Benefits and Notice Periods – Court Confirms Law

March 8, 2019

"Absent specific evidence concerning the premium costs for the benefit plan, an employer may be stuck with [the] rather arbitrary determination that 10% of base salary is an appropriate indicator of value."

Court: What’s the value of benefits during the notice period?

Employee: How about 10%?

Court: Sounds good.  

Klimczewski v. Nytric Ltd., a recent decision out of the Superior Court of Justice, considered the reasonable notice entitlement for Mr. Klimczewski, a 61 year old Software Engineer, employed for 10 years and earning $71,000.00 per year, who was dismissed without cause.   The decision is noteworthy because of the Court’s award of damages in lieu of the continuation of benefits through the reasonable notice period. As well, court decisions in relation to software professionals are few and far between so the decision is also notable for its relevance to this industry.

Mr. Klimczewski claimed entitlement to fifteen (15) months’ pay in lieu of notice of termination; the Employer believed that ten (10) months was appropriate.

The Court found that twelve (12) months was an appropriate notice period, relying principally on Mr. Klimczewski’s age and his limited skill set.  In particular, the Court acknowledged that at 61 years of age, and in the absence of a more relevant internet-based technical skillset, Mr. Klimczewski would have a challenging time finding suitable alternative employment.

The Court’s decision demonstrates that obstacles to finding replacement work will weigh in favour of a longer notice period assessment.

With respect to group benefits, Mr. Klimczewski requested payment equivalent to 10% of his base salary in order to compensate for his loss of participation in the employer’s group benefit plan over the reasonable notice period.

Prior to this decision, cases dealing with benefits during the notice period seemed inconsistent.  One line of cases suggested that employers had no liability for benefits during the notice period if the employee had no loss, either through securing replacement coverage or out of pocket medical expenses.   Another line of cases suggested that even in the absence of damages, an employee was entitled to sue for the replacement cost of coverage or the “pecuniary value” of the benefits.

The Court in this case had no evidence of the monetary value of the benefits Mr. Klimczewski  participated in during his employment and therefore accepted his estimate of 10% of base salary, or $7,100.00. That is a significant amount considering the replacement cost for most benefit plans would likely be half that amount.

Employees and employers will note this  decision for confirming that compensation during any reasonable notice period will include the value of group benefits.  That the employee may not have had out of pocket benefit expenses during the reasonable notice period is not relevant.  Absent specific evidence concerning the premium costs for the benefit plan, an employer may be stuck with Mr. Klimczewski’s rather arbitrary determination that 10% of base salary is an appropriate indicator of value.

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