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Posts tagged: Wrongful Dismissal Lawyers

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.

Constructive Dismissal: The Bane of An Employment Lawyer’s Existence

By , January 12, 2016 9:16 am

Constructive Dismissal: The Bane of An Employment Lawyer’s Existence

Definition of Constructive Dismissal:  The Traditional Definition

Until recently, a constructive dismissal was found to take place when an employer breaches an implicit or explicit term of contract and that breach “substantially alters an essential term of the contract.” The judge would apply an objective test; that is, at the time of the breach, would a reasonable person in the same situation as the employee have felt that the essential terms of the contract were being substantially changed?

Definition of Constructive Dismissal: The New Definition

In 2015, the Supreme Court of Canada recognized a second type of constructive dismissal. This kind of constructive dismissal occurs if an employee can show the employer no longer intends to be bound by the employment contract; the employee does not have to show that a specific term of the employment contract has been breached. For more information on this case, read my previous post “Supreme Court of Canada Update: Administrative Suspension Equals Constructive Dismissal.”

Traditional Constructive Dismissal Cases

Until the last few years, most constructive dismissal cases involved changes in compensation, and/or changes in job duties. Recently, however, the courts have expanded constructive dismissal law to other situations.

Non-Traditional Constructive Dismissal Cases

Here are three non-traditional constructive dismissal cases:

  1. Unpaid Suspensions

It is generally good human resources practice to progressively discipline an employee and one step in this process is usually a suspension. Unless the employee agrees, the employer has the right to suspend him without pay, however, such a suspension is generally a termination at common law. Accordingly, we suggest that an employer include such a term of employment in an employment contract.

  1. Temporary Layoffs

Although a “temporary” layoff is permitted under the Employment Standards Act, such a layoff often constitutes a termination at common law unless the employee has agreed that a temporary layoff is a term of his employment. Accordingly, we suggest that an employer include such a term of employment in an employment contract.

  1. Paid Administrative Leaves

In 2015, the Supreme Court of Canada concluded that an employer does not generally have the right to withhold work from an employee unless it can demonstrate that it is reasonable and justified. Furthermore, this court stated that an administrative suspension will usually not be justified where there has been no communication with the employee about the reason. Accordingly, we suggest that an employer provide reasons for the leave to the employee before the leave commences or include such a term of employment in an employment contract.

For more information on constructive dismissal law, read our other blogs on constructive dismissal.

For the past 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship including constructive dismissal cases. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

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