2011 QCCA 578, 2011 QCCA 578

Unofficial English Translation Velk c. Université McGill/McGill University 2011 QCCA 578 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-019801-091 (500-17-045819-086) DATE: March 24, 2011 CORAM: THE HONOURABLE ANDRÉ BROSSARD, J.A. FRANÇOIS DOYON, J.A. GUY COURNOYER, J.A. (AD HOC) THOMAS JAMES VELK KOHUR GOWRISANKARAN LAWRENCE MYSAK ISZTAR ZAWADSKI HENRY LEIGHTON WILLIAM G. BROWN NEVILLE SANCHO DANIEL GUITTON APPELLANTS – plaintiffs v.

UNIVERSITÉ McGILL / McGILL UNIVERSITY RESPONDENT– defendant JUDGMENT [ 1 ] The appellants appeal from a judgment of the Superior Court, District of Montreal (the Honourable Madam Justice Hélène Poulin), rendered on June 1, 2009, which dismissed with costs the motion for a declaratory judgment and a permanent injunction by the appellants, who are professors at the respondent institution.

With their motion, the appellants asked the Superior Court and are now asking our Court to: DECLARE that Plaintiffs are entitled to receive employer’s pension contributions and to contribute to the McGill Pension Plan between the age 69 and 71; DECLARE inoperative the amendment to the plan adopted to take effect on December 31, 2007 to the extent to which they conflict with this right; IN ADDITION, TO ISSUE a permanent injunction ordering Defendant to contribute and to allow contribution by Plaintiff to the McGill Pension Plan when Plaintiffs are between age 69 and 71; THE CONTEXT [ 2 ] The pension plan put in place by McGill University (“McGill”) for its employees is a private plan subject to the Supplemental Pension Plans Act . [1]

Section 73 SPPA , like the McGill pension plan, sets the normal retirement age at 65. When a member decides to continue working after that date,

section 76 SPPA states that his normal pension is in principle postponed until retirement. According to the trial judge, and this is the crux of the dispute,

section 78 SPPA provides that, during the postponement period, payment of contributions by the member is optional if it does not give rise to a concurrent contribution by the employer. [ 3 ] On the strength of these provisions, McGill decided, starting January 1, 1997, to extend to 69 the age to which members may contribute to the pension plan. [2] It also undertook to contribute to the pension plan of those members who continued to work for it until they attained age 69. [ 4 ] At that time, this key age coincided with the age at which members of a pension plan were obliged to begin receiving retirement benefits under the tax legislation then in effect. [ 5 ] In December 2007, with the adoption of the Act to implement certain provisions of the budget tabled in Parliament on March 19, 2007 , [3] Parliament raised the obligatory conversion age from 69 to 71, a point that marked the start of the payment of retirement benefits to a member, as well as the end of the tax holiday he could benefit from until then.

Section 34 of this Act, which

amends the Income Tax Regulations , [4] states that: 34.

(1) Subparagraph 8502( e )(

i) of the Regulations is replaced by the following: (

i) requires that the retirement benefits of a member under each benefit provision of the plan begin to be paid not later than the end of the calendar year in which the member attains 71 years of age except that, (

A) in the case of benefits provided under a defined benefit provision, the benefits may begin to be paid at any later time that is acceptable to the Minister, if the amount of benefits (expressed on an annualized basis) payable does not exceed the amount of benefits that would be payable if payment of the benefits began at the end of the calendar year in which the member attains 71 years of age, and (

B) in the case of benefits provided under a money purchase provision in accordance with paragraph 8506(1)( e.1 ), the benefits may begin to be paid not later than the end of the calendar year in which the member attains 72 years of age, and (2) Subsection (1) applies after 2006 . [Emphasis added] [ 6 ] Subsection 36(2) of the Budget Implementation Act, 2007 also amends paragraph 8506(2)(c.1) of the Income Tax Regulations as follows: 36.

(2) The portion of paragraph 8506(2)( c.1 ) of the Regulations before subparagraph (

i) is replaced by the following: ( c.1 ) no contribution is made under the provision with respect to a member , and no amount is transferred for the benefit of a member to the provision from another benefit provision of the plan, at any time after the calendar year in which the member attains 71 years of age , other than an amount that is transferred for the benefit of the member to the provision … (4) Subsections (1) to (3) apply after 2006 . [Emphasis added] [ 7 ] In short, under these legislative amendments, no contribution may be paid into a pension plan after the end of the calendar year in which the member attains 71 years of age.

