Canadian Employment Law Today

October 01, 2014

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

Issue link:

Contents of this Issue


Page 5 of 7

6 | October 1, 2014 Canadian HR Reporter, a Thomson Reuters business 2014 Cases and Trends No reference to possibility of change in benefits guides « from Gm rEtirEEs on page 1 Healthcare and life insurance benefits for retirees slashed In late 2007, GM announced restructuring efforts that would reduce healthcare ben- efits for salaried retirees, beginning on July 1, 2008. is was followed by a temporary reduction in the executive pension top- up benefit in August 2008 and reductions to the basic group life insurance benefit in 2010. e basic group life insurance benefit was worth up to $100,000 for many retir- ees, 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 supplemen- tal group life and personal umbrella liability insurance for executives were eliminated. In May 2010, Joseph O'Neill, a GM em- ployee who had retired in 2002 after more than 40 years of service, launched a class action suit on behalf 3,045 salaried retirees, 252 surviving spouses and 67 executive re- tirees. O'Neill saw his healthcare benefits reduced and his life insurance benefit cut from $100,000 to $20,000 in the restructur- ing. O'Neill passed away in 2012 and Lynn McCullough — a 44-year GM employee who retired in 2008 who had his healthcare benefits and life insurance cut similarly to O'Neill — took over as the representative plaintiff in the class action suit. e Ontario Superior Court of Justice certified the class action in October 2011 and, in July 2013, reached a decision. e court found the various documents GM provided to its salaried employees led them to reasonably expect they could "plan for and rely on a core of health care and life in- surance benefits that would be provided to them in their retirement" and those bene- fits would continue after they retired for the rest of their lives, as deferred compensation for performing their jobs. In addition, the court noted that, based on benefit docu- ments in the 1960s and 1970s, it was evi- dent that GM itself expected its health care and life insurance programs to continue "indefinitely." e court found that all the information GM provided to its employees regarding healthcare and life insurance did not clearly indicate the company reserved the right to change its benefits to employees after they retired due to changing economic condi- tions. In the main benefit documents, it was stipulated that GM could make changes to salaried employees' retirement benefits while they were still employees, but not af- ter they became retirees. erefore, GM was not contractually entitled to reduce the ben- efits to retired employees — only retirement- eligible employees who had benefits reduced while they were still working, said the court. However, the court found the execu- tive retirees were in a different situation. GM's benefits top-up, supplemental life insurance, and umbrella liability insurance programs were all accompanied by stipula- tions that they were not "pre-funded," not guaranteed and "may be reduced or elimi- nated with the prior approval of the board of directors." erefore, the executive retir- ees who had these benefit programs could reasonably have understood that 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 hearing be- gan last month, GM reached out to Mc- Cullough and the parties were able to reach an agreement. According to the settlement, as of Sept. 1, 2014, 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 announced. Class members are required to make contributions to the benefits plan — the amount determined by age and level of coverage — and GM will have the right to change and increase the contributions, as long as it is reasonable and proportionate to established practice. e benefits them- selves cannot be reduced by GM. As for life insurance benefits, GM will re- instate two-thirds of the value of the origi- nal life insurance for class members, with no right to reduce them in the future. e pension top-up and umbrella liability insurance benefits for executive retirees are restored, but the supplemental group life insurance is not. However, exec- utive retirees will receive the same health- care improvements as the salaried retirees in the class. In addition, the settlement stipulates that GM will pay $9 million into a fund that will compensate class members for the loss of life insurance and healthcare benefits from the implementation of the cuts on July 1, 2008, and August 31, 2014. Beneficiaries of class members who have died will receive two-thirds of the normal rate with the re- maining funds to be distributed equally to class members for past healthcare claims. e court approved the settlement, finding it was reasonable and avoided further appeals which could have taken years to resolve. "e settlement provides substantial re- covery for the class members in a timely and efficient manner, and eliminates the litigation risk and delay for the class mem- bers in a timely and efficient manner," said the court. "e settlement easily meets the criteria for approval. In my view, it is fair and reasonable and in the best interests of the class." For more information see: • O'Neill v. General Motors of Canada, 2014 CarswellOnt 11627 (Ont. S.C.J.). • O'Neill v. General Motors of Canada, 2013 CarswellOnt 9803 (Ont. S.C.J.). Scorned worker out of control « from rEvElation on page 3 cation from the supervisor of any romantic interest over several years, she had no rea- son to think the letter would be welcomed. However, even when the supervisor indicat- ed he wasn't interested, the nurse persisted in "trying to advance what seems to have been a private obsession," said the arbitrator. e arbitrator also found the supervisor didn't handle the situation perfectly and should have gone directly to the nurse to try to defuse things before going to man- agement. However, this did not excuse the nurse's conduct, the arbitrator noted. e arbitrator found there was no rea- son for deceit on the part of the supervisor and the nurse seemed to change her story depending on who she talked to. e health authority's reasons for dismissal were sup- ported by interviews with other staff mem- bers and management "with no axe to grind." It was clear that the nurse's conduct was contrary to the respectful workplace policy against harassment, said the arbitrator. e arbitrator also found the nurse was given multiple opportunities to tell her side of the story, but this usually degenerated into insults and false statements about a re- lationship with the supervisor. e arbitrator determined the nurse's ac- tions were "a serious breach of trust, direct- ed not only towards the employer but also towards (her) supervisor." e nurse's "pat- tern of denial" confirmed that the employ- ment relationship was irreparably broken, making dismissal appropriate under the cir- cumstances, said the arbitrator. See Fraser Health Authority and HSA BC (Gervasio), Re, 2014 CarswellBC 2139 (B.C. Arb.).

Articles in this issue

Archives of this issue

view archives of Canadian Employment Law Today - October 01, 2014