Are Pension Benefits Deductible From Severance Pay?

The Supreme Court recently decided this issue in Waterman v. IBM, 2013 SCC 70, finding that pension benefits received during the notice period (notice of termination in civil law) were not deductible from damages paid to an employee for dismissal without cause.

The Law as it Stood Previously

In Sylvester v. British Columbia, [1997] 2 S.C.R. 315, the Supreme Court had to decide whether an employee's disability benefits could be deducted from the employee's severance in connection to a dismissal without cause.

The Court decided that the disability benefits were an integral part of the employment contract and, therefore, that the question of their deductibility turned on the terms of this contract and the intention of the parties. This analysis led to the Court's finding that the contract terms did not permit an employee to receive both salary and disability payments and that such payments were to be deducted from the notice of termination provided.