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Posts tagged: benefits

Valuing Employee Pensions in Wrongful Dismissal Cases: A Boring but Important Issue

By , November 6, 2018 10:18 am

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.

The Facts

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

  1. 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.
  2. 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.
  3. 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.

Turning the Page and Upping the Wage: Some Changes to the Employment Standards Act

By , February 10, 2015 12:40 am

Bill 18, the Stronger Workplaces for a Stronger Economy Act, 2014 received Royal Assent last year but certain sections did not take effect immediately.

Schedule 2 of Bill 18 sets out amendments to the Employment Standards Act (the “ESA”). This blog summarizes some of these legislative changes as they will take effect chronologically in 2015.

1. The Monetary Limits for an ESA Complaint Increases: Starting February 20, 2015, there will be no limit on the amount of money an Employment Standards Officer can order an employer to pay for wages that become due to an employee. Wages include termination pay and severance pay. This change will significantly benefit long-service employees who work for an employer with a payroll of over $ 2 500 000 and who secure alternative employment shortly after being terminated. For example, an employee with 26 years service earning $ 100 000 a year can file a no cost claim under the ESA for termination pay and severance pay totaling $ 65 384.62. Prior to this change, the maximum order that could have been issued was generally $ 10 000.

2. The Time Limit for Filing a Complaint under the ESA Increases: Starting February 20, 2015, an employee will have two years to file a complaint under the ESA. We believe this will result in more complaints being filed under the ESA. What are the implications for employers? Employers should start keeping better records- including internal documents that confirm when vacation is taken and when people work overtime. The current time limit is generally 6 months.

3. Employers Must Provide Employees with a ESA Poster: Within 30 days of May 20, 2015 in most situations an employer will be required to provide every employee with a copy of the most recent poster published by the Minister of Labour under the Employment Standards Act (ESA). A copy of this poster is found here. Failure to comply could result in a compliance order or a fine or a prosecution under the Provincial Offences Act.

4. The Minimum Wage Increases: Starting October 1, 2015 the minimum wage will automatically increase on October 1st each year. The increase is tied to the Consumer Price Index. This change will benefit, among others, students and workers in the retail sector.

5. Employers are Liable for Temporary Help Agencies Obligations: Effective November 20, 2015, a temporary help agency and the employer are jointly and severally liable for wages owing if the temporary agency fails to pay the employee some or all of the wages owing. In other words, an employer can be ordered to pay a temporary worker his or her wages even if the employer has already paid his or her wages to the temporary agency. We therefore recommend that an employer only use reputable, and well-financed temporary help agencies.

For the past 25 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]

Debunking the Myths about Probationary Employees

By , July 28, 2014 11:32 am

According to thelawdictionary.org the word probation means: “Determining if a candidate is suitable for a job before giving his full time creditation as a member of an organization.”

Most employers believe that a probationary employee can be terminated at any time with no notice. Not true.

To achieve this objective, the employer must clearly set out the employer’s rights in an employment contract.

For more information about employment contracts, click here

Here are five questions we are asked about probationary employees

Q1 – Can we avoid paying termination pay to a probationary employee?

A – Under the Employment Standards Act (ESA), an employer has no obligation to provide notice of termination to an employee with less than 3 months service. If the employee has signed an employment contract with a termination clause that limits the employee’s rights to ESA minimums then the employer can avoid this obligation.

For more information about the ESA, click here 

Q2 – Can we extend an employee’s probationary period?

A – An employer can extend the probationary period and we suggest reserving this right in an employment contract. However, an employer cannot avoid the minimum notice requirements under the ESA. An employee who has worked more than 3 months and less than a year is owed one week notice of termination (or one week pay in lieu of this notice). On the other hand, if the probationary period is extended, and the employee has not signed an employment agreement with a termination clause then the employee is entitled to “reasonable” notice of termination which could be three months or more. A big difference.

For more information on wrongful dismissal, click here

Q3 – Can we delay a scheduled wage increase at the end of a probationary period?

A – It depends on the wording of the employment contract. If the contract states that the person’s wage rate will be increased after 3 months without any qualification- then failure to do so is likely a breach of contract.

Q4 – Can we delay an employee’s eligibility to receive employee benefits?

A – It depends on the wording of the employment contract and the terms of the group benefit plan.  If the contract says the employee is entitled to enroll in group employee benefit plans after a 90 day waiting period without qualification then failure to do so is likely a breach of contract.

Q5 – Can we terminate an employee during the probationary period for any reason?

A – No. If a person becomes disabled during a probationary period and is terminated for this reason then there has been a violation of Ontario’s Human Rights Code. An employer cannot contract out of the Code. Accordingly the disabled employee in this example could commence an application under the Code and be awarded damages for lost income as well as general damages.

For more information on Ontario’s Human Rights Code, click here

 

For the past 25 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 at 416 317-9894 or at [email protected]

Employee Payroll Costs in Ontario: Nowhere to Go but Up

By , July 17, 2014 12:03 pm

The Minimum Wage is Increasing

On June 1, 2014 the minimum wage increased to $ 11 per hour for most employees. A momentous increase for employers? Perhaps not. But let’s take a look at the bigger financial picture; the cost of employing a person in Ontario is more than the person’s salary or wages.

