood would not suffer serious or irreparable harm were the suspension not ordered. The Brotherhood raised fears that were legitimate but groundless, such as those concerning the solvency or funded status of the plan. The arbitrator nevertheless concluded that the arbitration could result in serious harm or could give rise to a state of fact or law that could not be remedied if the arbitrator’s decision was issued before a final judgment is rendered in the cases before the Superior Court. Finally, the balance of convenience would favour the Brotherhood.⁸

In light of all of the foregoing, the arbitrator ultimately concluded that the exceptional circumstances of the matter justified the suspension of the arbitration until a decision is rendered by the Superior Court on the constitutionality of Bill 15 and whether the Brotherhood’s pension plan is even subject to it.

Impact of the decision

With this decision, arbitrator Martin has paved the way for other municipalities that are also engaged in the arbitration process under Bill 15. However, the decision could result in a flurry of activity, as the parties have only 30 days to apply for judicial review before the Superior Court on a jurisdictional question (s. 49 of Bill 15).

If this decision is not judicially reviewed, the debate surrounding municipal pension plans will become focused solely on the pending judgment of the Superior Court, which will inevitably decide on the issues of the constitutionality of Bill 15 and whether or not municipal pension plans, including that of the Brotherhood, are even subject to it.

One thing is certain – the outcome of these proceedings will have a major impact on labour relations in the municipal arena.