Pension benefits Are Not Deducted From Reasonable Notice Payment

Posted by Johannes Schenk on February 19th, 2014 — Posted in Employment Law, Labour Law

One of the first questions everyone asks on an employment termination:

employer: what do we have to pay;
employee: what am I entitled to.

Fair enough. Usually the parties can work this out on the basis of standing earnings, benefits and other entitlements. Health and dental plans, club memberships, bonuses, pay increments, parking passes, employer contributions and so on are the easy ones to work out.

At times you also have to work out what to do with other types of payments such as WCB, private disability insurance and pension payouts. These can be tricky to deal with at the time of termination. If a deal is not worked out and you end up litigating the matter the question becomes more complicated as to whether these types of payments are to be deducted from monies paid in lieu of notice.

The case of IBM Canada Limited v. Waterman, holds that pension benefits are not to be deducted from reasonable notice payments. There is no double recovery. On a policy basis this make sense as a lot of employers would otherwise be looking to get out of making pension payments on terminations. In this particular case, the terminated employee was with IBM for 42 years and was offered two months severance pay (an alarmingly low amount of money for those many years of service). The lower Court ended up awarding 20 months of pay.

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