A Mandatory Pension with an Employer Contribution is coming

Employers are not currently required to provide any employee benefits. However, it appears that the tables are turning. On July 14, 2014,the Ontario government announced an intention to create an Ontario Retirement Pension Plan “to help working families build a more secure retirement.” The proposed plan requires workers to contribute 1.9 per cent of their earnings up to $90,000, matched by a 1.9 per cent contribution from employers.

The Ontario Retirement Pension Plan, if passed into law, will be mandatory for the more than three million Ontarians without a workplace pension plan.

The $ 64, 000 Question: Employee or Independent Contractor?

Employers currently have two options when it comes to payroll costs: absorb ancillary wage costs (which are on an upward trajectory) or save these costs by contracting out certain business functions to a consultant.

When answering this question, employers need to consider the totality of all payroll costs.  To that end, this blog outlines some of the ancillary payroll costs that an employer must pay in addition to an employee’s salary or wages.

1. Payroll taxes

 Employment Insurance

Employers are generally required to deduct and remit the employee and employer contributions to the employment insurance commission.

In 2014, the employee’s contribution is 1.8 % of wages up to $48 600 or a maximum contribution of $ 913.68 per year.

The employer’s contribution (or additional payroll cost) is 1.4 of the employee’s contribution up to $ 48 600 or a maximum contribution of $ 1,279.15per year.

2. Canada Pension Plan

Employers are generally required to deduct and remit the employee and employer contributions to the Canada pension.

In 2014, the employee’s contribution is 4.95 % of wages up to $ 49 000 or a maximum contribution of $ 2425.50 per year.

The employer’s contribution (or additional payroll cost) is also 4.95 % of wages up to $ 49 000 or a maximum contribution of $ 2425.50 per year

3. Workers Compensation

Employers who are covered by the Workplace Safety & Insurance Act are required to pay premiums to the WSIB. The amount of premiums (or payroll tax) depends on the nature of the employer’s business. For example, the rate for employers in auto vehicle assembly is $ 3.59 per $ 100 earnings up to $ 84,100 or up to $ 3019.19 per year.

4. Employer Health Tax

Employers are required to pay up to 1.95 % of Ontario payroll as an employer health tax. No tax is payable on the first $ 450 000 of compensation.

Mandatory Paid Unproductive Time

An employee is entitled to receive two weeks paid vacation each year and vacation pay is generally calculated as 4% of the employee’s wages in a vacation year minus vacation pay received in that year.

An employee is generally entitled to 9 paid statutory holidays which is approximately equal to 4% of the employee’s wages.

Employers are also required to provide mandatory training to employees. In 2012, a new law required training under the Accessibility for Ontarians with Disabilities Act for employers with 20 or more employees, and by July 1, 2014 employers should have provided mandatory health & safety training to its employees.

The Cost of Terminating an Employee

An employee is generally entitled to a minimum amount of notice of termination. Employers rarely provide an employee with notice of termination so the employer is required to provide pay in lieu of this notice. The amount this termination pay depends on the employee’s years of service and whether the employee has signed an employment contract with a termination clause. An employee with more than 8 years service is generally entitled to between 8 and 104 weeks termination pay depending on whether there is a termination clause in an employment contract. That’s right. 104 weeks.

An employee is generally entitled to at least 5 weeks severance pay if the employee has worked more than 5 years and the employer’s payroll exceeds $ 2.5M.

The cost of payroll taxes

 An employer with an Ontario payroll of over $ 850 000 in the auto vehicles assembly business pays $ 6474.65 payroll taxes each year for an employee earning $ 50 000 (i.e  $ 1,279.15 for EI, $ 2425.50 for CPP, $ 1795 for WSIB, and $ 975 EHT).

In addition the employer is required to pay a minimum of $ 2 000 in vacation pay and $ 1730.77 in statutory holiday pay for a total of $ 10 205.42 which is about 20% of the employee’s salary.

If the Ontario Retirement Pension Plan comes into effect as proposed then this amount will increase by $ 975 per year.

How to Avoid Payroll Costs

As mentioned previously, one way to avoid payroll costs is to contract out certain work to a consultant. An organization is not required to pay payroll taxes on a consultant’s compensation or provide paid vacation or pay for statutory holiday. An employer must, however, be very careful when doing so because the Canada Revenue Agency (CRA) carefully reviews these arrangements. If the CRA concludes the consultant is really an employee then the CRA will order the employer to pay EI and CPP premiums on the consultant’s income. The CRA generally applies a four part test when determining whether a person is an employee or an independent contractor. The same test is generally applied by the Workers Compensation Board in connection with workers’ compensation premiums, and the Minister of Finance in connection with the Employer Health Tax. If an employer carefully considers the nature of the work and ensures that a consulting arrangement passes the four part test then an employer can save the above noted payroll costs.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on whether to hire employees or retain consultants to perform certain business functions. You can contact him at 416 317-9894 or at [email protected]

 

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