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Fired senior entitled to pension and 20 months pay

Posted by on Jan 28, 2014 in HR Issues, Legal, Toronto Star | 0 comments

By Sheryl Smolkin

Toronto Star (edited version)

December 23, 2013

(not posted on line)


The Supreme Court of Canada has confirmed decisions of the British Columbia Supreme Court and Court of Appeal that a fired 65-year old IBM employee with 42 years of service was entitled to receive 20 months of pay and benefits without the deduction of pension payments received during the same period.

This judgment means that fired, older Canadians of pensionable age are entitled to collect both their pension and damages for wrongful dismissal for the full period of common law notice based on number of years they were employed by the company.

When IBM Canada Ltd. wrongfully dismissed long-time employee Richard Waterman with only two months of working notice, there was no longer a mandatory retirement policy in place for company employees.

Because he was entitled to a full defined benefit pension under the company plan, his termination had no impact on the amount of his pension benefits. However, the company told him that upon leaving the organization he would be treated as a retiree and must begin receiving pension benefits of approximately $2,124 per month on June 1, 2009.

Waterman sued for wrongful dismissal. The trial judge awarded him $93,305 in damages, based on the salary and benefits he would have earned if he had worked through the additional 18 months of notice, less the income earned from his new employment as an insurance agent during that period.

IBM appealed the decision to the BC Court of Appeal and then to the Supreme Court of Canada. Before the courts at all three levels, IBM argued that damages for wrongful dismissal should not exceed the former employee’s actual loss of income.

The company noted that if Waterman had been given adequate working notice of termination he would not have received both his employment income and his pension benefits during the notice period. Therefore, the company asked that 18 months of pension payments be deducted from his damages for wrongful dismissal.

Waterman urged the courts to reject IBM’s position. He compared the pension to a nest egg like an RRSP or savings account, which IBM could not take advantage of to offset the damages awarded. He also argued that he could have transferred the value of his pension to another savings vehicle if he had left employment with IBM before reaching the age of 65 and his retirement savings would consequently have been out of reach.

In the majority decision, Justice Thomas Cromwell noted that benefits received by a person through “private insurance” are generally not deductible from damage awards. While there is no single marker to establish which benefits fall within the private insurance exception, he said the more closely the intention of the benefit was to pay back the former employee for losses arising out of the termination, the stronger the case for deduction.

In this case he ruled that the facts clearly supported not deducting the retirement pension benefits from wrongful dismissal damages. While IBM made all of the contributions to fund the plan, Waterman earned his entitlement to benefits through his years of service, as the plan’s primary purpose was to provide periodic pension payments to eligible employees after retirement based on their service as employees.

As a result, the majority of nine Supreme Court of Canada judges hearing the case dismissed IBM’s appeal. Waterman was entitled to $93,305 pay in total plus 18 months of pension benefits in the amount $38,232 in pension benefits already received and his court costs.


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