Employee awarded $65,000 for loss of pension

Reasonable notice should be bridge to full pension if dismissed employee is close to eligibility: Ontario court

An employee who is terminated without cause is entitled to be made whole over the notice period by being placed in the same financial position the employee would have been in if her 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 about 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 court also reviewed an actuarial report regarding the present value required to invest outside of the pension to replace the monthly loss the employee would incur due to the difference in the monthly payments between the reduced pension and the full pension the employee would have received.

The court awarded the employee the following:

  • Approximately 17 months notice (less the statutory notice previously paid) to bridge the employee to the full, unreduced pension
  • $65,000 representing the value of the loss associated with the unreduced pension
  • The retirement allowance of 30 weeks’ pay
  • Pre-judgment and post-judgment interest
  • 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.

Lessons 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.

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.

Lessons 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. Alternatively, if termination cannot be deferred, the employee should be bridged to the unreduced pension date so the employer can avoid having to pay additional damages on top of notice for the loss of the pension due to early termination.

For more information see:

  • Arnone v. Best Theratronics Ltd
., 2014 CarswellOnt 11225 (Ont. S.C.J.).

Ronald S. Minken is a senior lawyer and mediator at Minken Employment Lawyers, an employment law boutique, located in Markham, Ontario. He can be reached at www.MinkenEmploymentLawyers.ca. Ron gratefully acknowledges Sara Kauder and Kyle Burgis for their assistance in preparation of this article.

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