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More Legislative Changes Coming with Bill 66

Bill 66, Restoring Ontario’s Competitiveness Act, 2018 was recently introduced in the Ontario Legislature (“Bill 66”).  Bill 66—as the name suggests—aims to make Ontario more competitive by reducing regulatory burden and giving businesses more flexibility.

Bill 66 proposes to make the following changes to existing legislation:

  • Excess Hours of Work and Overtime Averaging Applications: Bill 66 proposes to amend the Employment Standards Act, 2000 (“ESA”) to no longer require approval from the Director of Employment Standards of an application for excess hours of work and overtime averaging.

Employers would still be required to enter into written agreements with employees to have employees work excess hours and to average overtime hours worked.  Additionally, employers can only average an employee’s hours of work for the purposes of calculating overtime pay over a maximum of four (4) weeks.

  • ESA Poster: Bill 66 proposes to remove the requirement for employers to provide both the ESA poster to employees and post it in the workplace. Employers will only have to provide the most recent version of the ESA poster to the employees.
  • “Non-Construction Employers”: Public bodies, including municipalities, school boards, hospitals, colleges and universities, will be deemed “non-construction employers” through an amendment to the Labour Relations Act, 1995 (“LRA”).

This proposed amendment to the LRA will help to prevent certain broader public sector entities from becoming bound to collective agreements for the construction industry, when these entities are not actually in the construction business.

  • Merging Pension Plans: The Pension Benefits Act will be amended to make it easier for private-sector employers to merge single-employer pension plans with jointly sponsored pension plans.
  • Exemption from Guardrail Requirements for the Auto Sector: For assembly lines, there will be a new, targeted exemption from guardrail requirements for a conveyor and raised platform.
  • Workplace Hazardous Materials Information System (WHMIS) regulation: This proposed amendment to WHMIS regulations would allow new labels to be placed on old containers, preventing the need to dispose of chemicals with old labels. By removing the need to re-purchase newly labeled chemicals unnecessarily, this would result in saving Ontario universities an estimated $60.2 million to $107.9 million.

Bill 66 was introduced and carried first reading on December 6, 2018.  As Bill 66 progresses through the legislature, the proposed amendments may change and new amendments may be put forth.  We will continue to keep you updated.

The author would like to thank Jonathan Meyer for his assistance with this blog.

More Legislative Changes Coming with Bill 66

The More Things Change… Ford Government Rolls Back Bill 148

On November 21, 2018, Bill 47—the Making Ontario Open for Business Act, 2018—received royal assent. Bill 47 makes numerous amendments to the Ontario Employment Standards Act, 2000 (ESA), the Labour Relations Act, 1995 (LRA), and the Ontario College of Trades and Apprenticeship Act, 2009. As outlined earlier, Bill 47 revisits the previous Liberal government’s labour reforms included in Bill 148 and eliminates many of its most controversial aspects.

The effective dates of the changes as outlined in Bill 47 are as follows:

  • The majority of changes with respect to the ESA come into force on January 1, 2019.
  • The changes with respect to the LRA came into force upon royal assent (November 21, 2019).

A summary of some of the significant changes is provided below.

EMPLOYMENT STANDARDS ACT, 2000

  • The scheduled minimum wage increase effective January 1, 2019 is cancelled. The $14.00/hr minimum wage will be maintained and will be re-indexed beginning in October 2020.
  • Equal pay for equal work will be removed on the basis of employment status and assignment employee status. However, the requirement for equal pay on the basis of sex will be maintained.
  • The 2 paid personal emergency leave days will be removed. Personal emergency leave days will be provided up to 8 unpaid days consisting of up to 3 days for personal illness, 3 days for family responsibility, and 2 days for bereavement. Employers will not be prohibited from asking for a certificate from a qualified health practitioner as evidence to support the request for personal emergency leave days.
  • For employees who regularly work more than 3 hours per day but attend work and thereafter work less than 3 hours, the employer will be required to pay wages equivalent to 3 hours of pay.
  • The new scheduling and on-call provisions will be revoked.
  • The reverse onus on employers regarding independent contractors will be repealed.

