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CCCA_V6No4_Dept-PensionsLaw-FIN_CCCA_V6No4 11/27/12 12:05 PM Page 11 Pensions Law and that the offer to continue to provide of changes to PRBs, including eliminating of the process of determining how PRBs these benefits after retirement was a con- out-of-province emergency medical cov- would likely be characterized by the courts tractual term. erage. Mr. Gustavson’s claim for the cost of (i.e., as a description of current benefits The Court further concluded that the replacement insurance for this benefit was available or as a contractual promise to employee communications were inconsis- successful, as the trial judge determined future benefit entitlements). tent as to whether the employer had in fact that the rights in the letter reserved a right to amend or terminate “enjoy a degree of condi- PRBs, particularly after an individual had tional vesting” and in the These decisions consequently retired. While “reservation of rights” lan- tially less” than was origi-“ plaintiff’s circumstances, his guage was later added to the employee PRBs would be “substan- reveal the importance of communication materials, the Court con- reviewing employee cluded that the employer was not entitled nally agreed. to change benefits once an employee had The Court of Appeal, communications in detail... already retired by subsequently reserving while not directly address- ” the right to do so. On this basis,the Court ing the concept of vesting, in Weyerhaeuser held that the PRBs were appears to have implicitly accepted the trial Second, Weyerhaeuser illustrates the risk deferred compensation which would vest judge’s view that the plaintiff’s rights to that broad “reservation of right” language on retirement. any particular benefit was “conditionally in respect of PRBs can be read narrowly. vested” on retirement as a result of the Accordingly, it will be particularly useful “Conditionally vested” entitlements notwithstanding clause. In addition, the for employers to review the reservation of and a qualified right of amendment Court of Appeal accepted that an individ- rights language communicated to active Gustavson was not a class-action proceed- ual with “conditionally vested” PRBs may employees as it applies to PRBs in partic- ing. It involved a claim by an individual have a potential claim as a result of the ular, as there is more flexibility for an retiree complaining about PRB amend- amendment or discontinuance of a partic- employer to clarify the intent of such lan- ments which adversely affected him.The ular benefit in their PRB package, based guage in respect of active employees than dispute centred around the language con- upon their personal circumstances. in respect of existing retirees. tained in an employee’s early retirement Finally, employers should be aware that arrangement, including reservation of Lessons from these cases the terms of individual retirement arrange- rights language. Although these decisions were all decid- ments can affect an employer’s right to In 1992,when Mr.Gustavson retired,he ed in British Columbia, were driven by amend or terminate PRBs in relation to was provided with a letter outlining the the facts of the particular case, and have individuals covered by those arrangements, components of his early retirement conclusions that are not easy to reconcile, as demonstrated by Gustavson. arrangement, including a description of a few lessons can be taken away from the PRBs to which he would be entitled. these cases. 1 Dayco (Canada) Ltd. v. CAW-Canada, [1993] 2 S.C.R. 230 [Dayco]. The letter provided that his employer First, the employment contract (estab- 2 Bennett v. British Columbia, 2012 BCCA 115 reserved the right to amend or discontinue lished through various relevant agreements, (B.C.C.A.), affirming 2009 BCSC 1358 [Bennett]. benefit plans or programs referred to in the including employee communications) 3 Lacey v. Weyerhaeuser Company Limited, 2012 BCSC 353 (B.C.S.C.) [Weyerhaeuser]. letter, but provided:“[n]otwithstanding the formed the backbone of the determination 4 TimberWest Forest Corp. v. Gustavson, [2012] foregoing, the benefits to which you will as to whether any rights to PRBs had BCSC 1232 (B.C.S.C.), affirming [2011] BCPC be entitled shall not be substantially less than “vested” in each of Bennett, Weyerhaeuser 272 (B.C.P.C.) [Gustavson]. those outlined in this letter”(emphasis added). and Gustavson.These decisions consequent- In 2008, Mr. Gustavson’s employer ly reveal the importance of reviewing Jonathan Marin is an associate in theToronto announced that it would make a number employee communications in detail as part office of Osler, Hoskin & Harcourt LLP. HIVER 2012 CCCA Canadian Corporate Counsel Association 11