B.C. court stops changes to retiree health benefits

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A recent decision in the British Columbia courts highlights the difficulties employers may encounter if they attempt to change or abolish elements of post-retirement benefit programs available to company retirees.

Clarence Gustavson's former employer eliminated out-of-province coverage from his post-retirement extended health care coverage.

When he sued for damages the B.C. Supreme Court was sympathetic.

Gustavson was employed by Fletcher Challenge until he retired on August 1, 1994 at the company's request. His retirement letter said that retiree benefits include "basic medical, extended health care and dental benefits," without further explanation.

Although the final clause of the retirement letter stated that the terms of his retirement were binding on any successor companies, Fletcher Challenge reserved the right to amend or discontinue any benefit programs from time to time. However, the letter concluded by also reiterating that the benefits Gustavson was entitled to would not be substantially less that those outlined.

After purchasing the company from Fletcher Challenge, Timberwest Forest Corp. wrote to retired employees in late 2008 advising them that 12 months after the date of the letter, the company was going to discontinue outâ€'ofâ€'province coverage under the extended health care benefits provided to retirees. Arrangements were made for retirees to obtain similar coverage from Pacific Blue Cross at a 20% discount.

Gustavson brought proceedings against Timberwest in provincial court. The trial judge ruled that out-of-province coverage was promised to the respondent under the retirement arrangement and that the elimination of that coverage amounted to a "substantial reduction" in his benefits.

The company appealed to the B.C. Supreme Court. Read on to see what the appeal judge said.

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