Ont. court upholds arbitration award to prohibit employer from freezing defined benefit pension plan

The Ontario Divisional Court has upheld an arbitrator’s decision to prohibit freezing a defined benefit pension plan maintained as part of a collective agreement between a plastic and chemical company and a labour union.

In Nova Chemicals (Canada) Limited v. Unifor Local 914, 2022 ONSC 5861, the applicant, Nova Chemicals (Canada) Limited, brought an application for judicial review of an arbitration award with the Divisional Court. In the award, the arbitrator held that the applicant had the authority to change the pension plan under the collective agreement with the respondent, Unifor Local 914.

However, the arbitrator found that the applicant was estopped from implementing the proposed changes that would freeze the defined benefits component of the pension plan (defined benefit plan) scheduled for December 31, 2021, until the expiry of the collective agreement in March 2023.

The applicant alleged that the determination respecting estoppel was unreasonable and should be quashed. It also alleged that the arbitrator unreasonably found that it had made a representation about the continuation of the defined benefit plan that was detrimentally relied upon by the respondent.

The Divisional Court dismissed the application for judicial review and held that the arbitrator had clearly and logically explained why he applied the doctrine of estoppel.

The applicant argued that the elements of estoppel set out by the arbitrator in the award had not been properly applied. The elements are as follows:

• That the other party to the collective agreement made a clear and unequivocal representation concerning the interpretation or application of the agreement;
• That the representation was intended to and does affect the legal relations between the parties to the agreement;
• That it relied upon the representation by doing something or foregoing the opportunity to do something and that it would have acted otherwise but for the representation;
• That its reliance is detrimental because the situation cannot be restored to what it was when the representation was made.

The court disagreed with the applicant’s argument and found that the arbitrator carefully considered the evidence before him and correctly applied the elements.

According to the court, the arbitrator found a clear representation by the applicant in September 1999 to employees, including two witnesses for the union, by a member of the applicant’s human resources staff.

“This was made at the time that the employees were being asked to opt to continue in the defined benefits component of the plan or to move to the defined contribution component,” Justice Katherine Swinton wrote. “The union witnesses testified that they were told that if they chose the defined benefit plan, they would stay in that plan until they retired.”

The applicant also challenged the finding that there was a representation, as any statement was made to employees and not union officers, and there was no indication that the person who made the statement was authorized to do so. In effect, it sought to have the court interfere with the arbitrator’s fact-finding.

“It is trite law that the decision maker may assess and evaluate the evidence before it and that, absent exceptional circumstances, a reviewing court will not interfere with its factual findings,” Justice Swinton wrote. “The reviewing court must refrain from reweighing and reassessing the evidence considered by the decision maker.”

The court determined that there was ample evidence to support the arbitrator’s conclusion that there was a representation by the applicant, and there is no basis for judicial intervention relating to the finding of a representation.

The applicant also challenged the arbitration’s finding that there was reliance on the representation to the respondent’s detriment, arguing that it was “illogical and unreasonable.”

“Again, I disagree,” Justice Swinton wrote. “The arbitrator carefully set out why he found there was detrimental reliance.”

First, the respondent relied on the 1999 representation to its detriment as it lost the opportunity to negotiate protections around the defined benefit plan. Second, it did not grieve other changes to the pension plan and had not taken steps in response to the applicant’s repeated assertions of its right to change the pension plan. Third, it did not pursue proposals to amend the applicant’s right to change the pension plan because freezing the defined benefit plan was not within its contemplation.

Finally, the applicant argued that the arbitrator unreasonably relied on estoppel because there is an entire agreement clause in art. 4.03 of the collective agreement. The court did not think so.

“The arbitrator was applying the equitable doctrine of estoppel, as have many other arbitrators, in a situation where he found that the employer should not be permitted to insist on its strict legal rights because it would be unfair to do so, given the employer’s representation and the union’s reliance on it,” Justice Swinton wrote.