The Ontario Superior Court has ruled that employers may
unilaterally reduce retiree benefits after retirement
if there is clear and unambiguous language
demonstrating that the employer has reserved the right to do so in
its communications with employees (O'Neill v.
General Motors of Canada, 2013 ONSC 4654).
In 2007, General Motors began to unilaterally reduce health
coverage and life insurance for retired employees. In the
O'Neill v General Motors class action, the court examined 260
booklets, brochures and other communications provided to the
employees, finding that General Motors had not reserved a right to
alter retiree benefits for salaried employees. The salaried
employees could reasonably expect that the benefits claimed would
not be reduced following retirement, based on the communications
from General Motors. Language used by General Motors in its
communications attempting to reserve the right to alter benefits
had been ambiguous. Ambiguities are to be resolved in favour of the
General Motors was permitted to reduce retiree benefits
following retirement for retired employees who had been employed as
executives, based on communications that were found to be clear and
unambiguous in stating that the retirement fund was unfunded and
that benefits were not guaranteed. In addition, retired executive
employees were asked to sign a statement providing that benefits
under the retirement plan might be reduced or eliminated.
General Motors has announced its intention to appeal the
decision as it applied to salaried employees, regarding whom
General Motors was not permitted to reduce benefits. We will be
watching for further developments in this case, and will update you
as they come.
Employers who wish to reserve the right to alter employee
benefits following retirement should be aware of the importance of
clear and unambiguous drafting of communications with employees. If
you require drafting advice, or have any other employment law
related concerns, please don't hesitate to contact Dale &
Blog prepared with assistance of Phaydra Falkner,
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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