LABOUR RELATIONS ACT, 1995

  • The ability for trade unions to apply, when there is no certified bargaining agent for the employees, for an order requiring an employer to provide the trade union a list of all employees is revoked. Any applications under this section are immediately terminated and trade unions must destroy any employee lists they have received.
  • The Ontario Labour Relations Board is no longer required to certify a trade union for certain employer contraventions of the LRA.
  • The ability of the Ontario Labour Relations Board to review the structure of bargaining units and grant certain orders in certain circumstances is repealed.
  • The expansion of automatic, card-based certification for industries outside of construction is revoked.
  • Educational support in the practice of labour relations and collective bargaining is revoked.
  • The new first contract arbitration provisions are reversed.
  • Collective agreements will now be publically available on the Government of Ontario website.
  • The increase in fines for convictions under the LRA is reversed.
  • New methods of delivering notices and communications under the LRA are contemplated and corresponding presumptions with respect to receipt of these communications are included in the LRA.

Bill 47 did not repeal the increased vacation benefits nor the new leaves of absence (i.e. Child Death and Domestic or Sexual Violence Leave) which were introduced by Bill 148. Nonetheless, employers throughout the province will likely welcome these amendments which will help eliminate some of the uncertainty that was introduced along with Bill 148.

For those interested, the Ontario Minister of Labour, Laurie Scott, will be the keynote speaker at Dentons Canada LLP’s upcoming Labour, Employment and Pensions seminar on Friday, November 30. For more information regarding the seminar, please click here.

The More Things Change… Ford Government Rolls Back Bill 148

What happens to the pension when the pensioner disappears into thin air?

The Supreme Court of Canada recently agreed to hear an appeal of a Quebec case that deals with the obligations and rights of a pension plan administrator when a pensioner goes missing.

The facts are unique.  A 77-year-old retired university professor went for a walk one crisp autumn day and never returned.  He had been receiving a pension of approximately $7,000 per month from his former employer, Carleton University.  The type of pension that he had chosen to receive was a “life only” pension, meaning it would be paid only to him during his lifetime, with nothing left to his heirs or estate.

A ten-day police search found no trace of him.  When Carleton University found out that he was missing, it wanted to stop the pension payments.  But the professor’s former partner, heir and property administrator objected, pointing to the Quebec law that presumed him to be alive, until he can be declared dead after being missing for seven years.  So the University continued to make the pension payments.

Five years later the professor’s body was discovered in dense woods not far from his home.  A coroner concluded that his death was accidental, and that he had died shortly after going on that fateful walk.

The University had paid almost half a million dollars in pension benefits, from the date he went missing to the date his body was found.  The University wanted that money back.  It sued the professor’s former partner for reimbursement.

A Quebec Superior Court judge, and the Quebec Court of Appeal, agreed with the University.  They said that the University had been correct to continue the monthly pension payments for the five years that the pensioner was missing, because the pensioner was presumed to be alive then.  However, once the date of death was determined, the University was also correct to claim reimbursement of the pension payments that were made after the pensioner died.  The University had a retroactive entitlement to be reimbursed, in circumstances where no one did anything wrong.

The Supreme Court of Canada will have the last word on this sad and interesting case.

What happens to the pension when the pensioner disappears into thin air?

Cheers to the Ontario government: a tonic for dealing with pension statements for missing plan members

A helpful change to Ontario pension law has come into effect, coincident with the arrival of patio season. It is a refreshing tonic that will help administrators deal with pension plan members who are difficult to locate.

Until now, the obligation to send pension statements to former and retired plan members has been an absolute legal requirement. The fact that an administrator did not have correct (or any) address information, did not relieve the administrator from the legal obligation to send pension statements.  That has changed.

The Ontario Superintendent of Financial Services now has the authority to waive the administrator’s legal obligation to provide a pension statement that would otherwise have to be sent to an unlocatable member.  This is not automatic.  The administrator has to write to the Superintendent and demonstrate that the inactive member should be considered “missing”.

A message to pension plan administrators: please take this seriously.  Do not assume that there will be no repercussions if you simply don’t send statements to unlocatable members.  Have any of the biennial statements sent out this spring to former and retired members been returned to sender?  Find out who those people are, and write to the Superintendent now to request that he waive the pension statement obligation for those individuals.  Doing so will demonstrate that you understand and care about compliance with Ontario pension law.

