Law Times

LAW TIMES • MARCH 10, 2014 PAGE 11 www.lawtimesnews.com Waterman leaves disability issue unaddressed t came as a surprise to some people that the Supreme Court of Canada even agreed to hear IBM Canada Ltd. v. Waterman. "Most people thought that the issue of whether pension income was an off set to wrongful dismiss- al damages was long resolved," says Barry Fisher, a Toronto employ- ment law mediator and arbitrator. However that may be, the majority on the Supreme Court upheld the widely accepted view that pension payments received by an employee a er termination weren't deductible from damages awarded for wrongful dismissal. e court reasoned that pension benefi ts were deferred compensa- tion based on employees' service and noted it was more proper to characterize them as retirement savings than income replace- ment in the event of termination. Whether a plan was a defi ned- benefi t or a defi ned-contribution arrangement, moreover, didn't change its essential nature as a form of retirement savings. " e decision was, in my view, well reasoned and correct and should put an end to whatever de- bate remained about the deduct- ibility of pension income from wrongful dismissal damages," says Fisher. Still, he adds, the most interest- ing part of the decision was what the Supreme Court didn't do. "By giving leave in this case, the court had an opportunity to put an end once and for all to the distinction that exists in this area of jurisprudence between the treatment of disability benefi ts received by a plaintiff who has not made a direct contribution by way of a deduction from wages and one who has done so." To be sure, Waterman didn't directly engage the deductibil- ity of disability benefi ts. But the court did consider whether its 1997 decision in Sylvester v. British Columbia applied to the pension plan payments the plaintiff had received. In Sylvester, the court ruled disability benefi ts were deduct- ible where the employee hadn't contributed to them. e ma- jority in Waterman, however, distinguished Sylvester because pension benefi ts, unlike disability payments, weren't an indemnity against a loss of income but were rather retirement savings to which plaintiff s became entitled in con- sequence of their service. As Fisher sees it, the Waterman court had an opportunity to do away with the distinction made between disability benefi ts based on whether the employee had contributed to them and, he says, it ought to have done so. " e distinction is based on a misapprehension of the real workplace where the employees have no say in whether they have contributory or non-contributory disability plans," says Fisher. " e company alone makes that decision, but regardless of what that decision is, the cost of the disability plan is always fac- tored into the calculation of total compensation." Fisher posits the example of an employer that pays $20 hourly and provides disability coverage that costs the company $2 per hour for a total wage package of $22. e total wage package cost to the company, however, is exact- ly the same when the hourly rate is $22 but the employee pays the $2 disability premium. "Under Sylvester, the employee of the fi rst company has his dis- ability benefi ts deducted from the wrongful dismissal damages, whereas the employee at the sec- ond company probably gets both his wrongful dismissal damages and his disability benefi ts," says Fisher. He believes the distinction is unfair and unnecessary. "All employees who receive disability benefi ts and wrongful dismissal damages should be treated in the same way regardless of how the employer decides to set up the benefi t," says Fisher. "It is unfortunate that the [Su- preme Court] did not take the opportunity in Waterman to deal with the unfairness that arises from Sylvester." A close examination of the reasons in Waterman, however, suggests the court may eventually be heading in that direction. "Whether the plaintiff has con- tributed to the benefi t remains a relevant consideration, although the basis for this is debatable," the majority stated. Fisher, however, feels the court should have addressed the disabil- ity issue. "I guess they want to deal with disability benefi ts in another case, but why wait another 10 years to clear up this complicated issue?" he asks. It may be that the opportunity will come around more quickly even if it arises in another pension case. "Given the end of manda- tory retirement, we expect to see a lot more cases like Waterman because people reach the age of 65 and they want to be paid to leave," says Kathryn Bush, a pension law partner at Blake Cassels & Gray- don LLP's Toronto offi ce. "In fact, one of the things that the Supreme Court asked itself was whether it wanted to make it easier for employers to terminate people of that age." Bush points out the top court did make it clear that employ- ers could amend pension plans to specifi cally permit deductions from damages on termination. "But that's diffi cult to do given the existence of minimum stan- dards legislation for pensions that require, among other things, that pensions be regular and accrued," she says. "I don't know that regula- tors will go along with changing the requirements for people who get fi red at 65." Employers could insert clauses in individual employment agree- ments stipulating they can reduce termination pay through pay- ments out of the pension plan as long as the result doesn't off end the minimums in employment standards legislation. "We're going to see more of that kind of thinking because employ- ers are looking for ways to avoid extra payments for people on the way out," says Bush. LT FOCUS Sure, we could tell you that our client was awarded the largest personal injury judgment in Canadian history and that all our principal partners are past-presidents of the Ontario Trial Lawyers Association. We could also mention that our firm was voted top five in its field in Canada and that we have a five out of five preeminent peer review rating from Martindale-Hubbell. All those achievements and honours don't just happen. They're the result of the way we work and the way we care for our clients. Don't take our word for it... ask around. When you know someone with a personal injury case, call the lawyers that lawyers recommend most. Ask about our competitive referral fees. A Noticeable Difference ™ TORONTO I BARRIE I HAMILTON I 1-866-685-3311 I www.mcleishorlando.com Untitled-5 1 13-02-06 1:45 PM Untitled-5 1 13-02-06 1:45 PM TO RO N TO I B A R R I E I H A M I LTO N 1-866 - 685-3311 I w w w. mcleishor lando.com A Noticeable Difference ™ I KITCHENER Untitled-7 1 13-08-13 1:16 PM Proud Member McLeish_LT_Dec9_13.indd 1 13-12-03 8:37 AM 'Given the end of mandatory retirement, we expect to see a lot more cases like Waterman because people reach the age of 65 and they want to be paid to leave,' says Kathryn Bush. BY JULIUS MELNITZER For Law Times I

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