Although tax-deductible during the capitalization period, the contributions accumulated by the member then compulsorily begin to be paid to him in the form of a taxable pension. In brief, the tax provisions do not force the member to retire, but they oblige him to receive his pension even if he continues to work. [ 8 ] On December 31, 2007, McGill amended its employees’ pension plan in order to harmonize it with the text of the Income Tax Regulations , increasing to 71 the age at which its employees must begin receiving their pensions. Exhibit D-2 shows the amendments to

section 6.3 of the pension plan: [5] 6.3. A Member may elect to remain in the service of the University beyond the normal retirement date. In such event, the commencement of such Member’s Retirement Benefit shall be delayed until such Member’s actual retirement date and required contributions by the Member and the University will continue until such date, provided that in no event shall the Retirement Benefit for such Member commence later than the last day of the calendar year in which such Member reaches the age of 71 69 years or such other date as may be prescribed by Applicable Legislation from time to time .

McGill did not, however, change the age to which it and its employees may contribute to the pension plan, which continued to be the age of 69. [ 9 ] The appellants would like to be able to increase their pension plan until they reach age 71 by continuing their own contributions to the plan after age 69 and by requiring that McGill do likewise. According to them, McGill has deprived them of a benefit to which they are entitled because of their age, which constitutes a form of discrimination based on age in contravention of the Charter of human rights and freedoms . [6] [ 10 ]

Section 10 of the Quebec Charter is the only provision cited by the appellants in support of their motion. The Canadian Charter of Rights and Freedoms and its

section 15 are not at issue in the dispute. Moreover, before us, the appellants relied on

section 19 of the Quebec Charter concerning the right to equal wages for equivalent work. [ 11 ] In my opinion, this provision has no application to this matter. Contributions to a pension plan are not part of wages or salary.

Pension constitutes at most deferred wages whose value is above all a function of years of service and contribution and of age at retirement, which gives rise to it. [ 12 ] In the instant case, there is no distinction between the amount of the pension that was to be payable on the day of retirement and that is crystallized for all, at the same maximum age of 69. [ 13 ] There is therefore no discrimination in this respect against those who decide to postpone their retirement until age 71 and who are not deprived of any Charter right or contractual right.

THE JUDGMENT A QUO [ 14 ] After having stated the general context of the matter before her, as well as the parties’ arguments, Poulin J. pointed out that, under

section 10 of the Quebec Charter , a distinction based on age is not discriminatory if it is authorized by law. It is the very nature of the SPPA to establish distinctions based on age. The Act allows McGill to end the contributions of its employees when they reach age 65. In this context, to state that the Quebec Charter does not allow it to end the contributions when the employees are 69 would be ironic in that McGill offers its employees more than what the law requires. In brief, the aged-based distinction that the appellants complained of is authorized by law, in this instance by the SPPA .

Adding that a more generous application than what the law requires cannot constitute a discriminatory distinction, Poulin J. dismissed the appellants’ motion.

[ 15 ] The appellants appeal from the judgment. The appellants’ factum raises only one disputed question, namely whether the trial judge committed an error by concluding that the age-based distinction that the appellants complained of is authorized by law and therefore does not conflict with

section 10 of the Quebec Charter . SUBMISSIONS OF THE PARTIES [ 16 ] The appellants fault the judge for having decided that the SPPA enables an employer to put an end to contributions when the member attains the normal retirement age of 65, although it does not explicitly say so.

According to them, the distinction created by the respondent for employees between the age of 69 and 71 is therefore not based on any clear legislative authorization. [ 17 ] They add that this distinction runs counter to the principle whereby the employer must without discrimination pay equal salary or wages to employees who perform equivalent work. According to them, the professors in this age group have the same duties and obligations as the others in terms of research and teaching.

Finally, the appellants point out that this distinction could even be considered a form of illegal pressure to encourage them to take early retirement. [ 18 ] Lastly, they contend that the trial judge committed an error in interpreting the Quebec Charter when she decided that there are major differences between it and the Canadian Charter of Rights and Freedoms and that she allegedly stated that the Quebec Charter does not make equality a fundamental right. [ 19 ] For its part, the respondent points out that adopting the appellants’ point of view would oblige all employers that have put in place a private pension plan to contribute to it until members who continue to work after the normal retirement age attain 71 years of age, which in the majority of cases would involve the need for the employer to contribute for six additional years. [ 20 ] The respondent’s position is that if there is nothing discriminatory in having a pension plan that provides that contributions will stop at the normal retirement age, as was the case for McGill until 1997, it follows that, a fortiori , there is nothing discriminatory in voluntarily extending contributions beyond age 65, as was the case from 1997 to 2007, even if this voluntary extension is not for the entire period provided for other purposes by the tax regulations. [ 21 ] According to the respondent, the appellants have confused two separate concepts, namely the mandatory conversion age imposed by the tax authorities and the maximum contribution age.

It points out that no provision of the SPPA obliges an employer to contribute to a pension plan beyond the end of the month in which the member attains the normal retirement age, namely age 65. In addition, an employer is never obliged to offer a pension plan to its employees and, moreover, McGill’s pension plan provides that professors are not even obliged to join it. [ 22 ] The respondent adds that normal retirement age simply constitutes the age at which a member may, on certain conditions, require that he begin to withdraw his pension.

