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Reduction in Retiree Benefits Upheld

Written by
Mathews Dinsdale, Canada’s only national labour and employment law firm.
This article discusses Canadian case law on reduction in retiree benefits

In Bennett v. British Columbia (pdf), the British Columbia Supreme Court decided that a reduction in retiree benefits for a group of government retirees was within the legislative authority of the government and did not constitute either a breach of contract or a breach of fiduciary duties toward the retirees.

Retirees of the British Columbia government traditionally received premium-free medical benefits and extended health benefits. On January 1, 2005, changes were implemented to eliminate funding for the dental plan, increase the deductible for extended health benefits from $25 to $250, change the co-payments from 20% of the first $1,000 to 30% of the first $2,000, eliminate out-of-country coverage, and require retirees to pay one third of the medical benefit premiums. Mr. Bennett, a retired member of the British Columbia Public Service Pension Plan, commenced a class action against the British Columbia government.  The claim alleged that the changes constituted a breach of contract and a breach of fiduciary duties.

While this decision is one that involved government retirees covered by a statutory regime, there are aspects of the decision that are of interest to private sector employers, in particular the discussion of what the “contract” is between an employer and employees vis-à-vis retiree benefits. The court discounted the legally binding nature of employee and retiree communications. The court’s discussion of fiduciary duties and whether employees could reasonably expect to have premium-free retiree benefits for life is also of interest.