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65 year old employee with 40 years service awarded 20 months notice; pension payments not deducted

Jurisdiction: - British Columbia
Sector: - High Tech

In Waterman v. IBM Canada Limited, 2010 BCSC 376, a 65 year old employee with 40 years of service was awarded a 20 month notice period. At the time of dismissal, the employee had had no plans to retire.

In reaching its decision, the BC Supreme Court addressed the following issues of interest:

  1. the impact of the character of employment on the notice period;
  2. the impact of health problems on the notice period;
  3. compensation for lost stock purchases over the notice period; and
  4. whether pension benefits received over the notice period should be deducted from the damages award.

Character of Employment

The long established "Bardal" factors for calculating the reasonable notice period are: 1) age, 2) length of service, 3) character of employment, and 4) availability of similar employment having regard to the experience, training and qualifications of the employee.

At the time of his dismissal, the employee was an "Advisory Software Services Specialist". It was a non-managerial, non-supervisory that provided him with an annual of income of approximately $75,000.  It was considered to be a "lower staff position" in the employer's hierarchy.

The employee argued that he was entitled to a 24 notice period and that the character of his employment should not dictate the length of notice. In support of this position, the employee argued that that New Brunswick courts have completely abandoned this factor, pointing to the decision in Bramble v. Medis Health and Pharmaceutical Services Inc., 175 D.L.R. (4th) 385 (N.B.C.A.).

In rejecting this argument, the court stated that in BC the character of employment remains an important factor in determining the length of notice, citing the BC Court of Appeal decision in Burry v. Unitel Communications Inc. (1997), 46 B.C.L.R. (3d) 349. As such, the court concluded on this point that the employee:

...had no supervisory or management role. In the IBM hierarchy there were several levels of employment between himself and top management.  This militates against an award at the highest end of the upper limit (para. 22). 

Health Problems

The employee had been diagnosed with Parkinson's disease some six years before his employment was terminated. The progress of the disease had been continuous but very slow, and his symptoms were controlled by medication. The employer was not aware at the time of termination that the employee had the disease.

The employee argued that his health problems should be factored into the notice period assessment, as it would impact on his ability to find a new job.

The court, however, ruled that the employee's health was not a factor to increase the notice period, adopting the court's comments on this issue in Nicholls v. Richmond (Township) (1984), 52 B.C.L.R. 302 (S.C.) at 309-10

(This is not to say, however, that the courts will never consider the employee's health when calculating the notice period. For example, in the recent decision of Pereira v. The Business Depot Ltd., 2009 BCSC 1178, the court pointed to the employee's "past health problems and existing vulnerability" as a reason to increase the notice period by two
months. In that case, however, the employer was aware of the employee's condition/situation, in that the employee had recently checked out of a treatment facility for substance abuse issues.)

Purchase of Company Stock

The employee had been entitled to purchase the employer's stock at a reduced price while employed. The court found that he was not entitled to be compensated for this entitlement over the notice period, however, because:

  • that benefit was dependent upon him actually purchasing stock; and  
  • there is no evidence that he purchased any of the employer's stock subsequent to his dismissal.

Deduction of Pension Payments

Since his employment had been terminated, the employee had received a pension benefit of approximately $2,100/month from the employer's Defined Benefit Pension Plan. 

Under the terms of the pension plan, which was entirely funded by the employer, an IBM employee was not entitled to receive both pension and employment income concurrently unless he reached the age of 71. 

The employer argued that the pension payments received by the employee over the notice period should be deducted from the damages award in order to prevent "double recovery".

The court rejected this argument, however, ruling that it was bound by the decision of the BC Court of Appeal in Girling v. Crown Cork & Seal Canada Inc. (1995), 9 B.C.L.R. (3d) 1. In that case, the appeal court stated

...the pension benefits of the employment contract are collateral benefits of the employment contract which should not be considered income and should not be deducted from damages which are income in lieu of notice. The damages (pay in
lieu of notice) flow from breach of the employment contract and the collateral
pension benefits are payable pursuant to the contractual arrangements therefor.
They are not to be modified by the appearance of duplication.

Further, the court, following a previous BC court decision on this issue, also rejected the employer's argument that Girling should not be followed in light of the subsequent decision of the Supreme Court of Canada ("SCC") in Sylvester v. British Columbia,[1997] 2 S.C.R. 315. In that case, the SCC held that disability benefits received by an employee during the notice period should be deducted from the damages award.