This welcome change to Ontario pension law does not solve the problem of what to do with the payments owed to unlocatable members.  The Ontario government has promised to address that challenge.  In its April 2017 Budget the government stated that it was considering initiatives such as the possible establishment of a public registry where employers or administrators could post information regarding missing beneficiaries and individuals could search for missing benefits.  There may be more good news on this front in the coming months.

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Cheers to the Ontario government: a tonic for dealing with pension statements for missing plan members

Interesting times for employers with Ontario pension plans

Yesterday the Ontario Deputy Superintendent of Pensions released a formal statement that included the comment:  “these are interesting times in the pension sector.”  How true.

Many long-anticipated improvements to Ontario pension legislation, regulation and policies are finally coming into force.  The pension regulator will have more specific, helpful powers to target non-compliance issues.  Plan sponsors will have more choices in the design of pension plans, especially in the defined contribution sphere.  And many employers who sponsor defined benefit pension plans will be pleased by this morning’s Ontario government announcement about an entirely new framework for funding defined benefit pension plans, which will come into effect “in the coming weeks”.

We have written about some of these promised changes in prior posts (here and here).  We will be providing more details and strategic suggestions about these interesting developments, in future articles.  In the meantime, you can find information about this this morning’s announcement by the Ontario government here.

Please contact a member of Dentons’ Pensions and Benefits group for information and advice about how these significant changes will affect your business.

 

 

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Interesting times for employers with Ontario pension plans

Changes to the Canada Pension Plan: a field guide for Ontario employers

Are you an employer who is uncertain about what you should be doing to prepare for the changes to the Canada Pension Plan (CPP)?  This guide will help you.

The changes were announced by the federal government a year ago, and formal rules became law at the end of 2016.  Unlike the infamous Ontario Retirement Pension Plan, these government-run pension changes are here to stay.

Here is a summary of the changes.

 Mandatory contributions to the CPP by employers and employees will increase, starting January 2019.  The increases will be phased in gradually over several years.  By 2023 employers and employees will each be paying 5.95% of their eligible income to the CPP.  Right now they are each contributing 4.95% of eligible income.

It’s a significant increase in contributions.  The combined employer and employee mandatory contributions to the CPP will go from 9.9% of employees’ eligible income to 11.9% of their eligible income.  That’s a 21% increase.

And it’s an even bigger hit for higher-income employees and their employers.  Anyone with an annual salary of more than $70k (approximately), and their employers, will have to make additional contributions commencing 2024.

The upside is that the amount of the CPP benefit paid to Canadians will increase.  It is expected that the annual benefit paid by the CPP will increase by as much as 50%.  In today’s dollars, the maximum CPP annual payout would go from $13,370 to $20,000.  This full enhancement to the CPP benefit probably won’t be seen for approximately 40 years.

If you have Quebec employees, beware:  the CPP does not apply.  Changes to the Quebec Pension Plan are being considered, but it’s not known whether or when any changes will be made.

January 2019 is not far away.  If you will be making changes to retirement and savings plans as a result of the CPP changes, you may want to communicate those changes to employees in the next year or so.

As a starting point, here are some high-level strategic suggestions:

 If you have a Group RRSP or defined contribution pension plan:

  • Consider whether to reduce the amount of required employee contributions to your plan, so that there will be little or no impact on your employees’ take-home pay.
  • Consider reducing employer contributions to your Group RRSP or defined contribution pension plan, so that the overall employer costs of contributing to the CPP and your employer-sponsored plan remain level.  If you decide to do so, communicate the changes to employees now, so they are well aware in advance of any changes.

If you have a defined benefit pension plan:

  • Find out if there is anything in your pension plan that relates to the CPP.  Are employee contributions computed based on how much they contribute to the CPP?  Is there a “bridge benefit” that relates to the CPP?
  • Ask your actuary whether the liabilities of your pension plan will increase as a result of any provisions that relate to the CPP.
  • Consider amending your pension plan to lessen the impact of the CPP changes, if any, on the design of your plan.

