A Legal History of Employment Pension Plans in Canada
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Gifts or Rights? A Legal History of Employment Pension Plans in Canada by Elizabeth Jean Shilton A thesis submitted in conformity with the requirements for the degree of Doctor of Juridical Science Faculty of Law University of Toronto © Copyright by Elizabeth Jean Shilton 2011 Gifts or Rights? A Legal History of Employment Pension Plans in Canada Elizabeth Jean Shilton Doctor of Juridical Science Faculty of Law University of Toronto 2011 Abstract This thesis explores the role played by law in the current breakdown of the employment pension system, focusing on the legal status of pension plans within the employment relationship, and on the way lawmakers have defined, shaped and enforced employee pension rights. It traces the legal status of employment pensions from their 19th Century characterization as gifts to reward employees for long and faithful service, to their current 21st Century construction as terms of the contract of employment. The thesis argues that Canadian lawmakers within all three legal regimes structuring rights and obligations within the employment relationship – the common law, collective bargaining law and statute law – have contributed significantly to the overall dysfunction of the system by cultivating both substantive and procedural legal rules that locate critical issues concerning the scope, design, durability and distribution of employee pension rights within the control of employers. Predictably, Canadian employers have used that control to shape pension plans to meet their distinct business needs, needs that frequently collide with worker needs and expectations for good pensions. Even in the heyday of the „Fordist‟ work structures that fostered employment pension plans, the system delivered benefits very unequally, privileging the interest of elite ii workers who fit the „male breadwinner‟ mould, and failing to provide adequate and secure pensions for the majority of Canadian workers. Changes in the organization of work in Canada, including trends towards more precarious work, will continue to exacerbate the problems inherent in the system, escalating its distributional inequalities. In the current round of pension law reform, Canada‟s policy makers should abandon the effort to repair a system which is flawed at its core, and should instead seek a new foundation for pensions outside the employment relationship, a foundation which will not subordinate the pension interests of workers to the business interests of employers. iii Acknowledgments I am profoundly grateful to my supervisor, Professor Kerry Rittich, and to the members of my thesis committee, Professors Brian Langille and Morley Gunderson, for the generosity with which they shared their wisdom and scholarship with me, and for their skillful and patient guidance throughout the process of producing this thesis. iv Table of Contents CHAPTER 1 INTRODUCTION ......................................................................................... 1 1.0 INTRODUCTION ..................................................................................................... 1 2.0 THE CANADIAN RETIREMENT INCOME SYSTEM ......................................... 3 2.1 The Three-Pillar System ......................................................................................... 3 2.1 Employment Pension Plans .................................................................................... 5 3.0 THE INTERNATIONAL RETIREMENT INCOME POLICY CHALLENGE ....... 8 4.0 EQUALITY AND RETIREMENT INCOME SYSTEMS ...................................... 12 5.0 THE CENTRAL ARGUMENT OF THIS THESIS ................................................ 18 6.0 THE SCHOLARLY CONTEXT ............................................................................. 24 CHAPTER 2 PENSIONS AS GIFTS: EMPLOYMENT PENSION PLANS IN THE PRE-COLLECTIVE BARGAINING ERA ....................................................................... 32 1.0 INTRODUCTION ................................................................................................... 32 2.0 A BRIEF HISTORY OF PENSION PLANS IN CANADA ................................... 33 2.1 Introduction .......................................................................................................... 33 2.2 The Purpose, Structure and Function of Early Pension Plans .............................. 36 2.2.1 From Charity to Efficiency ........................................................................... 36 2.2.2 Pension Plans and Business Purposes ........................................................... 39 2.2.3 The Structure of Early Pension Plans ........................................................... 43 2.2.4 Railway Pension Plans: The Canadian Pacific Railway (“CPR”) Plan ........ 47 2.2.5 Public Sector Plans: The Federal Civil Service Plan .................................... 52 2.3 The Funding of Pensions ...................................................................................... 55 2.4 Contributory v. Non-Contributory Plans .............................................................. 60 3.0 THE LEGAL FRAMEWORK FOR EMPLOYEE PENSION CLAIMS AT COMMON LAW ..................................................................................................... 63 3.1 Introduction .......................................................................................................... 63 3.3 The Canadian Case Law ....................................................................................... 67 3.3.1 Early Concepts of Vested Rights .................................................................. 67 3.3.2 Procedural Pension Rights ............................................................................ 72 v 3.4 The Legal Status of Pension Rights in Canada in the Mid-20th Century ............. 77 4.0 CANADIAN PENSION PLANS PRIOR TO THE ADVENT OF COLLECTIVE BARGAINING ........................................................................................................ 82 4.1 Factors Influencing Change in the Canadian Pension Landscape ........................ 83 4.2 What Did Post-War Canadian Pension Plans Look Like? ................................... 89 5.0 CONCLUSION ........................................................................................................ 91 CHAPTER 3 EMPLOYMENT PENSION PLANS AND COLLECTIVE BARGAINING ...................................................................................................................... 95 1.0 INTRODUCTION ................................................................................................... 95 2.0 THE EVOLVING LEGAL CHARACTERIZATION OF PENSIONS .................. 97 3.0 BARGAINING FOR PENSIONS ........................................................................... 99 3.1 The Legal Battle over Pension Bargaining in the United States: The Inland Steel Case ........................................................................................................... 100 3.2 The Scope of Pension Bargaining in the Canadian Private Sector..................... 102 3.3 The Scope of Pension Bargaining in the Canadian Public Sector ...................... 104 4.0 PENSION RIGHTS WITHIN THE CONTEXT OF COLLECTIVE AGREEMENTS: THE ARBITRAL JURISPRUDENCE ..................................... 105 4.1 Introduction ........................................................................................................ 105 4.2 Reserved Management Rights and Mandatory Retirement ................................ 107 4.3 Arbitrability and the Evolution of the „Four-Category Test‟ ............................. 114 4.4 Individual Bargaining and the Recognition Issue .............................................. 117 5.0 ENFORCEMENT OF PENSIONS RIGHTS FOR UNIONIZED EMPLOYEES 120 6.0 PENSIONS AND THE CONSTRAINTS OF COLLECTIVE BARGAINING ... 130 6.1 Introduction ........................................................................................................ 130 6.2 The Canadian Collective Bargaining Structure .................................................. 131 6.2.1 Bargaining Units and Pension Units ........................................................... 131 6.2.2 Non-Employee Interests .............................................................................. 135 6.3 Unions and Pension Bargaining ......................................................................... 139 6.3.1 A Brief History of Unions and Retirement Income Issues ......................... 139 6.3.2 Some Institutional Issues ............................................................................ 143 6.3.3 Mandatory Retirement ................................................................................ 147 vi 7.0 THE IMPACT OF COLLECTIVE BARGAINING ON CANADIAN PENSION PLANS ................................................................................................................... 154 8.0 CONCLUSION ...................................................................................................... 161 CHAPTER 4 THE STATUTORY REGULATION OF EMPLOYMENT PENSION PLANS ................................................................................................................................. 163 1.0 INTRODUCTION ................................................................................................. 163 2.0 THE POLICY PROBLEM .................................................................................... 165 3.0 THE MAKING OF CANADA‟S THREE-PILLAR SYSTEM ............................. 170 3.1 The Evolution of the Canada