The different applicable tax rules, in and of themselves, do not govern pension plans except that they impose a specific mandatory date for the end of contributions as well as a specific mandatory ultimate date when payment of the pension must begin. [ 23 ] Since 2007, subparagraph 8502 ( e )(

i) of the Income Tax Regulations has set the time of mandatory conversion no later than the end of the calendar year during which the member attains age 71. Paragraph 8506(2) (c.1) of the same Regulations prohibits any contribution from that time. The respondent argues that these provisions of a purely fiscal nature do not oblige the employer to contribute to the pension plan until that time and have no impact on the SPPA . [ 24 ] According to the respondent, the trial judge committed no error by concluding that the distinction that the appellants complain of is allowed by the SPPA .

Under this Act, contributions may stop at the normal retirement age, which is set at 65. If, and only if, the pension plan provides for payment of contributions during the postponement period, the contributions must respect the rules established in sections 78 et seq. SPPA . By offering its employees conditions that are more advantageous than those provided in the Act, the pension plan offered by the respondent cannot be deemed discriminatory, especially as the second paragraph of

section 5 SPPA states that a pension plan may provide conditions that are more advantageous than those imposed by the Act. ANALYSIS [ 25 ]

Section 10 of the Quebec Charter states that: 10. Every person has a right to full and equal recognition and exercise of his human rights and freedoms, without distinction, exclusion or preference based on race, colour, sex, pregnancy, sexual orientation, civil status, age except as provided by law , religion, political convictions, language, ethnic or national origin, social condition, a handicap or the use of any means to palliate a handicap.

Discrimination exists where such a distinction, exclusion or preference has the effect of nullifying or impairing such right. [Emphasis added] [ 26 ] In this case, the fact that the pension plan provided by McGill clearly establishes a distinction based on age is not challenged. Indeed, it is clear that the group aged 69 to 71 is treated differently from the group aged 65 to 69. In the instant case, the question is therefore to determine whether this distinction or difference is provided by law.

An affirmative answer to this question would, in my opinion, ipso facto resolve the dispute between the parties. [ 27 ] The McGill pension plan was established and introduced under the authority of the SPPA , of which the following provisions are in my opinion the most relevant: 37. The member contribution is the contribution that an active member is required to pay or the amount he elects to pay with a concurrent contribution by the employer. The employer contribution is the contribution that the employer is required to pay.

An additional voluntary contribution is the amount that a member elects to pay without a concurrent contribution by the employer. … § 3. — Normal pension 73. A normal pension is a retirement pension, payment of which begins at normal retirement age . Normal retirement age shall not be later than the first day of the month following the month in which the member attains 65 years of age . 74. Unless

section 76 prescribes the postponement of the normal pension, every active member, except an active member who has received a retirement pension under the pension plan, is entitled to the normal pension on attaining normal retirement age . § 4. — Postponed pension 75. A postponed pension is a retirement pension, payment of which begins after normal retirement age . 76. The normal pension of a member shall be postponed if, after normal retirement age, he remains employed by the employer by whom he was employed at normal retirement age. … 78.

If contributions are paid during the postponement period , the resulting additional amount of pension shall be of a value equal to or greater than that of the benefits that could be purchased, at the end of the postponement period, with the member contributions paid during such period, including accrued interest. The additional pension must also meet the requirements set out in

section 84. 79. Where all or part of a normal pension is postponed , the amount of pension not paid during the postponement period shall be adjusted at the end of the postponement.

The pension plan shall prescribe the adjustment formula. [ Emphasis added] [ 28 ] It seems clear to me from these provisions that everything that may occur after the date on which the employee reaches normal retirement age, namely the age of 65, becomes strictly optional and imposes no obligation of any kind whatsoever in terms of contributions, whether the contributions of the member or those of the employer, the only obligation being postponement of payment of the normal pension of a member who continues to work after normal retirement age. [ 29 ] The employer remains the sole master of the pension plan, subject only to the obligations imposed by the Act or freely granted to the employee by agreement, whether on a group basis or an individual basis, which is not the case here. [ 30 ] This choice, which is the employer’s alone, seems to me to be clear from

section 78 supra . [ 31 ] In brief,

section 78 does not deprive the member of a right during the postponement period, but provides clearly that a concurrent contribution by the employer to the payment of contributions is not mandatory. [ 32 ] Thus, relying on the aforementioned provisions, and as already stated, McGill decided in 1997 to adjust the pension plan, whose normal application age was 65, to the new tax provisions enabling any citizen to continue contributing on a tax-free basis to his RRSP or to another individual pension plan eligible for the tax holiday until age 69 and to provide the obligation of withdrawing his pension on expiry of that term.

McGill was not obliged to do so but voluntarily introduced this so-called postponement formula.

