Bridging Terminated Employees to Full Pension: the Next Frontier After Taggart
In the recent decision Arnone v. Best Theratronics Ltd., the Ontario court determined that a terminated employee’s close proximity to retirement and the receipt of a full unreduced pension was a critical factor to be considered in not only determining his damages, but in determining his entitlement to reasonable notice.
Brief Summary of Facts
Mr. Arnone was the Manager of a medical equipment manufacturing company, which he was employed by for 31 years. At the time of his termination, he was 16.8 months away from qualifying for a full unreduced pension upon retirement as well as a retiring allowance equal to one week for each year of service (to a maximum of 30 weeks). Upon termination, Mr. Arnone was only granted the statutory minimum notice provided for under the Canada Labour Code (CLC) and was denied compensation for his lost pension benefits as well as for the loss of his retiring allowance.
Reasonable Notice Period
In determining the reasonable notice period to which Mr. Arnone was entitled, the court held that it was imperative to consider the reality of Mr. Arnone’s approaching entitlement to a full unreduced pension. The fact that Mr. Arnone’s entitlement was a mere 17 months away was held to be a critical factor in the factual matrix surrounding his termination. Given the flexibility of the Bardal test, the court determined that though it normally would have awarded Mr. Arnone a notice period of 22 months- in this case, he should be awarded 17 months notice- the number of months that it would require to bridge him to a full unreduced pension- but without any reduction for mitigation income. It was the court’s view that:
“Time to retirement is an obvious consideration when long-term employees are dismissed due to restructuring. In such circumstances it is also common that the employer does not have an expectation of mitigation because the bridging period is [sic] maybe less than the notice period that would otherwise be applicable”.
In essence, the court bridged Mr. Arnone to retirement, yet held that the 17 month notice period would be exempt from reduction as a result of any mitigation income earned over the notice period.
Damages upon Retirement
In assessing damages, the court held that the employer’s decision not to protect Mr. Arnone’s entitlement to an unreduced pension warranted compensatory damages of $65,000.00 representing the present value of the loss of Mr. Arnone’s unreduced pension. This award was quantified on the basis of an actuarial report which indicated the present value required to invest externally in a pension plan that would replace the monthly loss Mr. Arnone would incur in his retirement years. Furthermore, the court held that Mr. Arnone was also entitled to a retirement allowance equal to 30 weeks pay which he would have received upon retirement but for his termination prior to the expiry of the 17 month bridging period.
Building on Taggart v. Canada Life Assurance Co.
The well known Ontario Court of Appeal decision in Taggart v. Canada Life Assurance Co., established that employers are liable for the loss of pension benefits normally accrued by employees during the reasonable notice period post termination. This case stands for the principal that an employee is to be kept whole over the notice period including their entitlement to receive damages for the loss of pension benefits that would have accrued over that time. Damages for the loss of pension benefits is characterized as the increased value that would have accrued to the employee’s pension entitlement if working notice had been provided.
The Arnone case builds on this decision, holding that not only is an employee’s lost pension benefits a factor to be considered in determining an employee’s damages over the notice period post termination, but an employee’s proximity to the receipt of a full unreduced pension is an important factor to be considered in determining the employee’s common law notice entitlement as well as his or her associated mitigation obligations or lack thereof.
Lessons for Plaintiff’s Counsel Going Forward
In circumstances where an employee has been terminated and an employer refuses to continue his or her pension benefits- Plaintiff’s counsel should not only consider a claim for the loss of this benefit, quantified on the basis of the present value of the loss incurred by the terminated employee’s future pension but should also consider how this factor plays into the determination of the terminated employee’s notice period entitlement. Plaintiff’s counsel should ensure they have sufficient evidence to present to the court in support of any pension damages claimed, specifically an actuarial report prepared by a qualified financial professional.
Employment Law and Litigation