On February 28, 2014, in Hydro-Québec v SSPHQ et al.,1 the Quebec Court of Appeal ruled on an employer’s right to recover employees’ premiums retroactively to the effective date of changes to a supplemental group life insurance plan.
The unionized employees of Hydro-Québec belonging to two unions are entitled to supplemental group life insurance (SGLI) coverage. This insurance is optional and the costs are borne equally by the supplemental group life insurance plan members (Plan Members) and Hydro-Québec.
In November 2000, Hydro-Québec informed the Plan Members of changes that would result in a sharp increase in their premiums. Grievances were filed alleging that the changes contravened the collective agreement. Hydro-Québec set the effective date for the changes at August 31, 2001, and asked the Plan Members to elect to either maintain or terminate their enrolment in the plan on that date.
On August 28, 2001, the union applied to the grievance arbitrator for a safeguard order. The order was allowed. The arbitrator ordered Hydro-Québec to maintain the status quo in respect of the plan, maintain the funding method and existing rates and suspend the elections already made by the Plan Members until there was a final ruling or until an agreement was reached between the parties.
Three years later, an arbitration panel found that Hydro-Québec had not contravened the collective agreements. It did determine, however, that Hydro-Québec had failed in its duties as mandatary and it prevented Hydro-Québec from giving effect to its changes unless certain conditions were met.
Judicial reviews ensued, culminating in a Quebec Court of Appeal ruling on April 30, 2009. The court found that Hydro-Québec had not contravened the collective agreement and it revoked the arbitrator’s conditions.
A leave for appeal to the Supreme Court was dismissed on December 17, 2009.
Following this win, Hydro-Québec asked the Plan Members to pay the premiums they would have been required to pay during the period from September 2001 to June 2010. The unions filed a grievance against this decision by Hydro-Québec, arguing that the changes to the SGLI plan came into effect only on December 17, 2009.
Hydro-Québec argued that the safeguard order was provisional and conservatory and, consequently, the rights of the parties were preserved in the same state as before the order. Hydro-Québec could therefore demand payment of the modified premiums because the arbitration panel had ruled that it had the right to make changes to the SGLI plan and increase the premiums, as that right had existed since 2001.
The decision of the arbitrator, Jean-Pierre Lussier
The arbitrator, Jean-Pierre Lussier, allowed the grievances on January 27, 2011. He reasoned that a distinction needed to be made between a safeguard order issued in civil matters and such an order issued in labour law. The arbitrator stressed that a safeguard order in civil matters lasts for a very limited period of time—i.e. until the interlocutory judgment—whereas a safeguard order issued under the Labour Code lasts until the grievance is finally decided.
The arbitrator then refuted Hydro-Québec’s argument that its right to collect premiums had been suspended since 2001. He stated that Hydro-Québec’s right was uncertain at the time the safeguard orders were issued and the exercise of that right had been suspended pending a final decision by the arbitrator. The right only became certain and implementable when the arbitrator handed down a final decision. The right to demand premiums from the Plan Members was therefore situated in time by the arbitrator at December 17, 2009, without retroactive effect.
To support his reasoning, the arbitrator gave the example of an order to maintain the status quo ante, which allows a dismissed employee to continue working despite his or her dismissal. He explained that if the grievance contesting dismissal is subsequently disallowed, the dismissal has to take place after the arbitrator’s final decision. Accordingly, the work that the employee performed in the interval and the compensation received could not be affected retroactively. By analogy, the right in the case involving Hydro-Québec came into existence at the time of the final decision and the employees therefore did not have to pay the modified insurance premiums retroactively.
The arbitrator recognized the potential damage this situation could cause Hydro-Québec, which had seen its exercise of a recognized right suspended by a safeguard order, and said that the case illustrated the need to be very careful before issuing such an order.
The ruling of the Court of Appeal
The Court of Appeal dismissed the motion for a judicial review filed by Hydro-Québec. It agreed fully with the arbitrator’s line of reasoning. It said that it concurred with the arbitrator that certain safeguard orders, like those in this instance, cannot be revoked retroactively. It acknowledged that the changes to the SGLI plan presented by Hydro-Québec could not be implemented until the time of the final decision and that Hydro-Québec could not demand retroactive payment of the new premiums.
The court took great care to point out that its ruling did not claim to settle the fate of all safeguard orders issued under the Labour Code. It is important to realize that this was a very special situation for Hydro-Québec: it wanted to make changes to the terms and conditions of an SGLI plan; a safeguard order prevented it from implementing the changes during an eight-year period; its right to change the plan was finally recognized by the courts and the safeguard order was revoked; yet, despite this, it could not demand payment of the insurance premiums retroactively because the right, according to the Court of Appeal, came into existence at the time of the grievance arbitrator’s final decision. If there is a lesson here, it is this: be very careful before issuing an order to safeguard the rights of the parties.
1 Hydro-Québec c Syndicat des spécialistes et professionels d’Hydro-Québec, section locale 4250, SCFP-FTQ (SSPHQ), 2014 QCCA 396.
Norton Rose Fulbright Canada LLP
Norton Rose Fulbright is a global legal practice. We provide the world’s pre-eminent corporations and financial institutions with a full business law service. We have more than 3800 lawyers based in over 50 cities across Europe, the United States, Canada, Latin America, Asia, Australia, Africa, the Middle East and Central Asia.
Recognized for our industry focus, we are strong across all the key industry sectors: financial institutions; energy; infrastructure, mining and commodities; transport; technology and innovation; and life sciences and healthcare.
Wherever we are, we operate in accordance with our global business principles of quality, unity and integrity. We aim to provide the highest possible standard of legal service in each of our offices and to maintain that level of quality at every point of contact.
Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright Canada LLP, Norton Rose Fulbright South Africa (incorporated as Deneys Reitz Inc) and Fulbright & Jaworski LLP, each of which is a separate legal entity, are members (‘the Norton Rose Fulbright members’) of Norton Rose Fulbright Verein, a Swiss Verein. Norton Rose Fulbright Verein helps coordinate the activities of the Norton Rose Fulbright members but does not itself provide legal services to clients.