About 3,000 salaried retirees have won a class-action case against their former employer, General Motors of Canada Ltd., after the auto giant slashed their health and life insurance benefits as it scrambled to stay afloat during the financial crisis.
The ruling could cost the company hundreds of millions of dollars in past and future benefits that it tried to clear from its books as it teetered toward insolvency five years ago. The final bill must still be worked out, but the plaintiffs’ statement of claim initially demanded $350-million.
Faye Roberts, a spokeswoman for GM, said the company was disappointed with the decision and planned to file an appeal.
In a judgment released on Wednesday, Mr. Justice Edward Belobaba of the Ontario Superior Court ruled that GM’s contract language was not “sufficiently clear and unambiguous” to enable it to slash most of its retirees benefits unilaterally.
However, the judge ruled that in the case of a smaller group of retirees, 67 former executives, GM was entitled to deny them an enhanced set of benefits they were promised.
As outlined in the ruling, during the two-year financial meltdown from 2007 to 2009 GM slashed the benefits it was paying to its non-unionized salaried retirees and executive retirees, affecting semi-private hospital coverage, drug costs, and dropped the basic life insurance benefit to $20,000 from $100,000 or more.
GM argued that its benefit documents allowed it to “amend, modify, suspend or terminate” benefits “at any time,” but the judge ruled this only applied to employees, not retirees.
“The salaried employees, some of whom had worked for decades at [GM Canada] and were told repeatedly in the benefit documents that they could rely on the promised health care and life insurance benefits, were stunned,” the judge writes.
The class action case was originally launched by GM retiree Joseph O’Neill, who retired in 2002 and then saw his health and life insurance benefits slashed in 2007-2009. But he died last year, and another retiree was named as the representative plaintiff in his place.
A lawyer for the retirees, Louis Sokolov, said the plaintiffs were pleased with the decision: “These are people who were planning their retirement based on what was promised to them.”
Mr. Sokolov said the ruling could affect retirees at other companies in distress, depending on how their contracts are worded.