A long simmering dispute between the Higgs provincial government in New Brunswick and the Canadian Union of Public Employees came to a boil this week as both sides battled it out in court over whether the pensions of 16,000 workers and retirees should be converted to a cheaper plan.
The injunction sought by the union, commonly called CUPE, would be an emergency court order to halt the process the Higgs government started by passing a law last December and new regulations in February.
The government wants to flip the workers and retirees, including active and former school bus drivers, educational assistants and personal support workers, from an expensive defined-benefit plan to a more affordable shared-risk model.
And its three lawyers presented arguments to Justice Ivan Robichaud of the Court of King’s Bench that had not been mentioned publicly before – that New Brunswick’s unique pension laws are on its side and that the expiration of the workers’ collective agreements meant their retirement funds could be changed.
“The province isn’t shy to identify a solution given the desperate challenge facing the defined-benefit plans,” said Josie Marks, a partner with Stewart McKelvey who represented the province along with two other lawyers from the law firm.
The two union lawyers countered that the Higgs government had left more than 50 years of collective bargaining on pensions in tatters, a clear violation of labour law.
Lawyer Peter Engelmann, representing CUPE, said on Friday the province’s case was “illusory, all smoke and mirrors,” and it was unequivocable that the government was “responsible for backstopping the pension.”
Roots of the dispute
More than a decade ago tens of thousands of public servants in New Brunswick had defined-benefit plans, conceived several generations ago when people didn’t live as long and payouts after retirement didn’t last as many years.
By the time the Alward Progressive Conservative government took power in 2010, Blaine Higgs, who was finance minister, started to raise concerns about the sustainability of the plans, arguing taxpayers couldn’t continue to bail them out, putting the pensions of workers at risk.
He put a plan in place to convert them to a shared-risk model, which had been successfully introduced in the Netherlands. As the name suggests, it puts more emphasis on both the government and the beneficiaries of sharing the financial risk. That means benefits can be lowered if the big retirement fund sinks, rather than just the government bailing it out all the time.
Despite pushback from retirees, most of the plans were converted to shared-risk in 2014, with three notable exceptions – those belonging to CUPE Local 1253, representing school bus drivers and custodians, CUPE 2745, representing educational support staff, and the New Brunswick Council of Nursing Homes Union, also a part of CUPE.
The two locals had their pension embedded in their contracts since the early 1970s, making it difficult for the Tory government to change their plans. The nursing home workers, meanwhile, are employed by private homes, with pension matters handled by the New Brunswick Association of Nursing Homes, even if the government is the de facto funder.
By 2021, Higgs was premier and several CUPE locals went on strike for 16 days, mostly over wages. However, to get the bus drivers and educational support staff to sign new collective agreements, the province offered their union leaders memorandums of agreements that established a formula for working out a new pension deal.
What happened since then is in dispute, with both sides providing correspondence to the judge in the Burton courtroom outside of Fredericton to support their viewpoint they weren’t at fault for a breakdown in talks.
The Higgs government, however, said the union hadn’t lived up to its end of the bargain and passed a law in December to unilaterally convert the pensions, a move condemned by labour leaders and the opposition Liberals and Greens.
The workers make on average between $30,000 and $40,000 a year and their pensions in retirement would be a fraction of that.
CUPE soon filed a lawsuit in the Court of King’s Bench to argue the Higgs government had violated the Charter of Rights and Freedoms, which guarantees the right to associate and collective bargaining, a case that’s expected to take up to a year or longer to decide.
In the meantime, the union sought an injunction from the court to halt the conversion of the plans until the charter case is decided.
Workers and retirees express unease
As part of the courtroom proceedings over five days, CUPE’s legal team presented six sworn affidavits from workers and retirees.
They wanted to underscore that the pension conversion was going to cause irreparable harm to plan members who would make life-altering decisions because of their worry and unease over the changes.
Although the judge struck some passages from the affidavits, based on objections from the province that they were full of opinion and hearsay, he let most of them stand.
One was from Louise Daigle, a Fredericton school bus driver for 20 years, who retired a week after she heard about the pension change, worried that the reforms would mean she couldn’t retire until age 65. Under the current plan, she can retire after 60 with no penalty.
“I felt like I was losing everything I had worked for over my career and my options were disappearing,” she wrote, adding that she had made lifestyle decisions, such as going out to restaurants with her husband, based on the expectation her retirement income would be guaranteed.
“I would have been more careful with my money.”
Another was from Lindsay Brown, a Saint John nursing home worker with 16 years’ experience. She said with the changes, she was torn between putting money into her children’s education fund or supplementing her retirement savings.
“I am feeling a panicked need to increase my savings, but I will have less money to work with, and no spare room in my budget,” she wrote. “There is nothing I can cut in my budget given the high cost of necessities of daily living such as childcare and food. The only thing I can imagine cutting is the savings for my kids’ education.”
A $123-million problem and then some
Marks didn’t question the sincerity of the sworn statements, but argued they could still be wrong. The province’s three shared-risk plans have outperformed the old, traditional plans, paying out higher indexation benefits during the last few years of costly inflation, she said.
“The shared-risk plans have performed exceptionally well for more than a decade,” she said, beaming.
Moreover, the Moncton lawyer warned that an injunction would only delay a conversion, expected to take over a year, of plans that are already tens of millions in the hole and whose financial position is steadily deteriorating.
She said in the case of the pension for the nursing home workers, the provincial government isn’t even the plan sponsor – the nursing homes, represented by the New Brunswick Association of Nursing Homes, would be on the hook, along with the workers for any special payments due.
The pension deficit for those 8,815 members alone has reached $123 million, a financial situation that will only continue to worsen if an injunction is granted, Marks argued.
“You can’t have these nursing homes folding. They provide a critical service. And the employees can’t pay for half of the special payments due. It’s not a sustainable solution.”
Her team argued there were only two ways a pension plan could have legal force – by statute or by contract.
Reading from two New Brunswick laws – the Pension Benefits Act and the Nursing Homes Pension Plans Act – Marks said there was no written requirement for the provincial government to act as the guarantor of the pension, meaning it had no obligation to pay for any shortfalls. Instead, she said the homes and the workers are responsible for any special payments, an enormous amount that would cost each individual member almost $18,000.
When it came to the two locals, Marks argued their pension plans only had protection if the collective agreements were in effect. But they had expired.
The union lawyers jumped on this idea, arguing that it was well established in labour law that the provisions of collective agreements were still in force until a new collective agreement was signed.
“There’s a statutory freeze under the Labour Relations Act,” said Engelmann, a lawyer from Goldblatt Partners in Ottawa. “The freeze only ends when a new collective agreement is signed.”
The union team also pointed to an arbitrator’s decision from 2022 that the province should make $75 million in special payments into one of the defined-benefit plans over a 15-year period to shore it up.
“Any changes to this plan must be bargained,” Engelmann insisted.
He also said trying to wind back the plan once a conversion happens would be hugely difficult and costly.
“It’s very hard to put Humpty Dumpty back together,” the lawyer warned.
Justice Robichaud said he’d deliver his decision later this month.
Written by John Chilibeck, Local Journalism Initiative Reporter, The Daily Gleaner