When, in December of 2007, the legislature again extended its tax provisions by increasing the mandatory conversion age from 69 to 71, McGill, as it was entitled to do, refused to follow them by maintaining 69 as the age limit for contributions. [ 33 ] One can note, in passing, that this decision by McGill did not deprive its members of any right whatsoever in comparison with the general population because nothing prevents a professor who attains age 69 from contributing to a personal RRSP the amount of what would have been his normal contribution to the McGill plan, from age 69 to age 71, if he so desires. [ 34 ] This challenged distinction is, moreover, not the only one found in the pension plan at issue, which apparently has never been the subject of any challenge whatsoever.

It is enough to point out, for example: - A professor is not obliged to be a member of the pension plan (s 3.1); - Any member of the plan is free to contribute voluntarily an additional amount over and above the base amount (s 4.1.3); - The basic contribution percentages in terms of income vary substantially depending on whether the member is aged 39 or younger, aged 40 to 49, or aged 50 or older on joining (s 4.3); - The normal retirement age is always 65 (s 6.1). [ 35 ] The amount of the pension, or the value of the funds accumulated individually in the event of redemption pure and simple at the time of retirement, both depend essentially on the contributions made to the employee’s individual account, by the employer and the employee (s 6.4.1), and the impact of the number of years of service is limited to an amount established as a function only of the normal retirement age of 65 (s 7.4.2).

[ 36 ] No evidence was filed into the record to establish, in fact, what the actual financial impact would be for the member. [ 37 ] If any doubt remains regarding the scope of

section 78 supra of the Act, the Journal des débats of the National Assembly of Tuesday, June 13, 1989, during the detailed study of the draft Supplemental Pension Plans Act before the Standing Committee on Social Affairs and the appearance by senior managers of the Régie des rentes du Québec, who are responsible for its application, leaves no doubt.

An employer’s contributions to a pension plan after the normal retirement age are essentially optional. [ 38 ] In brief, an employer has no obligation to set up a pension plan (s 6 SPPA ) and, if it does so, it has no obligation other than that established by the Act concerning the age at which a member may receive his retirement pension or stop any contributions even if he continues to work, namely the age of 65 established by law. [ 39 ] The Act also provides, in sections 75 to 78 supra , the rights of the members and the obligations of the employer when the employee continues to work after normal retirement age. [ 40 ] The use, in

section 78, of the expression “[ i]f contributions are paid” clearly shows that the plan may provide that payment of contributions will stop at any time after the member reaches normal retirement age. If the plan provides that contributions may be paid during the postponement period, however, which is the case here, such contributions shall respect the aforementioned provisions of the Act, which is also the case here. In brief, the SPPA provides the strictly optional nature of contributions during the postponement period.

McGill could therefore very well provide for cessation of contributions at normal retirement age, namely age 65, which was the case until 1997. By allowing its members to contribute until age 69, McGill gave them more advantageous conditions that those imposed by the Act, which was explicitly allowed by the second paragraph of

section 5 SPPA . [ 41 ] In addition, McGill has no obligation to set the age at more than 69. The distinction likely to result therefrom is provided for and authorized by law so that there is no discrimination arising therefrom within the meaning of

section 10 of the Quebec Charter . [ 42 ] To conclude, the case law clearly establishes that, contrary to

section 15 of the Canadian Charter of Rights and Freedoms , the discrimination prohibited by

section 10 of the Quebec Charter exists only when a fundamental right stated elsewhere in the Charter is infringed for one of the reasons contained in this

section ( Commission scolaire St-Jean-sur-Richelieu v. Commission des droits de la personne du Québec ; [7] Ruel v. Marois ; [8] Roger Gosselin et autres v. Procureur général du Québec ; [9] Gosselin v. Québec (Procureur général) ). [10] This is not the case here. [ 43 ] During the deliberations, the parties referred us to the recent decision of the Supreme Court in Withier v. Canada (Attorney General ) [11] , which concerns the

interpretation of

section 15 of the Canadian Charter of Rights and Freedoms in the context of a challenge of the reduction of the federal supplementary death benefit because of the age of the deceased. [ 44 ]

Section 15 is not at issue in our appeal. Even so, Withier confirms our conclusion that the aged-based distinction of the pension plan put in place by McGill University is provided for by law and does not create “a disadvantage by perpetuating prejudice or stereotyping”. [ 45 ] For all these reasons, the Court is of the opinion that the judgment a quo is well founded in law and would therefore dismiss the appeal with costs. ANDRÉ BROSSARD, J.A. FRANÇOIS DOYON, J.A. GUY COURNOYER, J.A. (AD HOC) Mtre Julius H. Grey Mtre Véronique Cyr Grey, Casgrain For the appellants Mtre Gregory B. Bordan Ogilvy, Renault For the respondent Date of hearing: January 24, 2011