O’Neill v. General Motors: Court Rules That Retiree Benefits May Be Reduced

The Ontario Superior Court of Justice ruled last week that retiree benefits may be changed even after an employee retires: O'Neill v. General Motors of Canada Limited, 2013 ONSC 4654. In other words, an employee's right to retiree benefits does not irrevocably vest in the employee upon retirement. Nor does the right to such benefits vest in an active employee upon the employee satisfying the age and service criteria that may be established by an employer for entitlement to the benefits.

However, in this case the court decided against the employer, General Motors of Canada Limited ("GM"), because GM did not adequately reserve to itself the right to make changes to its retiree benefits program. The result in this case is the same as that reached last year by the British Columbia Supreme Court in Lacey v. Weyerhaeuser Company Limited, 2012 BCSC 353.1 We understand that GM will be appealing the decision to the Ontario court of appeal.

This was a judgment of agreed-upon common issues in a class action commenced by a retiree, Joseph O'Neill who retired in 2002. The class action was certified in October 2011 and Mr. O'Neill passed away in 2012. Lynn McCullough, who retired in 2008, succeeded Joseph O'Neill as the representative plaintiff. The class of retirees was comprised of 3,297 members, including surviving spouses, and 67 of whom were retired executives.

GM made an announcement at the end of 2007 that certain post-retirement benefits would be reduced over the ensuing three-year period. Most of the reductions seem to be quite minor, such as the availability of semi-private hospital coverage, the right to add new dependants for coverage, availability of out-of-province coverage and the level of co-payments on prescription drugs. The other change, announced in 2009, which was more significant, was a reduction in life insurance from, in many cases, $100,000, to $20,000.

The above changes affected only former salaried employees who had retired after January 1, 2005. The reason why the reductions in coverage applied only to those who retired after that date was because since 1994 GM had, in its view, consistently reserved its right to terminate and make changes to its post-retirement benefits. The court was faced with reviewing a total of 260 different communications, comprised of booklets, brochures, letters and other announcements.

Based on the documentation and an analysis of relevant caselaw, the court made the following determinations:

The...