Canadian HR Reporter

Canadian HR RepoRteR September 22, 2014 eMPLoyMeNt LAw 5 slashed benefits restored to gM retirees Restored post-retirement benefits were cut by GM after 2008 recession General Motors of Canada has reached a settlement with more than 3,200 retired employees after it was faced with a class- action suit by retirees. e settlement, approved by the ontario superior Court of Justice, restores many of the benefits cut by the automaker after the 2008 recession. GM has provided post-retirement benefits to employees for a long time. ese included health-care and basic life insurance benefits, which were outlined in numerous documents such as informational brochures and booklets (there was no single benefits agreement) that indicated employees could count on certain core benefits through- out their lifetimes. Employees also received followup life insurance notices from GM outlining the amount of continuing life insur- ance for the rest of their lives. GM also provided executive employees with additional ben- efits, including a pension top-up benefit, supplemental group life insurance and "personal umbrella liability insurance." In late 2007, GM announced restructuring efforts that would reduce health-care benefits for salaried retirees who retired af- ter 1995, beginning July 1, 2008. is was followed by a temporary reduction in executive pension top-up benefits in August 2008 and reductions to the basic group life insurance benefit in 2010. e basic group life insurance ben- efit was worth up to $100,000 for many retirees, but the reductions would reduce it to $20,000 for most of them. In addition, the reduction in the executive top-up benefit was made permanent and the supple- mental group life and personal umbrella liability insurance for executives was eliminated. In May 2010, Joseph O'Neill, a GM employee who had retired in 2002 after more than 40 years' ser- vice, launched a class-action suit on behalf of 3,045 salaried retirees, 252 surviving spouses and 67 exec- utive retirees. O'Neill passed away in 2012 and Lynn McCullough — a 44-year GM employee who retired in 2008 and had his health- care benefits and life insurance cut similarly to O'Neill — took over as the representative plaintiff in the class-action suit. The Ontario Superior Court of Justice certified the class ac- tion in 2011 and, in July 2013, reached a decision. The court found the various documents GM provided to salaried employees led them to reasonably expect they could "plan for and rely on a core of health-care and life insur- ance benefits that would be pro- vided to them in their retirement" and those benefits would continue after they retired for the rest of their lives, as deferred compensa- tion for performing their jobs. In addition, the court noted that, based on benefits documents in the 1960s and 1970s, it was evi- dent GM expected its health-care and life insurance programs to continue "indefinitely." e information GM provided to employees regarding health care and life insurance did not clearly indicate the company reserved the right to change its benefits for employees after they retired due to changing econom- ic conditions, found the court. It was stipulated GM could make changes to salaried employees' retirement benefits while they were still salaried employees, but not after they became retirees. erefore, GM was not con- tractually entitled to reduce the benefits to retirees — only to re- tirement-eligible employees who had benefits reduced while they were still working, said the court. However, executive retirees were in a different situation. GM's benefits top-up, supplemental life insurance and umbrella liability insurance programs were all ac- companied by stipulations that they were not "pre-funded," not guaranteed and "may be reduced or eliminated with the prior ap- proval of the board of directors," said the court. erefore, execu- tive retirees with these benefit programs could have reasonably understood GM could do what it did in cutting the benefits in 2010 and GM was contractually entitled to make the cuts, said the court. Settlement ends legal battle GM appealed the decision and McCullough cross-appealed. Shortly before the hearing began last month, the parties were able to reach an agreement. According to the settlement, the company is restoring most of the health benefits that had been reduced to all members of the class action, including employees who retired after the cuts were an- nounced. Class members are re- quired to make contributions to the benefits plan — the amount determined by age and level of coverage — and GM has the right to change and increase the contri- butions, as long as it is reasonable and proportionate to established practice. e benefits themselves cannot be reduced by GM. As for life insurance benefits, GM will reinstate two-thirds of the value of the original life insur- ance for class members, with no right to reduce them in the future. e pension top-up and um- brella liability insurance benefits for executive retirees are restored, but the supplemental group life insurance is not. However, execu- tive retirees will receive the same health-care improvements as the salaried retirees in the class. In addition, GM will pay $9 mil- lion into a fund to compensate class members for the loss of life insurance and health-care benefits from the implementation of the cuts. Beneficiaries of class mem- bers who have died will receive two-thirds of the normal rate, with the remaining funds to be distrib- uted equally to class members for past health-care claims. e court approved the settle- ment, finding it was reasonable and avoided further appeals that could take years to resolve. "e settlement provides sub- stantial recovery for the class members in a timely and efficient manner, and eliminates the litiga- tion risk and delay for the class members in a timely and efficient manner," said the court. "e set- tlement easily meets the criteria for approval. In my view, it is fair and reasonable and in the best in- terests of the class." For more information see: • O'Neill v. General Motors of Can- ada, 2014 CarswellOnt 11627 (Ont. S.C.J.). • O'Neill v. General Motors of Can- ada, 2013 CarswellOnt 9803 (Ont. S.C.J.). Jeffrey R. Smith is the editor of Canadi- an Employment Law Today. For more information, visit www.employment- lawtoday.com. Jeffrey smith Legal View CPASource.com CPAs are Canada's most knowledgeable, skilled and respected accounting and business professionals. And this is where to find them. HIRE A PRO.

• Cover