Don’t deduct pension benefits from wrongful dismissal damages: Supreme Court

Contribution by employee and purpose of pension benefits key to determining if they are part of compensation lost
By Ronald Minken
|Canadian Employment Law Today|Last Updated: 02/19/2014

After a hard fought five-year battle, and in a 7-2 decision, the Supreme Court of Canada has decided an employee can keep his pension benefits as well as the full damages awarded to him for wrongful dismissal.

Richard Waterman was terminated by IBM Canada after 42 years of service and was provided with two months’ notice. At the time of termination, Waterman was 65 years old and entitled to a full pension in accordance with IBM’s defined benefit pension plan. Over the course of his employment, IBM made all of the contributions to fund the pension plan on Waterman’s behalf as part of his annual compensation package. Waterman began receiving his monthly pension following his termination, but commenced legal proceedings against IBM seeking damages for wrongful dismissal.

The trial judge determined Waterman was entitled to a total of 20 months’ notice from IBM. IBM took the position that Waterman’s pension payments over the notice period should be deducted, as otherwise Waterman would be placed in a greater economic position than he would have been in had he not been terminated. IBM argued this would be contrary to the general rule of contract damages, being the compensation principle. The trial judge disagreed and IBM appealed the decision to the British Columbia Court of Appeal, which dismissed the appeal. IBM appealed again to the Supreme Court of Canada.