On December 13, 2013, the Supreme Court of Canada (“SCC”) released its judgment in IBM Canada v. Waterman. The Court upheld a British Columbia Supreme Court (“BCSC”) decision, concluding that pension benefits should not be deducted from wrongful dismissal damages.
The case involved a 65-year old employee at IBM Canada with 42 years of service who was dismissed without cause on two months’ notice. IBM contributed to the defined benefit pension plan on his behalf. Upon termination, the employee was entitled to receive a full pension. He sued IBM to enforce his contractual right to reasonable notice. The BCSC set the appropriate period of notice at 20 months and held that pension benefits paid during the notice period should not be deducted in the calculation of damages.
The SCC upheld the decision of the lower courts that employee pension payments should generally not reduce the damages paid for wrongful dismissal. In support of this conclusion, the court pointed to the nature of the benefit and the intention of the parties. Pension benefits are meant to be a form of deferred compensation and are a type of retirement savings. They are not intended to protect against wage loss due to unemployment. The court reasoned that the parties could not have intended that the employee’s retirement savings would be used to subsidize the wrongful dismissal and, on this basis, should not be considered as mitigation of damages.
This decision may prove to have implications for the deductibility of other payments from wrongful dismissal damages. The Court came to the broad conclusion that, in general, a monetary benefit will not be deducted from wrongful dismissal damages if it is not aimed at protecting against wage loss caused by loss of employment, particularly where the employee has contributed to the benefit in question. Employers should be cautious about assuming benefits payable to an employee will be deductible from any pay in lieu of notice that might otherwise be owing upon termination of employment.
If you have any questions about wrongful dismissal actions, or any other questions relating to workplace law, please do not hesitate to contact a Mathews Dinsdale lawyer.
For more information on new developments in Workplace Law, please refer to our website at:
Click here for downloadable version