Supreme Court Finds Inability of Pension Plan Members to “Buy Back” Full Pension Credit for Job-Sharing Service to be Unconstitutional

On October 16, 2020, the Supreme Court of Canada released its decision in Fraser v. Canada (Attorney General). Justice Abella, writing for the majority, held that the inability of members who participated in a job-sharing program to “buy back” pension credits under the employer’s pension plan amounted to discrimination on the basis of sex, contrary to s. 15(1) of the Charter of Rights and Freedoms. In separate dissenting reasons, Justices Brown and Rowe on the one hand and Justice Côté on the other held that the appeal ought to have been dismissed, although for different reasons.

Background

Ms. Fraser, Ms. Fox, and Ms. Pilgrim (Employees) were employed by the Royal Canadian Mounted Police (RCMP) when they took maternity leaves in the early-to-mid 1990s. When they returned to full-time service, the Employees experienced difficulties in combining their work obligations with their childcare responsibilities. In December 1997, the RCMP introduced a job-sharing program that allowed two or more employees to share one full-time position. The Employees enrolled in the RCMP’s job-sharing program between 1997 and 2011. Most of the participants in the job-sharing program were women with young children.

The Employees participated in the RCMP’s pension plan (Plan), a contributory defined benefit pension plan. After enrolling in the job-sharing program, the Employees learned that they would not be able to purchase full-time pension credit for their job-sharing service. The Employees claimed that the pension consequences of job-sharing were illogical, unfair, and discriminatory because the Plan allowed members to purchase other gaps in service, such as a leave of absence without pay, thereby disproportionately and negatively affecting women. The Employees brought an application arguing that the pension consequences of job-sharing were contrary to s. 15(1) of the Charter.

Lower Court Decisions

The application judge found that job-sharing is part-time work for which participants cannot obtain full pension credit. In her view, this outcome did not violate s. 15(1) of the Charter because there was insufficient evidence that job-sharing was disadvantageous compared to an unpaid leave. She held that even if there were negative consequences to job-sharing, these were the result of the member’s choice to job share.

The Federal Court of Appeal upheld the decision of the application judge and held that job-sharing participants did not receive inferior compensation to members on leave without pay, and that any adverse impact on those participants resulted from their choice to work part time, and not from the Plan terms.

At the Supreme Court

Majority Reasons

In finding in favour of the Employees, the majority of the Supreme Court considered the test and type of evidence relevant to a s. 15(1) Charter claim. In assessing a s. 15(1) claim, a Court should apply the following analysis:

First, the claimant must prove a prima facie case of discrimination. Specifically, a claimant must prove that:

(a) The impugned law must have a disproportionate impact on members of a protected group. Two types of evidence may be used either together or independently to satisfy this evidentiary burden, namely:

i. evidence about the claimant group’s situation (i.e. evidence about the physical, social, cultural or other barriers that provide full context of the situation), and/or

ii. evidence about the outcomes the impugned law has produced in practice (e.g. statistical evidence showing a disparate pattern of exclusion or harm).

(b) The impugned law must have the effect of reinforcing, perpetuating, or exacerbating disadvantage. This may be done by examining the impact of the harm caused to the affected group in light of any systemic or historical disadvantages faced by the claimant group.

If the claimant has successfully met its onus at step 1 (a) and (b), then at step 2 the burden shifts to the government to show that pursuant to s. 1 of the Charter, the impugned law or state action is justified because, among other things, it is not arbitrary and is in furtherance of a legitimate state objective.

In the case of the Employees and the RCMP, the majority found that the negative pension consequences of job-sharing had an adverse and disproportionate impact on women based both on qualitative evidence relating to the situation of the Employees themselves and quantitative statistical evidence about the job-sharing program more generally. The majority said it was inconsequential that the Employees chose to job-share rather than pursue an unpaid leave: “The Court has consistently held that differential treatment can be discriminatory even if it is based on choices made by the affected individual or group”. Also significant to the majority’s opinion was that other types of leaves permitted the buy-back of pension credits whereas it was only the job-sharing program, used mainly by women with young children trying to maintain their position in the workplace, that did not have access to the same option.

The majority found that the impugned plan could not be justified under s. 1 of the Charter and subsequently issued a declaration that the Employees’ s. 15(1) Charter rights had been breached.

Dissenting Reasons

Justices Brown and Rowe delivered lengthy joint dissenting reasons, which emphasized that the s. 15(1) Charter analysis requires a contextual approach that in their view the majority disregarded. They found that the majority treated the Employees as full-time employees, despite the finding of the lower courts that the Employees worked part-time while job-sharing. This approach did not account for the context of the entire Plan, most notably how it defines and treats part-time members. The Plan did not contain specific provisions relating to job-sharing, but the relevant RCMP policies defined job-sharing as a form of part-time work. Therefore, job-sharers were treated as part-time members under the Plan. Justices Brown and Rowe found that it is inaccurate to speak of “buying back” service with respect to job-sharing, since the hours worked while job-sharing are already fully pensionable and there is no remaining time to “buy back”. They emphasized that no other Plan members were entitled to the benefit that the Employees were seeking; namely, to obtain full-time pension benefits in respect of a period where they had worked part-time hours.

In separate dissenting reasons, Justice Côté found that the claim failed at the first step of the s. 15(1) Charter analysis because the offending provisions of the Plan did not create a distinction on the basis of the enumerated ground of sex, but rather on the basis of caregiving responsibilities, which the Court has not recognized as an analogous ground under s. 15(1).

Conclusion

The Supreme Court’s decision reflects the ongoing debate about the appropriate test to be applied in determining whether there has been a breach of s. 15(1) of the Charter, and the type of evidence that an applicant must put forward to advance such a claim.

It is difficult to reconcile the Supreme Court’s majority analysis, which results in certain individuals being able to indefinitely earn a pension benefit for time they might in theory have worked but didn’t, with the fact that pension plans and some other non-wage benefits have in the past been viewed by courts to be a form of deferred wages.

While the Charter applies only to government actors (and therefore may impact pension plans created by a statute), it remains to be seen whether the analysis will be applied under human rights statutes to a broader range of employers who sponsor private pension plans.

Where the analysis applies, the decision could create a great deal of confusion for pension plan administrators, who may be forced to determine who is simply a part-time worker and who is working under a protected arrangement that entitles the individual to “buy” the service they are not working. The result could be that some pension plan sponsors consider amendments to narrow or restrict their plan’s permitted leave of absence buy-back provisions in response, the “chilling effect” about which two of the dissenting judges were concerned.

Should you require any further information about this decision, please contact Caitlin Morin of our Pension Benefits and Executive Compensation Group, Lesley Campbell of our Human Rights Practice Group or your regular Hicks Morley lawyer.

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