• Damages for wrongful dismissal include the value of what the terminated employee would have earned (“accrued”) if he had remained in employment for the common‐law notice period.
  • Many employers provide pension accrual only for the statutory notice period. Terminated employees should demand the value of accrual for the entire common‐law notice period, even if that accrual is not permitted under pension law due to the fact the individual is no longer an employee.
  • Severance packages can be structured to allow a terminating employee to continue to accrue pension benefits for the entire period of common‐law notice. The basic rule is that the individual must be an employee under the Income Tax Act for accruals to be permitted under pension law. Pension accruals are permitted during a salary continuance period, where some other benefits continue. The employee doesn’t have to be actively at work, but his earnings must be T4 insurable earnings.
  • The fatal point is usually the issuance of an ROE, or payment of a retiring allowance lump sum – once that happens, accruals under a pension plan usually must cease, according to pension and tax legislation. But damages for pension accrual are still payable under the common law of wrongful dismissal.
  • If a cash payment is made to a terminating employee in lieu of pension benefits he would have earned during a notice period, it should be grossed up to take account of the fact it’s immediately taxable. Surprisingly, many plaintiff lawyers don’t demand this.