Supreme Court of Canada refuses to deduct pension earnings from wrongful dismissal damages

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Mr. Waterman worked for IBM (United Kingdom) and subsequently IBM (Canada) for 42 years when he was dismissed without cause in March of 2009 and was given 2 months of pay in lieu of notice. Subsequently, he began collecting pension payments from the defined pension plan. IBM had contributed a percentage of Mr. Waterman’s salary annually to the plan. Mr. Waterman had not contributed financially to it.

Mr. Waterman brought a wrongful dismissal lawsuit. The British Columbia (BC) Superior Court determined a reasonable notice period of 20 months and ordered IBM to pay the 18 month balance. The BC Superior Court did not deduct the pension payments that Mr. Waterman had received. IBM appealed to the BC Court of Appeal and argued the pension payments should have been deducted. The BC Court of Appeal dismissed the appeal.  In a further appeal to the Supreme Court of Canada, IBM attempted to make the argument that the full amount of the pension payments should be deducted from the damages owed. The Supreme Court of Canada dismissed the appeal.

The Supreme Court of Canada found that the “private insurance exception” applies to benefits such as pension payments to which an employee had contributed and were not intended to be an indemnity for the type of loss suffered as a result of IBM’s breach of the employment contract and therefore did not need to be deducted from damages. The Court commented that a retirement pension is not an indemnity for wage loss, but rather a form of retirement savings.  Interestingly, even though IBM was the only financial contributor to Mr. Waterman’s pension, the Court still determined that Mr. Waterman had “contributed” to the pension payments through his years of service to the company.

This case supports the generally understood principle that pension payments are not deductible from wrongful dismissal damages.  Read the decision.