If you have a union:

  • Find out if there are sections of the collective agreement that will restrict you from making changes to your retirement savings plans.  Consider letting the union know, in collective bargaining, that changes may be made due to CPP changes.
  • If the term of the collective agreement goes beyond 2018, formulate a plan to communicate to the union the fact that employee take-home pay will go down as a result of higher CPP contributions.

Please contact a member of the Dentons Canada pension and benefits group for assistance in understanding how the CPP changes will impact your organization.  Be prepared.

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Changes to the Canada Pension Plan: a field guide for Ontario employers

Who is a “parent” in the Ontario pension world? And why does it matter?

Any person who is the “spouse” of a member of a registered pension plan in Canada has rights regarding the pension entitlement of his or her partner. That important policy has been entrenched in pension legislation for decades.  Exactly who is a “spouse”?  The answer to that question has recently become a bit more complicated.

The Ontario government changed the Ontario Pension Benefits Act effective January 1, 2017 to recognize the evolving definition of a family, for legal purposes.  Administrators of registered pension plans should take steps now to ensure that their pension plan documentation and administration is keeping up with these changes.  Reputational and financial costs could be imposed on pension plan administrators who fail to recognize spouses’ rights to pensions, in this modern world where there has been an evolution of what constitutes a spouse.

The basic rules in Ontario are that two people are spouses for pension purposes if they are married to each other, or they fall within one of the following two categories:

  • they have been living in a conjugal relationship continuously for at least three years, or
  • they have been living in a conjugal relationship of some permanence for less than three years and are the parents of a child.

Effective January 1, 2017 a change was made to Ontario pension benefits legislation that is relevant to the phrase, “parents of a child”.

Prior to 2017, the Ontario legislation said that spousal pension rights under the parent category were triggered if the plan member and his or her partner were “the natural or adoptive parents of a child”.  That wording was simple.  Arguably, it did not capture circumstances where a child was conceived with assisted reproduction.  And it certainly did not address the complex issues of surrogacy or sperm donors.

The Ontario government has stepped in to address these complex issues. The definition of “parents of a child” in the Ontario pension benefits legislation now refers to provisions of the Ontario Children’s Law Reform Act.  That legislation has detailed provisions that address the complicated question of “who is a parent?”.  These are not simple provisions.  For example, they address circumstances of surrogacy where entitlement to parentage has been waived.  They also address circumstances of sperm donors where there is a written agreement, prior to conception, confirming that the donor does not intend to be a parent.

Pension plan administrators should consult their advisors to understand how to navigate these new requirements. Pension plan texts, member booklets, forms, and all other communications and administration must align with these changes.  Administrators will have to rely on experts to determine whether an individual is a spouse of a pension plan member, if the two individuals have been living together for less than three years, but may qualify as “spouses” because there is a child.

Administrators have a legal obligation to ensure that the correct individuals receive their pension entitlements. That means that these new Ontario requirements should be considered and implemented in all aspects of documentation and administration.

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Who is a “parent” in the Ontario pension world? And why does it matter?

Ontario regulatory form regarding pension plan contributions: comply!

Trustees and administrators of Ontario registered pension plans: beware of Form 7.

That’s the form that administrators of registered pension plans must complete, and send to their pension fund trustees, that summarizes the estimated employer and employee contributions that will be due to be made to the pension plans in future. The form must be provided by the registered administrator of every Ontario registered pension plan to the trustee, at least annually.  If there’s a change to the estimated future pension contribution requirements, the administrator must send a revised Form 7 to the pension fund trustee within 60 days of becoming aware of the change.

Trustees of pension plans (which for this purpose include insurance companies) are not required to complete Form 7’s. But trustees have an important, independent legal obligation to notify the Ontario Superintendent of Financial Services if they do not receive the required Form 7.  Further, if contributions to the pension plan are not received by the trustee in accordance with the estimates in the Form 7 received by the trustee, the trustee must notify the Superintendent.  There are prescribed time limits for all of these requirements.

In essence, the Form 7 rules require pension fund trustees to police timely plan contributions. The law requires trustees to blow the whistle if a plan administrator is not making contributions on time.

In 2013 a trustee was prosecuted in Ontario for failing to report the non-filing of a Form 7 with respect to a plan administrator who eventually filed for bankruptcy protection from its creditors. The trustee plead guilty and was fined $50,000.

