Pension Benefits and Wrongful Dismissal Damages: Double Recovery or Double Jeopardy
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Pension Benefits and Wrongful
Dismissal Damages: Double Recovery
or Double Jeopardy?
Kenneth Win. Thornicroft*
In the Waterman case, the Supreme Court of Canada decided - at least
with respect to the defined benefit pension plan under review - that pension
benefits received by a wrongfully dismissed employee during the reasonable
notice period are not deductible from any severance pay in lieu of reasonable
notice that is otherwise payable. A majority of the Court held that the pen-
sion benefits constituted a form of deferred compensation that was not intended
to indemnify against income loss due to a wrongful dismissal, while the min-
ority maintained that pension benefits received during the notice period must
be deducted to prevent the dismissed employee from obtaining an undeserved
windfall. In this article, the author reviews the law relating to the deductibility
of various benefit payments from wrongful dismissal damages. In his view, the
Waterman majority judgment does not provide wrongfully dismissed employees
with an improper windfall, and there is no principled reason why pension bene-
fits should be deducted from a damages award and thereby placed on a separate
footing from other benefits that are components of an employee's overall com-
pensation package.
1. INTRODUCTION
Issues relating to pension plans' commonly arise in wrongful
dismissal litigation, and two principles appear to be clearly established.
First, the reasonable notice period cannot be extended solely to provide
* LL.B./J.D., Ph.D., Barrister & Solicitor, Professor of Law and Employment
Relations, Peter B. Gustavson School of Business, University of Victoria.
1 Private pension plans, broadly speaking, fall into two categories - defined
benefit or defined contribution. Defined benefit plans provide a specified
income stream after retirement. In contrast, defined contribution plans do not
guarantee any particular pension benefit but, rather, oblige the employer and/
or employee to make specified contributions to a fund that can provide post-em-
ployment pension income. There are also hybrid plans that combine elements of
both defined benefit and defined contribution plans (see Jana R Steele, Angela
Mazerolle & Mel Bartlett, Target-Benefit Plan in Canada - An Innovation
Worth Expanding (CD Howe Institute Commentary No 411, July 2014) [unpub-
lished, archived at CD Howe Institute], online: http://www.cdhowe.org/pdf/
Commentary_41 1.pdf).](ViewImageLocal?handle=hein.journals/canlemj19&div=9&collection=&method=preview&ext=.png&size=3)
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Pension Benefits and Wrongful Dismissal Damages: Double Recovery or Double Jeopardy
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