Navistar Canada Inc. v. Superintendent of Financial Services, 2015 ONSC 2797

Navistar Canada Inc. (Navistar) sponsored the Navistar Canada Inc. Non-Contributory Retirement Plan (Navistar Plan), a defined benefit pension plan. In 2008, Navistar began developing a reorganization strategy. Over the next several years, multiple rounds of layoffs took place and plant operations were reduced. On July 28, 2011 (Closure Date), the Chatham, Ont., plant was permanently closed. A closure agreement was not negotiated.

In March 2013, the Ontario Deputy Superintendent of Financial Services (Superintendent) issued a notice of intended decision (NOID) to order that Navistar partially wind up the Navistar Plan effective July 28, 2011; to include certain members in the wind-up group who had ceased to be employed, whether voluntarily or involuntarily, after June 30, 2009, when the collective agreement expired; and to include in its partial wind-up report the full value of certain benefits under the Navistar Plan. Navistar filed a request for a hearing before the Financial Services Tribunal (FST) in respect of the NOID.

The FST’s decision was reported in the September 2014 Pensions Newsletter. With respect to the issue of the wind-up group’s scope, the FST noted that the parties had agreed to July 28, 2011, as the wind-up date for valuation purposes but that “it is necessary to explore whether the related events prior to July 28, 2011 led to a loss of employment by a significant number of Navistar Plan members as a basis for triggering their inclusion in the partial windup group.”

The FST rejected Navistar’s argument that the Superintendent could not rely on multiple provisions of subsection 77.3(1) of the Ontario Pension Benefits Act (PBA) in ordering a partial wind-up. According to the FST, “there is nothing in the Act or law that prohibits the Superintendent from applying more than one provision of subsection 77.3(1).” In this case, the FST found that the conditions under both subsections 77.3(1)(a) and (b) of the PBA were met.

Finding that the Closure Date “does not draw a hard line between inclusion . . . and exclusion” in the partial wind-up group, the FST ordered that all Navistar Plan members who ceased to be employed after February 1, 2009, were entitled to wind-up benefits. The FST noted that the closure “was simply the final step in the reorganization.”

The FST rejected Navistar’s attempts to further exclude from the partial wind-up group those members who received severance packages and those who signed a waiver purportedly disentitling them to wind-up benefits. In rejecting Navistar’s arguments, the FST found that severance benefits are distinct from wind-up benefits and the former cannot be used by employers to offset the latter.

Navistar appealed the FST’s decision to the Divisional Court (Court) challenging the FST’s findings that Navistar undertook a reorganization under subsection 77.3(1)(a) of the PBA and that the wind-up group included Plan members who ceased to be employed from February 1, 2009 to the Closure Date.

On the issue of whether a reorganization had taken place, Navistar argued that because of the failure to renew its collective agreement with Unifor, resulting in the Chatham plant closure, there could not have been a reorganization. Rather, what had transpired was a planned reorganization that never materialized. The Court rejected this argument and affirmed the FST’s decision that Navistar did indeed undertake a reorganization within the meaning of subsection 77.3(1)(a) of the PBA. Navistar had planned out a new strategic direction for the Chatham plant and undertook steps to implement its plan. Navistar’s reorganization was well under way before the failed attempt at a collective agreement and resultant closure of the Chatham plant.

On the issue of the wind-up group’s scope, the Court affirmed the FST’s decision that the wind-up group includes Plan members who ceased to be employed from February 1, 2009 to July 28, 2011, regardless of whether the members ceased employment voluntarily or involuntarily.

The Court held that the FST’s decision was reasonable for several reasons. First, subsection 77.3(1)(a) of the PBA does not distinguish between employees who cease employment voluntarily and those who cease employment involuntarily. The subsection refers generally to employees who cease to be employed as a result of a reorganization. Second, the FST should not look to each employee to determine if termination was voluntary or involuntary. Prior case law has established that — in the absence of exceptional circumstances — if employment ceases during an extended reorganization process, the employment is deemed to cease as a result of the reorganization. Third, the findings of fact made by the FST indicated that Navistar was developing a reorganization strategy in 2008, and that to implement this plan, 500 employees were laid off effective February 1, 2009. Given these facts, it was reasonable for the FST to define the wind-up group as including Plan members who ceased employment from February 1, 2009. Finally, the Court reasoned that an employer should not be able to avoid its statutory wind-up obligations by staggering its layoffs and encouraging members to cease employment voluntarily.

Navistar has filed a notice of motion for leave to appeal to the Ontario Court of Appeal.

Ontario Divisional Court Decision