Law Times

Page 8 august 24, 2015 • Law Times www.lawtimesnews.com employers' counsel unhappy with Navistar pension ruling By JuliuS Melnitzer For Law Times he Divisional Court's July 2015 decision in Navistar Canada Inc. v. Superintendent of Financial Services went a long way to resolving the seven-year-old pension saga aris- ing from the company's decision to reorganize in 2008. But employers' counsel aren't all that happy about the ruling that upheld the decision of the Ontario deputy superintendent of financial services requiring Navistar to include certain for- mer employees in the windup group for the company's pen- sion plan. "The decision adds about $14 million to the cost of the pension windup and penalizes companies who are trying to rationalize their workforce dur- ing an economic downturn with the aim of building the work- force back up when the recovery comes," says Jessica Bullock, of Davies Ward Phillips & Vine- berg LLP in Toronto. "It also doubly compensates workers who voluntarily severed their employment by accepting generous severance or early-re- tirement packages by requiring their inclusion in the windup group." Navistar was the sponsor of the company non-contributory re- tirement plan, a defined benefit program cover- ing former employees represented by the Ca- nadian Auto Workers at the company's plant in Chatham, Ont. Navistar began imple- menting a reorganiza- tion strategy in 2008 in which it reduced plant operations with multiple layoffs over the following three years. In July 2011, the com- pany closed the Cha- tham plant. At the time, negotiations for a closure arrangement supplanted talks aimed at renewing a collective agreement that had expired in June 2009. Although the parties resolved many matters, disputes over pensions and severance pay pre- vented a final agreement. In March 2013, the super- intendent ordered Navistar to partially wind up its plan as of July 2011 and include former employees who had ceased to be employed, voluntarily or involuntarily, both before and after the expiry of the collec- tive agreement. The Financial Services Tribunal upheld the or- ders with Navistar appealing to the Divisional Court of the On- tario Superior Court of Justice. At the core of the tribunal's decision was the conclusion that Navistar was engaging in a reor- ganization. At the relevant time, s. 77.3(1) of the Pension Benefits Act gave the superintendent dis- cretion to order a partial windup "as a result of the reorganization of the business of the employer." Navistar argued no reorga- nization could have taken place without a renewed collective agreement in place. The com- pany submitted that without the renewed agreement, what was in place was a "planned reorgani- zation which never took place." But the tribunal relied on precedent, recognizing that a reorganization under the act has "a broader meaning than that which is given under certain statutes dealing with corporate organization." Among other things, a reor- ganization under the pension legislation connoted "a group of intended events occurring as a result of some form of deliber- ate guidance." Establishing the existence of a reorganization, then, required at a minimum "that the guiding mind had, at the beginning, at least a rough sense of what the organization would look like at the end of the process, of the approximate du- ration of the process, and of the route that would be followed to get to the end." As the Divisional Court saw it, the tribunal's analysis was correct. "In the end, the failure to re- new the collective agreement may have ultimately brought on the Plant closure; however, the evidence is clear that Navistar had implemented a reorganiza- tion well before the Plant was closed," the unanimous court stated. The tribunal had also prop- erly exercised its discre- tion as to the makeup of the windup group. An employer, the court reasoned, shouldn't be able to avoid its windup obligation by stagger- ing its layoffs and en- couraging members to cease their employment where there was little or no chance of a recall. "To read the section otherwise would run the risk of members be- ing excluded from their rights under the Plan be- cause of a strategy by the company to move gradu- ally towards the ultimate closure of a plant with- out telling the members when that closure will occur," the court wrote. "In the face of clear moves by an employer to reorganize their busi- ness so as to drastically cut employees over time leading to ultimate clo- sure, many members will in- evitably take a severance pack- age or resign. If they do so, they should not be forced to give up their rights under the Plan." It's important to note that this case relied on a previous version of the Pension Benefits Act. The current version recog- nizes only full windups and not partial ones. "After the amendments took effect, the Navistar plan would have continued indefinitely un- til production ceased altogeth- er," says Bullock. But Lewis Gottheil, who represented Unifor (formerly the CAW), says the Divisional Court's affirmation of the tribu- nal's broad interpretation of re- organization continues existing jurisprudence that militates in favour of workers' rights. The Divisional Court's rul- ing will also help bring the severance pay dispute to an end. Under the Employment Standards Act, employees who receive unreduced pension ben- efits on severance aren't entitled to severance pay. But in March 2015, the On- tario Labour Relations Board refused to declare that the com- pany's refusal to arbitrate the severance pay issue was a fail- ure to bargain in good faith and make every reasonable effort to make a collective agreement. Because the resolution of the pension matters could affect the issues of entitlement and quan- tum, the board reasoned, the severance pay issues couldn't be finally determined. Now they can, but just how long that will take is unclear. LT The decision penalizes companies that are trying to reorganize their workforces during a downturn, says Jessica Bullock. FocuS on Pensions Law T Untitled-5 1 2015-08-20 9:13 AM

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