Feb 9

Wrongful dismissal damages plus pensions

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Many employees who are terminated late in their careers question if they are able to sue their employer for wrongful dismissal as well as retire and collect a pension.

The Supreme Court of Canada has recently found that this is possible.

Applicable Law
In Sylvester v. British Columbia, [1997] 2 S.C.R. 315, the Supreme Court found that disability benefits should be deducted from the wrongful dismissal damages owed to the client.

Therefore if an employee is terminated and chooses to apply for short or long term disability these benefits must be deducted from their wrongful dismissal damages.

The Supreme Court ruled that they should be deductible on the basis that if they had ruled that the disability benefits should be in addition to wrongful dismissal damages, then it would be a ‘deterrence factor’ for employers in that they would be less inclined to set up disability plans for employees.

But what about pensioners? Should pension amounts be deducted from such a costs award if a pensionable employee chooses to litigate a wrongful dismissal matter? Many employers used Sylvester to attempt to deprive employees who chose to receive a pension from wrongful dismissal damages.

Recent Case Law
This very question was answered in the (very) recent case of IBM Canada Limited v. Waterman, 2013 SCC 70. The case involved a pensionable employee, Richard Waterman, who sued IBM Canada Ltd. (“IBM”) on the basis that they did not provide him with adequate notice.

At the initial trial, the trial judge found that the pension should not be deducted. IBM appealed on the grounds that the pension should be deducted, pursuant to Sylvester and related case law. The Court of Appeal dismissed the appeal. Once again, IBM appealed, this time to the Supreme Court of Canada.

Cost/Benefit Analysis
Just as the court found in Sylvester that the separation of disability benefits from wrongful dismissal damages would lead to a decline in companies efforts to provide their employees with disability plans, the court in Waterman found that Waterman should not have his pension deducted on the principle that allowing it to be deducted would have a negative effect in that it would “provide benefits to an employer dismissing pensionable employees”. The court went on to distinguish the case from that of Sylvester, stating at paragraph 46 that:

“In Sylvester, non-contributory disability benefits received during the notice period were deducted from wrongful dismissal damages otherwise payable. The benefits were intended to be an indemnity for lost wages while the plaintiff was unable to work, the plaintiff had not contributed to acquire the benefit, and policy considerations favoured deduction. “

Of course, in Waterman, the pension benefits were not intended as an indemnity. They were always intended to be provided to the Plaintiff after his employment ended. IBM made the argument that the Plaintiff was “better off than if the contract would have been fulfilled”, but the court rejected that argument, distinguishing pension benefits as something worthy of additional protection (para 57):

“The pension benefit, therefore, is the type of benefit which should not be deducted”.

Ongoing Advice
If you have been wrongfully terminated the area of law is in constant shift and you need legal advice. The financial difference for a long-term employee with a pension can be a huge amount. If you require assistance contact Monkhouse Law today.

We can assist you in the litigation process, and provide you with advice as to what benefits may be available to you in a court of law, according to the court’s decisions on cases like Waterman.