Ontario Civil

Civil Procedure

Contractual language allowing defendant to reduce benefits not sufficiently clear

Defendant substantially reduced healthcare and life insurance benefits of former salaried and executive employees after employees retired. Plaintiff brought class action. Plaintiff brought motion for partial summary judgment as to whether defendant was contractually entitled to reduce post-retirement benefits after employees’ retirement. Defendant brought cross-motion for partial summary judgment on common issues dealing with new hires and early retirees. Defendant was not contractually entitled to reduce healthcare and life insurance of salaried employees after they retired. Defendant was contractually entitled to reduce or eliminate benefits of executive retirees. Contractual language allowing defendant to reduce benefits was not sufficiently clear and unambiguous for salaried employees. Under reservation of rights clause defendant had right to reduce benefits while salaried employees were actively employed but had no right to do so after employee retired. It was reasonable expectation of salaried employees that salaried employees could rely on core of healthcare and life insurance post-retirement benefit that would continue unchanged for remainder of their lives. Benefits were provided as deferred compensation for services rendered and were not gratuitous. Interpretation was in line with duty of good faith favouring plaintiff’s claim that benefits could not be reduced after employee retired. In reducing or eliminating benefits after retirement, defendant breached contract with salaried employees. There was no good reason to treat new hires differently. Early retirement agreements did not release defendant from liability. Defendant was not in breach of contract in reducing benefits for executive retirees and their dependents. Reservation of rights clause in place for executive employees stated with more clarity exactly what might happen. Executive employees knew from outset that their retirement benefits were not guaranteed. Defendant was contractually entitled to reduce or terminate benefits of executive retirees.

O’Neill v. General Motors of Canada Ltd. (Jul. 17, 2013, Ont. S.C.J., Edward P. Belobaba J., File No. CV-10-402515CP) 230 A.C.W.S. (3d) 413.

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