The St. Marys Cement and United Steelworkers Local 9235 decision by a labour relations arbitrator may provide some comfort to employers who sponsor collectively bargained pension plans, since the arbitrator in that decision held that an employer’s ability to amend a pension plan is not necessarily restricted simply because the pension plan is incorporated by reference into a collective agreement.

This decision arises from a grievance concerning the company’s decision to unilaterally convert its pension plan from a defined benefit plan to a defined contribution plan.

In July 2008, immediately prior to collective bargaining, the company advised the union of its intention to convert the pension plan to a defined contribution plan. A notice concerning the proposed conversion was sent to all employees.

A new collective agreement was ratified in August 2008. The provisions dealing with the pension plan remained unchanged from the previous collective agreement, and the union failed to obtain the employer’s agreement to maintain the pension plan as a defined benefit plan. After ratification of the collective agreement, the union grieved the conversion of the pension plan and argued that such a change to the pension plan was contrary to the terms of the collective agreement. Specifically, the union argued that the collective agreement, which made reference to the pension plan, secured the “defined benefit promise” and that any substantive change to the “defined benefit promise” could only be achieved through the collective bargaining process.

The arbitrator concluded that since the pension plan formed part of the collective agreement, the amendment power contained in the pension plan, which provided that the company “reserves the right to amend the Plan or discontinue the Plan either in whole or in part at any time”, also formed part of the collective agreement. Additionally, there was nothing in the language of the collective agreement which limited the company’s right to amend the pension plan unilaterally or prevented the company from making changes to the pension plan for the duration of the collective agreement. Therefore, the company did have the power to unilaterally amend or discontinue the pension plan.

The arbitrator also noted that since the union had an opportunity to deal with the pension plan conversion through the collective bargaining process, it could not revive the issue through the grievance procedure.

The arbitrator’s decision lends support to the argument that an employer’s ability to amend a pension plan is not necessarily prohibited simply because the pension plan is incorporated by reference into a collective agreement. The employer’s amendment power is determined by the language in the collective agreement and the pension plan documents. It is therefore necessary to review the terms of the collective agreement and the relevant pension plan documents in order to determine whether a collectively bargained pension plan may be amended without union consent.