Changes to employee benefits plans are sometimes necessary for an employer to sustain the viability of its benefits packages.  When is an employer able to unilaterally make those changes? The British Columbia Court of Appeal recently addressed that question in Lacey v. Weyerhaeuser Company Limited, 2013 BCCA 252.

In the Lacey case, the employer, Weyerhaeuser, reduced its contribution to the health plan premiums of its retired, salaried employees and their spouses from 100% to 50%. The plaintiff-employees were all hired by Weyerhaeuser’s predecessor, MacMillan Bloedel Ltd. Three of the five employees retired before MacMillan was acquired by Weyerhaeuser, and the other two retired shortly thereafter.

The employees claimed that a fully funded health plan was a term of their employment contract. Weyerhaeuser argued that the benefits were gratuitous, and in any event, that MacMillan had reserved the right to unilaterally amend the benefits packages.

Since there was no written contract in place, the trial judge carefully scrutinized company documents relating to benefits, particularly the communications made from MacMillan to its employees during the time that the Plaintiffs were still employed. While some documents reserved the employer’s right to amend the benefits plan, others indicated, without reservation, that MacMillan would pay the full cost of the health care plan “for life”. The judge also considered both companies’ practices, as evidenced by managers’ testimony.   The Court of Appeal upheld the finding of the trial judge that, based on the evidence, it was a term of the Plaintiffs’ employment contracts that the employer would pay the cost of post-retirement benefits and therefore that Weyerhaeuser was not entitled to unilaterally amend the contributions of premiums to the retirees’ health insurance.

The Court of Appeal agreed with the trial judge’s conclusion, noting that it would have been open to the employer to change the terms of employment before the employees retired. However, once they did retire, the benefits vested and the employer was no longer at liberty to amend the benefits. The difference, according to the Court of Appeal, is that employees in the workplace have the opportunity to reject the change by seeking employment elsewhere. Retirees, on the other hand, accepted the employer’s promise to pay full health plan premiums for life by staying with MacMillan (and its successor) until retirement.

The decision contrasts with another recent decision by the BC Court of Appeal in Bennett v. British Columbia, 2012 BCCA 115. In that case, the Court found that the employees’ employment contracts did not guarantee that the employees would receive premium-free retiree benefits. In that case, there was not the extent of evidence that there was in Lacey of the employer’s commitment to pay the cost of retiree benefits. This distinction was noted by the Court of Appeal.

This most recent decision again confirms the importance of all communications provided to employees, such as benefits booklets, when addressing employee and retiree claims to benefits. Employers should review all documentation provided to employees, particularly before making a decision to change benefits.