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"Accounting for Pensions: Addressing Employees’ Pension Entitlements in Wrongful Dismissal Litigation & Settlement Negotiations"

Mitch Frazer and Tara Sastri from Torys LLP presented a paper on "Accounting for Pensions: Addressing Employees' Pension Entitlements in Wrongful Dismissal Litigation and Settlement Negotiations" at the Ontario Bar Association CLE - 8th Annual Current Issues in Employment Law (February 25, 2009).

The Precis of the paper is as follows:

When terminating an employee, an employer must be cognizant of its responsibilities to the employee, including its obligation to provide notice of termination or payment in lieu thereof. The minimum standards legislation requires that benefits be continued during the notice period, including continued contributions to pension benefits. At common law, although there is no obligation to continue participation during the notice period, the calculation of a payment in lieu of notice will include amounts for pension benefits. If the employer does not meet its obligations under minimum standards legislation or provide payment in lieu of pension benefits for the common law notice period, the employee generally has a right to seek damages for pension loss. The court's valuation of damages will vary depending on the type of pension plan and damages may be grossed-up to account for adverse tax consequences.

Pension plan administrators have statutory, professional and common law duties to communicate information and assist employees in making informed decisions about their pensions upon termination of employment.

In this paper, the authors will also address how pension entitlements are affected by the particular payment structure agreed on in a wrongful dismissal settlement. Also discussed are other important factors in achieving comprehensive settlement terms that reduce the likelihood of unintended tax, financial and other consequences.