When a court determines an employee has been wrongfully dismissed, there is a well- established rule that the sole remedy available is a monetary payment. Yet, for every rule, there is an exception. In a departure from legal precedent, an Ontario court recently ordered1 an employer to enroll an employee in a retiree benefit program, rather than order the employer to pay a seven-figure lump sum.
What happened?
Roland Ruel was an Air Canada employee. Due to workforce reductions necessitated by the COVID-19 pandemic, after 24.5 years’ service Ruel’s employment was terminated in the summer of 2020. Dissatisfied with the severance package offered to him, Ruel commenced legal proceedings in the Ontario Superior Court of Justice. He was successful in a motion for summary judgment and awarded 24 months’ pay in lieu of notice, including compensation for base salary, bonus, loss of health insurance benefits, pension and stock.
However, one item in Ruel’s claim was outside the norm. It was a retiree benefit which provided him with travel privileges for the balance of his lifetime on attaining 25 years’ service (“Travel Benefit”). At the time his employment was terminated, Ruel was six months short of 25 years’ service, but he would have achieved the required length of service early into his 24-month notice period had he been provided with working notice.
Air Canada defended the Travel Benefit claim arguing it was a “privilege” or “perk” and not an entitlement. As such, it should not form part of Ruel’s severance compensation. The court rejected this argument on the basis Ruel would have received the Travel Benefit had he attained 25 years’ service; the benefit was not discretionary.
Appropriate legal remedy
In the lawsuit, Ruel claimed the monetary value of the Travel Benefit over the balance of his expected lifetime. He provided expert evidence that the value was $1.8 million – an amount greater than the rest of his entire claim. In the alternative, Ruel claimed “specific performance”.
Specific performance is a legal term which means the court orders performance of a specific contractual obligation (other than payment of a debt). In most cases, monetary damages are an adequate legal remedy, thus courts rarely order specific performance. In addition, courts are concerned about the possibility of having ongoing supervisory obligations if specific performance is ordered but not complied with.
In Ruel’s case, the judge made an exception to the rule. The judge noted a provision in the Travel Benefit document that allowed Air Canada to modify or cancel it. If that should occur, there was a possibility Ruel would not be entitled to the Travel Benefit for all or part of the rest of his lifetime, and the assumptions made by Ruel’s expert to determine the value of the Travel Benefit could become inaccurate. Rather than speculate on an uncertain monetary value, the court decided that the goal of placing Ruel in the same position as other retirees was best achieved by ordering Air Canada to enroll Ruel in the retiree Travel Benefit.
Takeaways for employers
This decision is important because it has implications for other benefits. For example, similar to the Travel Benefit, valuation of lost pension and/or retiree health benefits involve uncertain predictions. When these types of claims are compensated through a cash payment they are usually calculated using factors such as life expectancy, frequency of use and future interest rates, and then sometimes adjusted upwards due to income tax considerations, known as “gross-up”.
The consequence of this approach is that it could generate a monetary award that ends up being either too high or too low, when compared with what actually happens in an individual’s life. Interestingly, these types of uncertain claims were compensated by a monetary award in the Ruel case, without further explanation from the judge.
If the goal is to put an employee in the position they would have been had they been given working notice, this decision may open the door for a future court to consider specific performance as compensation for certain types of benefits. Depending on the nature of the benefit at issue, this could be a win-win for both the employee and the employer.
To learn more and for assistance, contact your Sherrard Kuzz LLP lawyer, or our firm at info@sherrardkuzz.com.
1Ruel v. Air Canada 2022 ONSC 1779
