In TRW Canada Ltd. and Thompson Products Employees'
Assn. (Retiree Benefits) (Re), collectively bargained changes
to vested retiree benefits were found to have been made without
The changes had been proposed by the employees' association
("Association"), following a particularly hard round of
collective bargaining, and after the employer threatened to close
one of its plants if it did not obtain a "competitive labour
agreement". The changes included the elimination of retiree
semi-private coverage, the elimination of retiree life insurance,
and the introduction of a retiree co-pay obligation. However, from
the outset of collective bargaining, the Association asserted that
it did not believe that the employer had the legal right or ability
to reduce or eliminate the retiree benefits listed in the
collective agreement. The Association later filed two grievances on
behalf of an individual retiree and on behalf of all other retirees
of the employer disputing the retiree benefit changes.
At arbitration, Arbitrator William Kaplan ("Arbitrator
Kaplan") allowed the grievance, noting that although the
parties had agreed to the retiree benefit changes, the Association
had only done so in the context of the imminent shut-down of the
plant. Arbitrator Kaplan also noted that the Association had from
the beginning of the negotiations raised concerns about the
lawfulness of the steps the parties were jointly taking. Therefore,
the Association in this case was not in agreement from the start
that it could "bargain" for the retirees.
Significantly, Arbitrator Kaplan found that, if the parties to a
collective agreement wish to reserve the right to reduce, eliminate
or otherwise change retiree benefits for retired employees, it is
open to them to do so provided they use clear and unequivocal
language. However, for the following reasons, Arbitrator Kaplan
found that such rights had not been reserved in the current
the collective agreement expressly required that the employer
pay for all retiree benefits set out in the agreement, and
introducing a co-pay was inconsistent with this obligation to pay
the entire amount of benefits; and
although the collective agreement provided that the parties
could amend the benefit plans to decrease benefits with mutual
agreement, it did not provide for the complete elimination (as
opposed to reduction) of the semi-private hospital coverage and
retiree life insurance.
Arbitrator Kaplan's decision was subsequently upheld by the
Ontario Divisional Court on judicial review. The Divisional Court
applied a reasonableness standard of review, and found that
Arbitrator Kaplan's decision was "within the range of
reasonable outcomes." (TRW Canada Ltd. v. Thompson
Products Employees' Assn.,  O.J. No. 6211).
The TRW case was clearly decided in the context of very
specific facts, including particular collective agreement language.
Most importantly, the negotiated "agreement" between the
Association and the employer was reached in spite of the
Association's very clear objection and its stated concerns
about its ability to make the deal on behalf of the retirees. It is
also unclear from the decision whether the changes that were made
to retirees' benefits (who would not have had a voice in the
ratification of the collective agreement) were equally imposed on
the active members (who ratified the agreement). In any event, it
is important to take all steps necessary to ensure the
enforceability of any agreement that is being negotiated with a
union, to ensure union acknowledgement that the retirees'
benefits are subject to change in all the circumstances of the
case, as well as the union's ability to agree to the
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