The gravity of compliance with Form 7 rules was recently emphasized by the Ontario pension regulator in an announcement that can be found here.  A few days ago, the regulator released a revised Form 7 that can be found here, as well as a comprehensive User Guide that can be found here, to assist plan administrators in completing Form 7.  It also released two new standardized templates, to be used by pension fund trustees to report to the Superintendent when a plan administrator fails to submit a Form 7, or fails to make the contributions as summarized in a Form 7.  The templates can be found here.

Although Form 7 is a prescribed form, it does not have to be filed with the Ontario pension regulator. It is simply a required communication from plan administrators to pension fund trustees.  Do not take this as an indication that the Ontario pension regulator is indifferent about compliance with the Form 7 rules.  It has clearly demonstrated that it requires compliance, and it has provided a guide and templates to assist the pension industry with the rules.

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Ontario regulatory form regarding pension plan contributions: comply!

Witness the Creation of Ontario’s Modern Pension Regulator

To remain relevant and effective, industry regulators need to stay current. They must be attentive to economic realities, adapt to new technology and evolve with the industries they regulate. Ontario’s pension regulator is overdue for a major overhaul that will bring it into the 21st century.

Ontario’s Fall 2016 Economic Statement announced that government’s intention to introduce a new financial services regulator which will be known by the acronym FSRA (Financial Services Regulatory Authority). The FSRA announcement came shortly after the release of the Final Report, of the Ontario Expert Advisory Panel mandated to examine the Financial Services Commission, Financial Services Tribunal and Deposit Insurance Corporation.

The March 31, 2016, cover letter that accompanied the Panel’s Final Report stated that its recommendations for a ‘world-class regulatory system’ were prepared with “both the present and future in mind, and in light of industry and regulatory trends here and around the world.” It also recognized the rapid pace of change in the financial and pension sectors and concluded that the agencies under review had to be modernized and sufficiently independent, flexible, innovative and expert to facilitate the changes in governance, structure and accountability necessary to achieve the desired result.

Panel recommendations of particular relevance to the pension industry include:

  • FSRA should operate as an integrated financial services regulator with responsibility for, among other things, consumer protection (referred to as ‘market conduct’), prudential oversight and pension plans;
  • FSRA should be directed to protect beneficiaries while promoting a strong sustainable pension system that would operate in an efficient and fair manner, balancing the interests of all parties;
  • FSRA’s mandate should require it to use its authority to adequately, firmly and consistently discourage fraudulent activities or behaviours that mislead or harm consumers and pension plan beneficiaries;
  • FSRA’s mandate should require that it undertake its activities in a proactive manner;
  • to remain relevant and flexible, FSRA’s mandate should include a commitment to innovation and transparency – to stay abreast of those issues that could compromise its ability to satisfy its mandate;
  • the existing Financial Services Tribunal, which is housed within the current Financial Services Commission and, therefore, subject to potential conflicts, should be established as an independent tribunal with its own budget funded by government; and
  • the Financial Services Tribunal should have authority to adjudicate matters clearly articulated in its enabling statute, including appeals from certain decisions of FSRA.

Bill 70, Building Ontario Up for Everyone Act (Budget Measures), 2016, was introduced by the Ontario government on November 16, 2016, and passed ‘First Reading’ in the Legislative Assembly. Among other things, this omnibus legislation would:

  • enact legislation establishing FSRA, replacing both the Financial Services Commission and Deposit Insurance Corporation; and
  • amend the Pension Benefits Act (Ontario) (PBA) to provide the Superintendent of Pensions with authority to impose significant administrative penalties for contravening or failing to comply with the PBA.

It is too soon to tell whether all aspects of the Panel’s recommendations will be implemented by the Ontario government. The proposed legislation is bare bones and creates only the framework for the FSRA. It does not set a clear mandate other than the fact that FSRA will regulate specific financial sectors of the Ontario economy.

On the other hand, proposed changes to the PBA clearly demonstrate a new regime involving administrative penalties – a hallmark of modern regulatory systems, providing the muscle to enforce compliance. If adopted, the amendments will enable the Superintendent to quickly impose meaningful administrative penalties (up to $25K for corporations and $10K for individuals) to ensure compliance with legislative requirements, orders and undertakings. As an added jolt, administrative penalties may not be paid from the pension fund of an offending administrator.

