Last week the Supreme Court of Canada denied Weyerhaeuser’s leave to appeal the BC Court of Appeal decision in its salaried retiree benefits case. The original claim arose from Weyerhaeuser’s unilateral reduction of retiree benefits and is reviewed in an earlier article.
In an effort to save money, Weyerhaeuser reduced by half, and froze its premium contributions, toward provincial and private medical benefits for certain retirees and their dependents. The Company said that its contributions had been discretionary, gratuitous, and not part of guaranteed employee compensation. A small group of retirees argued that they had a contractual right to fully-funded medical benefits as a term of their employment, a right which vested at the time of their retirement.
At the trial level, the trial judge ultimately concluded that Weyerhaeuser could not unilaterally reduce its contributions to fund retiree health insurance because that obligation was a term of employment. This finding was upheld by the BC Court of Appeal. The decision of the British Columbia Court of Appeal was appealed to the Supreme Court of Canada, which has now denied leave to appeal.
The outcome in the Weyerhaeuser case is not substantially different from the recent GM Canada decision which we reviewed in an earlier article. That Ontario case, which is now under appeal, involved a class action by GM salaried retirees against the automobile manufacturer because it unilaterally reduced retiree life insurance and healthcare benefits.
In that case, the trial judge found that documentation about GM’s right to alter core benefits after retirement was vague and, taken as a whole, created a reasonable expectation that those benefits would remain available to retirees for life. The notable difference in the case is that GM was partially successful with respect to the unilateral reduction of certain retired executive benefits which were in addition to core benefits enjoyed by all retired salaried employees. In finding for GM on that issue, the trial judge noted that GM’s communications with executives had consistently reserved to GM the right to alter or eliminate the additional executive benefits. In fact, retiring executives had been required to acknowledge, in writing, that the additional benefits granted to them were not guaranteed and could be reduced or eliminated even after retirement.
Employers seeking to unilaterally alter, reduce or terminate retiree health and welfare benefits must ensure they have a clear contractual right to do so before proceeding. It is equally important for employers establishing new benefit programs to ensure that their communications clearly reserve the right to alter, reduce or terminate the benefits in the future, both during employment and following retirement.
These recent court decisions serve as reminders to employers of the importance of written policies and employee communications in the area of employment benefits. Clear, consistent, concise and precise documentation and communications are the key to reducing risks and increasing flexibility in this important component of Workplace Law.