Where contributions to pension or group benefit plans are based on an employee’s earning or hours worked, at first blush it seems attractive to argue that if the employee is on an unpaid leave of absence, the employer has no contribution obligation. Three recent arbitration decisions have rejected this argument -Employees of the Hunter Amenities International Ltd. v. Hunter Amenities International Ltd., Jungbunzlauer Canada Inc. v. United Food and Commercial Workers Canada Local 175 and most recently, Canadian Red Cross Society Community Health Services Ontario Zone v. Service Employees International Union Local 1 Canada.
Although these cases took place in the unionized environment, since the decisions were based on the provisions of the Ontario Employment Standards Act (the ESA) and not the collective agreements, the reasoning may potentially apply to non-unionized employees as well.
While on their face, the contribution formulas in the plans and the collective agreements resulted in contributions not being required during the unpaid leaves of absence (since contributions were based on earnings (one case) or hours worked (two cases) and the employee had no earnings or hours worked during the leaves), the arbitrators concluded that contributions were required to continue because of section 51 of the ESA.
Section 51 of the ESA requires that during certain leaves (i.e., pregnancy, parental, family medical and personal emergency leaves) the following continue: (a) the employee’s participation in certain plans (such as pension, life insurance and extended health plans) unless the employee elected in writing not to do so; and (b) the employer’s contributions to such plans unless the employee gives the employer written notice that the employee does not intend to pay the employee’s contributions, if any.
The arbitrators gave a broad interpretation to section 51 of the ESA and concluded that it requires contributions to continue to be made at the same level as they were made prior to the commencement of the leave. In all three cases, the arbitrators were guided in their interpretation by the principle that the ESA, as minimum standards legislation designed for the protection of employees, ought to be interpreted in a broad and generous manner.
These cases reinforce the fact that ensuring compliance with legislative provisions can require a more detailed review of the applicable legislation and surrounding facts than one’s first instinct might suggest. In particular, in the pension and benefit field, special attention is required when determining the employer’s obligations to provide pension and benefit plans in respect of employees on leaves of absence governed by the ESA.