‘Two hats’ pension doctrine endorsed by Supreme Court

Ruling involving HBC seen as good news for employers
By Sarah Dobson
|Canadian HR Reporter|Last Updated: 11/15/2010

The “two hats doctrine of pension law — in which an employer may or may not have fiduciary obligations at different times — has effectively been endorsed by the Supreme Court of Canada, according to industry experts.

In Burke v. Hudson’s Bay Co., Canadian employers were delivered an encouraging ruling. Essentially, when a company sells a division, it might not have to transfer any of a pension plan’s actuarial surplus when transferring assets to cover a pension plan’s defined benefits for former employees. In addition, an employer is allowed to pay plan administration expenses out of the fund.

For a long time, pension lawyers and others have put forward the idea that the same company can wear two different hats, depending on what it’s doing with its pension plan at any particular time, said Gary Nachshen, a partner in the employment, labour and pension group at the Toronto office of Stikeman Elliott. So employers may have fiduciary obligations when they’re acting as administrators, and not have such obligations if they’re not.