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Québec: The Interplay Between Collective Agreements and Pension Plan Benefits


March 7, 2007


Pierre Jolin
Gilles Rancourt

Last fall, an arbitrator handed down an important decision concerning a number of trade union claims relating to employee pension plan entitlements following the shutdown of the Abitibi-Consolidated plant in Port-Alfred, Québec.

Because of the economic situation of the North American pulp and paper market and the strength of the Canadian dollar, Abitibi decided to shutdown its Port-Alfred plant temporarily in November 2003, and for an indeterminate period three weeks later. All employees were finally laid off on April 1, 2004.

The trade union claimed more than $35 million from Abitibi, challenging the company’s decision to apply the provisions of the pension plan regime instead of those of the collective agreement. The trade union claimed that an employee credited with five years’ continuous service after his or her lay-off under the terms of the collective agreement should have the same amount of time recognized under the terms of the pension plan. The claims were based on summary language in the collective agreement about pension plan benefits.

The arbitrator upheld Abitibi’s argument that the pension plan was incorporated by reference in the collective agreement. The arbitrator rejected the trade union’s suggestion that the length of service under the collective agreement should be the same under the terms of the pension plan, because the pension plan clearly provided for termination of service after a lay-off period of two years.

The trade union also argued that all employees were entitled under the terms of the collective agreement to an early retirement pension without reduction at age 58, together with all associated benefits, regardless of the provisions of the pension plan, which provided for age 65 as the normal retirement age.

The arbitrator agreed with Abitibi’s argument that the pension plan regime took precedence over the collective agreement, concluding that the collective agreement provisions dealing with the pension plan merely summarized the benefits; it was the pension plan that regulated them. As a result, laid-off members less than 55 years of age on April 1, 2006 were not entitled to an early retirement pension, only to a deferred pension at 65.

A motion for judicial review was recently filed by the trade union in the Superior Court of Québec to challenge the arbitral decision, and it is expected a hearing will be held later this year.

McCarthy Tétrault Notes:

This decision is indicative of the increase in pension litigation in Canada over the past few years, partly due to the number of litigants involved and the sums of money at stake.

McCarthy Tétrault acted for Abitibi in this matter.