While there is a right to a hearing if an administrative penalty is proposed by the Superintendent, the process is swifter and more appropriate than current regulatory measures that require Crown prosecution under the Provincial Offences Act (Ontario). The difference between an administrative penalty and offences prosecution can be likened to the difference between a speeding ticket and a drunk-driving charge. Both involve motor vehicles, but in the former case you can pay your fine and drive away, while in the latter you’re obliged to spend time in court and will likely want a lawyer.

Bill 70 represents an initial response to the Panel’s numerous recommendations. Nevertheless, with just these preliminary changes, pension administrators and their agents should brace for more fines and greater enforcement in the future. Industry professionals expect the Ontario government to implement more Panel recommendations in 2017 and sense that they are witnessing the creation of a modern, responsive and far more dynamic pension regulatory system for Ontario.

Witness the Creation of Ontario’s Modern Pension Regulator

Environmental, Social and Governance Factors: Should Pension Plan Administrators Look to Rating Agencies for Links Between ESG and Credit Worthiness of Target Investments?

In my August 17, 2016 post (found here), I summarized Ontario’s recent changes to the Pension Benefits Act and Regulation that require a pension plan’s statement of investment policies and procedures (“SIPP”) to include information as to whether environmental, social and governance (“ESG”) factors are incorporated into the plan’s SIPP and, if so, how those factors are incorporated.  I noted that while the incorporation of ESG factors into a pension plan’s SIPP is not a statutory requirement, the question arises as to whether a failure to consider ESG factors in your pension plan’s SIPP could be a breach of fiduciary duty.  I didn’t answer the question directly but did say that many of Canada’s largest public sector pension funds have now incorporated ESG into their investment policies.

Given that provincial pension legislation requires plan administrators to exercise the care, diligence and skill that a person of ordinary prudence would exercise when dealing with the property of another person, would that exercise not, by logical extension, include investigation of the consideration of ESG factors in the assessment of creditworthiness of investee entities?

Recent announcements by some of the world’s largest credit rating agencies recognize that ESG factors can affect borrowers’ cash flows and the corresponding likelihood that they may default on their debts. S&P Global Ratings, Moody’s, Dagong, Scope, RAM Ratings and Liberum Ratings signed a “Statement on ESG in Credit Ratings” (the “Statement”) in May of this year acknowledging that ESG factors are important elements in assessing creditworthiness of borrowers and, for corporations, “concerns such as stranded assets linked to climate change, labour relations or lack of transparency around accounting practices can cause unexpected losses, expenditure, inefficiencies, litigation, regulatory pressure and reputational impacts.”

Included in the Statement are 100 investors managing US $16 trillion of assets, all of whom are signatories to the six UN-supported Principles for Responsible Investment wherein the investors affirmed their commitment to:

  • incorporate ESG factors into investment analysis and decision-making processes;
  • seek appropriate disclosure on ESG issues by investee entities; and
  • report on activities and progress towards implementing responsible investment.

Several well-known Canadian institutional investment corporations are included in the list of 100 investors.

Rating agency reports that incorporate ESG factors in the assessment of credit risk may soon form part of the statement of the valuation method process required by pension regulators.

The Fall 2016 Corporate Knights article, Credit ratings and climate change, cited a 2015 report from the Center for International Environmental Law, which accused the rating agencies of repeating their risk analysis mistakes from the sub-prime mortgage debacle when it comes to fossil fuel investments: “In assuming a business as usual scenario, rating agencies may be artificially inflating the credit ratings and financial value of companies that contribute to global warming”.  The report added that “This poses significant risks for investors, and the climate, and could expose rating agencies themselves to legal liability.” The May 2016 Statement on ESG in Credit Ratings appears to be the first step in addressing the gap in credit rating which doesn’t necessarily consider sustainability and governance factors in credit ratings and analysis.

Plan administrators should seek legal advice to ensure their fiduciary duties are fulfilled when they embark on considering ESG factors in their investment decision making process.

Environmental, Social and Governance Factors: Should Pension Plan Administrators Look to Rating Agencies for Links Between ESG and Credit Worthiness of Target Investments?