An employee who is terminated without cause is entitled to be made whole over the notice period by being placed by the employer in the same financial position the employee would have been in if their employment had continued over that period of time. But what happens to a long term employee who is terminated shortly before reaching the threshold to a full, unreduced pension? Is the employee who is forced to take a reduced pension due to termination entitled to compensation for the loss of the full pension? This question was addressed in the recent Ontario Superior Court decision of Arnone v. Best Theratronics Ltd.
After 31 years of service, a 53 year old employee was terminated without cause as part of a restructuring. The employee was approximately 17 months away from achieving a full, unreduced pension as well as a retiring allowance of 30 weeks’ pay in accordance with the employer’s policy. The employee was only provided with his minimum statutory notice entitlements at the time of termination. The employee commenced legal proceedings for wrongful dismissal seeking additional notice, payment of the retiring allowance as well as compensation for the loss of full pension.
At the Summary Judgment Motion, the Court determined that the employee’s close proximity to receiving a full, unreduced pension was an important factor in determining the employee’s common law notice entitlement and associated damages, along with the other Bardal factors. Whether the employee would have retired at that time or continued working was not relevant. The Judge also reviewed the evidence contained in an actuarial report regarding the present value required to invest outside of the pension to replace the monthly loss the employee will incur due to the difference in the monthly pension payments between the reduced pension and the full, unreduced pension the employee would have received.
In rendering it’s decision, the Court awarded the employee the following: (1) approximately 17 months notice (less the statutory notice previously paid) to bridge the employee to the full, unreduced pension; (2) $65,000.00 representing the value of the loss associated with the unreduced pension; (3) the retirement allowance of 30 weeks’ pay; (4) pre-judgment and post-judgment interests; and (5) costs and disbursements of $52,280.09. The Court stated that, “the [employer’s] decision not to protect the [employee’s] entitlement to an unreduced pension warrants the award of a monetary amount to compensate him for this loss.” The Court also stated that but for the unreduced pension, the employee’s reasonable notice period would be 22 months.
Lesson for Employees
An employee who is terminated shortly prior to being eligible for a full, unreduced pension may be entitled to additional damages on top of notice to compensate for the loss of the unreduced pension. The Courts will try their best to make a terminated employee whole during the notice period and this may include bridging the employee to the full, unreduced pension through an award of reasonable notice as well as damages for the loss of full pension. It is important for employees to obtain evidence to establish the pension loss to assist the Courts in awarding these damages.
Long term employees should consult with Employment Law Lawyers when they are terminated to ensure that all aspects of their compensation prior to termination are included in the termination package. Any items that are not included in the termination package or are not continued over the total notice period should be negotiated to ensure that the employee remains whole over that period of time.
Lesson for Employers
Employers should be cautious when terminating long term employees who are close to being eligible to receive a full, unreduced pension. In these circumstances, it may be best to defer termination until after the employee becomes entitled to the unreduced pension, or alternatively, if termination cannot be deferred, the employee should be bridged to the unreduced pension date so that the employer can avoid having to pay additional damages on top of notice for the loss of the pension due to early termination.
Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.
See also our article published online by Canadian Employment Law Today, October 23, 2014, “Employee awarded $65,000 for loss of pension”.
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