An Ontario court on Thursday dismissed an appeal by the union representing former Nortel Networks Corp. employees seeking retirement and severance payments.

The decision by the Court of Appeal in Toronto involves the Canadian Auto Workers union, employees who retired from Nortel, which has its corporate headquarters in Toronto, and former workers who were fired.

Former Nortel workers say they face living on welfare or unemployment insurance if they don't get their pensions. (Paul Sakuma/Canadian Press)

Judge Stephen Goudge wrote that a collective labour agreement between Nortel and its union only applied to current employees, and not retired workers.

The union and former employees had argued that the agreement covered both the 45 current workers and those who were retired or were laid off. They argued that retired workers should receive termination and severance payments in addition to monthly retirement payments.

The decision upheld a June 18 ruling in the Ontario Superior Court that rejected arguments that Nortel violated the law when it refused termination, severance and vacation pay to the former employees.

Nortel filed for bankruptcy protection in January and began selling off its units one by one.