Ontario Court Forces Pension Surplus Distribution

July 29, 2004 (PLANSPONSOR.com) - The Supreme Court of Canada has ruled that laid off Ontario workers are entitled to a share of any company pension surplus.

While the unanimous 7 to 0 ruling immediately means Monsanto Canada Inc., will have to pay out additional benefits to 146 workers who were fired in 1997-98, it could also have future ramifications for other Ontario employers, according to the Canadian Press.

It could also have an impact beyond Ontario, depending on pension rules in other jurisdictions with six other provinces and the federal government currently considering similar pension legislation, the CP said.

At issue was whether companies must perform a “partial wind-up” of pension plans – and distribute the surplus – when they shut down plants or otherwise shed a large number of workers. The Monsanto dispute centered on $3 million, the estimated share for the laid-off employees in a larger surplus of $19 million in the company pension plan. The company announced it would give out some of the overage, but only to the 45 terminated employees aged 50 or older.

That proposal was blocked by the Financial Services Commission, the provincial regulatory body, which ruled that the surplus had to be distributed equitably. An appeal tribunal reversed the ruling and agreed with Monsanto. But further court action restored the fired workers’ claim to share in the windfall.

The last judgment in favor of the workers, delivered by the Ontario Court of Appeal in 2002, was considered a political bombshell for the Conservative government of then-premier Ernie Eves that had just introduced legislation to make it easier for companies to retain pension surpluses.

At the time, labor groups and retirees denounced the measure, saying it opened the door to corporate raids on money that belonged to employees. Liberal Dalton McGuinty – then in opposition, now the premier – called the bill “patently unfair” and said it trampled on the rights of workers. In the wake of the appeal court ruling, Janet Ecker, the finance minister at the time, was forced to withdraw the bill.