General Motors Canada broke an agreement with some of its retired workers when it slashed health care and life insurance benefits in 2009 in a bid to cut costs as part of its restructuring after the financial crisis, an Ontario court ruled Wednesday.
In a 27-page decision, Ontario Superior Justice Edward Belobaba said GM Canada was “not contractually entitled” to make changes to the benefits of salaried retirees.
The ruling comes after a class-action lawsuit was launched against the auto manufacturing giant in May 2010 on behalf of 3,297 retirees and their families.
GM Canada spokeswoman Faye Roberts said the company plans to appeal the ruling.
“We are disappointed with the decision,” she wrote in an email.
In some cases, former workers saw their basic life insurance benefit cut from more than $100,000 to $20,000.
Other changes included the elimination of semi-private hospital coverage, a reduction in the annual maximum coverage for dental and orthodontic benefits and an increase in the amount members would have to pay for prescription drugs.
GM had argued that a clause allowing it to make the changes was included in a benefits package booklet that was handed out to employees.
The provision stated the company was allowed to “amend, modify, suspend or terminate” any of the benefit programs “at any time,” according to the decision.
But Belobaba ruled that GM was vague about its right to reduce or eliminate these benefits, particularly after the employees had stopped working.
“The salaried retirees, some of whom had worked for decades at GM and were told repeatedly in the benefit documents that they could rely on the promised health care and life insurance benefits, were stunned,” said the decision.
“Surely, they said, GM’s right to make changes to the benefit programs didn’t mean that GM could cut retirement benefits after retirement. If that’s what the company intended, they argued, GM should have told them while they were still working, in language that was clear and unambiguous.”
In the same decision, Belobaba also ruled that GM was within its rights to reduce or eliminate any additional benefits enjoyed by its executive retirees.
The judge said that in this instance, the automaker had been clear in warning that it maintained the right to do so. The 67 executive retirees in the case are still eligible for their core benefit packages, as the other workers in the lawsuit.
Steven Barrett, a lawyer for the plantiffs, said the court decision is potentially precedent-setting.
“It’s a very positive outcome for them and for any Canadian workers who’ve been promised retirement benefits and after they retire, the employer tries to reduce them or eliminate them,” he said.
Co-counsel Louis Sokolov said the cuts left retirees at a loss because many were unable to purchase life insurance or health benefits elsewhere due to their age once their company benefits were slashed.
“If you’re going to change the rules of the game for someone after they retire, you better be entirely explicit about it upfront,” he said, referring to the ruling.
Sokolov said the plantiffs are seeking a reinstatement of their benefits, and any money they should’ve been paid since 2009.
The lawsuit named plaintiffs who had retired from the automotive giant between 1995 to October 2011.
Notice of appeal must be filed within 30 days.
The Canadian Auto Workers union agreed in 2011 to allow a trust — funded with $2.5 billion from GM —to take over responsibility for paying supplementary health benefits for 32,000 retired former unionized employees of the automaker.
The Auto Sector Retiree Health Care Trust pays for costs had previously been borne by the company including supplementary health benefits such as prescription drugs, dental care and vision care.