On February 16, 2015, arbitrator Denis Provençal issued an important decision1 affecting pension plans in Quebec. He found that the active employment of employees affected by a plant closure ends on the day the plant closes permanently. This decision sets aside previous rulings of the New Brunswick courts,2 including that province’s Court of Appeal, which had determined that active employment for such employees continues until the end of their recall privileges.

Facts

On February 29, 2012, RockTenn announced that it was permanently closing its Matane plant. In April 2012, the union and the employer signed a permanent closure agreement. In accordance with this agreement, all employees were paid a few weeks’ notice and their pensions were calculated. Inventories and raw materials on the site were sold, and the plant equipment was partly dismantled. Some parts were sent to other plants, and the paper-machine boilers were pierced so that cardboard could no longer be produced at the Matane location.

Grievances

In April 2014, three plant employees, two of whom continued working after February 29 to ensure an orderly closure, filed grievances claiming the benefit of an early retirement, pursuant to the plan in place. They argued that they had already accumulated 20 years of service when the plant closed and had reached the age of 55 during the period covered by their recall privileges set out in the applicable collective agreement. The employees claimed that they had continued to be actively at work until the expiry of their recall privileges – in this instance, a period of 36 months after their last day of work.

Positions

The union argued that under the collective agreement, employees lost their seniority only if they had not been hired back after being on layoff for more than 36 consecutive months. Again according to the union, in view of such recall privileges providing that an employee has the right “[translation] to be rehired as jobs open up,” a layoff could only become a termination, and thus end active employment, after the 36-month period had expired. Employees who turned 55 during the 36-month period following the plant closure should therefore be considered as having been actively at work on their birthday and thus eligible for early retirement. This was the position taken by arbitrator Brian Bruce in a decision involving a pension plan that was substantially identical to RockTenn’s3 – a decision that was subsequently upheld by both the Court of Queen’s Bench (superior court)4 and the Court of Appeal5 of New Brunswick, giving it significant precedential value.

The employer argued that, in Quebec, an employee’s active employment should end when it has become clear that there is no possibility of a return to work. In this case, because the end of work for the employees was permanent, it could in no way be considered a layoff, in whatever form, giving rise to recall privileges, as their active employment ended in 2012.

The decision

The arbitrator begins by noting that the February 2012 closure was permanent, leaving the employees with no hope of being called back to work. It therefore remained to be determined whether, as a result of having turned 55 during their recall period, they could receive the pension benefits they were seeking.

Upon reviewing the relevant wording of the collective agreement, the pension plan and the Supplemental Pension Plans Act6 (SPPA), the arbitrator states that he cannot ignore applicable Quebec law and consequently draws on sections 36 and 54 of the SPPA and its interpretation by the Quebec courts7 to conclude that “[translation] […] it is the real possibility of a return to work and not simply the existence of recall privileges that must be considered in determining whether the three employees are correct in claiming that they were continuing their active employment at RockTenn.”8 He also points out that it is necessary to consider the situation as a whole “[translation] […] to determine if the closure was a permanent closure and whether the recall privileges provided for in the collective agreement, the SPPA and a pension plan became theoretical and whether they can be exercised.”9

Addressing an additional argument from the union that the sale of the plant could have given rise to the application of section 45 of the Labour Code,10 which would have bound the acquirer to comply with the recall privilege provisions of the collective agreement, the arbitrator, noting that there was no evidence of a possible resumption of operations, states that “[translation] in Boucher, the T.A.Q. (the Administrative Tribunal of Quebec) ruled that the Régie des rentes du Québec (Quebec’s pension board) could not rely on subsequent events to identify a new possibility of a return to work.”11  

The arbitrator, finding that the three employees had no real and reasonable possibility of being recalled after their last day of work at the Matane plant, therefore dismissed the three grievances.

Conclusion

This decision has the merit of clearly rejecting the principles adopted by the New Brunswick courts, which had raised serious doubts among employers and pension plan administrators since 2008. It serves as a reminder of how important the events surrounding a business closure decision are, underscoring the need for employers to act in a manner consistent with a closure decision by, among other things, settling all the details with the unions, paying the amounts due to the affected employees and making sure there is no longer any real possibility for them to return to work. Otherwise, the door will always be open to employees claiming that they were actively at work during the recall period provided for in their agreement.

An application for judicial review has been filed concerning this decision.