Valuing Employee Pensions in Wrongful Dismissal Cases: A Boring but Important Issue
A long service, older worker is terminated. Under the terms of the individual’s pension plan, the employer is not permitted to continue his participation in the pension plan. So the question arises: when calculating wrongful dismissal damages, how do you calculate damages for pension benefits?
A recent case considered this question.
Imperial Oil Ltd. terminated Donald Dussault’s employment after 39 years of service when he was 63 years old. Imperial Oil immediately discontinued Mr. Dussault’s participation in its pension plan and Mr. Dussault decided to start collecting his pension benefits.
A judge concluded that Mr. Dussault was entitled to compensation in lieu of 26 months’ notice of termination. One component of his compensation was his pension.
Commuted Value of Pension
Imperial Oil called an expert witness who concluded that Mr. Dussault’s pension was worth $189,117 more than if Imperial Oil had kept him in its pension plan for the 26-month period after his termination. Mr. Dussault did not call an expert witness of his own on this issue.
Employee Claim for Damages for the Employer’s Contributions to his Pension During Notice Period is Denied
Since Mr. Dussault would have been enrolled in the pension plan if Imperial Oil had provided him with 26 months’ notice of termination, and since Imperial Oil would have made contributions to his pension during this notice period, Mr. Dussault sought damages equal to these contributions. The court concluded that the value of his pension was higher than if Imperial Oil had continued paying into his pension plan until the end of the 26-month notice period. However, the court refused to order the requested damages because Mr. Dussault could not prove any damages.
Employer Claim to Reduce Employee Damage Award by the Value of the Pension Benefits he Received During the Notice Period is Denied
Mr. Dussault collected pension benefits during the 26-month notice period. Imperial Oil asked the judge to deduct this amount from Mr. Dussault’s wrongful dismissal damages. However, the judge refused to do, concluding that pension benefits are a benefit employees have earned for their years of service and are not meant to be an indemnity for the loss of employment.
Lessons to Be Learned
- Every employer should require all employees to sign an employment contract with a legally enforceable termination clause. In this case, Imperial Oil could have reduced a 26-month common law reasonable notice period to as little as 8 weeks’ termination pay and 26 weeks’ severance pay. This is another case where a judge concluded that the common law notice period was more than 24 months.
- For long-service employees who are entitled to a lengthy common law reasonable notice period, damages for a reduced or an enhanced pension can be significant. I have represented clients who have not taken pension benefits during the notice period and the value of lost pension value (as opposed to an enhanced pension value in this case) has been significant.
- When valuating pension benefits, it is important to retain an expert. A slight change in actuarial assumptions can result in significant differences in a pension’s valuation.
For almost 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416-317-9894 or at [email protected]
The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.
Tags: Barrie Employment Lawyer Benefits Departing Employees Doug MacLeod Employee Benefits Employee Terminations Employment Contract Employment Law Barrie Employment Law Toronto Employment Lawyers Barrie Employment Lawyers Toronto MacLeod Law Firm Pension Pension Benefits Damages Pensions Reasonable Notice Of Resignation Termination Toronto Employment Lawyer Wrongful Dismissal Wrongful Dismissal Lawyers
Doug’s Top 5 Employment Law Stories of 2022
Here are my top 5 employment law stories for 2022: 1. COVID 19 - Temporary Layoffs This issue remains my number one story because this issue impacts so many court cases. Some judges have concluded that a temporary layoff set out in the Infectious Disease Emergency...
Reducing Litigation Risk
In a recent case, Pohl v. Hudson’s Bay Company, 2022 ONSC 5230 (CanLII),an employer was ordered to pay a long service employee the equivalent of about 3 years pay and contribute about $ 35 000 to his legal fees. Although this was a without cause termination case, it...
Employment Law Update: Electronic Monitoring Policy
A new amendment to the Employment Standards Act requires employers with 25 or more employees on January 1st of a given year to put in place a written policy regarding any electronic monitoring processes they use to monitor employees. The deadline for 2022 is October...