Pension Contributions — Ontario Employment Law
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About Pension Contributions
Pension contributions are a critical, yet often overlooked, component of an employee's total compensation package in Ontario. They represent deferred wages—money earned today that is set aside to provide income in retirement. When an employment relationship is stable, these contributions are typically made according to a set formula outlined in an employment contract or a pension plan's terms. However, their importance becomes especially pronounced when employment ends.
In Ontario, employers have specific obligations regarding pension contributions upon termination. Under the Employment Standards Act, 2000 (ESA), an employer must continue making all regular contributions to a pension plan throughout the statutory notice period. This means that for the one to eight weeks of notice required by the ESA, it should be business as usual for your pension contributions, just as it is for your salary and other benefits.
Where the situation becomes more complex is in cases of wrongful dismissal, where an employee is entitled to a longer 'reasonable notice' period under common law. This period can extend for many months, or even years. During this common law notice period, the employee is entitled to be 'made whole,' receiving damages equivalent to the total compensation they would have earned. This explicitly includes the value of the employer's pension contributions that would have been made. For a Defined Contribution (DC) plan or group RRSP, this is often a straightforward calculation based on the contribution percentage. For a Defined Benefit (DB) plan, calculating the value of the lost pension accrual can be far more complex and may require an actuarial assessment to determine the true financial loss.
As seen in numerous court cases, Ontario judges consistently award damages for lost pension contributions as part of a wrongful dismissal award. Failing to account for these lost contributions in a severance package can leave a significant amount of money on the table. Because the specifics of pension plans and the calculation of losses are so individualized, understanding your full entitlement often requires a careful review of your unique circumstances and plan documents.
Frequently Asked Questions
My employer fired me without cause. Do they have to keep paying into my pension?
Yes. In Ontario, your employer must continue making pension contributions during your minimum notice period under the Employment Standards Act. If you are entitled to a longer common law notice period, you can claim damages for the value of the pension contributions you would have received during that entire period.
What's the difference between a DC and DB pension plan when calculating what I'm owed after termination?
For a Defined Contribution (DC) plan, the loss is typically the percentage of your salary the employer would have contributed. For a Defined Benefit (DB) plan, the loss is more complex; it's the reduced value of your future pension benefit due to the shortened service period, which often requires an expert to calculate.
My employer suddenly stopped making pension contributions but I'm still working. What can I do?
An employer's unilateral decision to stop making agreed-upon pension contributions can be considered a breach of your employment contract. In some cases, this could even amount to constructive dismissal. You should document this change and seek legal advice promptly.
Is there a time limit to sue my employer for unpaid pension contributions?
Yes, under Ontario's Limitations Act, you generally have two years from the day you discovered (or should have discovered) the non-payment or loss to start a legal claim. This makes it important to act quickly if you notice a discrepancy.
My severance offer includes salary but doesn't mention my pension matching plan. What should I do?
You should not sign the offer without clarification. The value of lost pension contributions is a separate and additional component of a fair severance package. This is a perfect time to have an employment lawyer review the offer to ensure it fully compensates you for all your losses, including pension.
How do I prove the value of my lost pension contributions in a wrongful dismissal claim?
You will need your employment contract, pay stubs showing the contribution amounts, and the pension plan documents. For a defined benefit plan, you may need to hire an actuary to prepare a report quantifying the capital value of your loss.
Common Scenarios
- A 58-year-old plant manager with 22 years of service is terminated without cause, and the initial severance offer fails to account for the substantial impact on her defined benefit pension, which was just a few years from maturing.
- A software developer is let go after four years. Her employer offers statutory pay in lieu of notice but immediately cuts off the 6% RRSP matching contribution she was promised in her employment contract.
- A company facing financial difficulty informs all employees via email that it will be 'temporarily pausing' its contributions to the group RRSP plan, creating uncertainty and a potential breach of contract.
- Following a wrongful dismissal, an employee finds a new job that pays a similar salary but offers no pension plan. Her former employer argues they shouldn't have to pay for lost pension contributions, even though it's a clear part of her loss.
What You Should Know
- Always keep copies of your employment agreement, pension plan booklets, and annual pension statements. These documents are crucial evidence of your entitlements.
- If you are terminated, review any severance offer carefully to see how it addresses pension contributions. It should be a separate line item from salary continuance or a lump sum payment.
- Regularly check your pay stubs and pension statements to ensure your employer is making the correct contributions. If you find a discrepancy, raise it with HR in writing to create a paper trail.
- The calculation of damages for lost pension contributions is a specialized area. Consulting with an employment lawyer is vital to ensure this valuable part of your compensation is not overlooked in any severance negotiation or claim.
Featured Cases
Milwid v. IBM Canada Ltd.
2023 ONSC 490 (CanLII) · 2023-01-2638-Year Employee Wrongful Dismissal: 27 Months Notice and Damages
A wrongful dismissal case involving a 38-year employee terminated without cause. The court extended the notice period to 27 months, applied Bardal factors, and addressed compensation for unvested RSUs and discretionary bonuses. Mitigation efforts and pension contributions were also considered.
Dussault v. Imperial Oil Limited
2018 ONSC 4345 (CanLII) · 2018-07-13Wrongful Dismissal: Pension and Employment Benefits Damages Awarded
A wrongful dismissal case where the Supreme Court of Canada ruled on the award of damages for pension contributions and loss of employment benefits. The court determined that no damages were awarded for pension contributions where no pension loss occurred, but plaintiffs were entitled to 3% of base salary for Savings Plan contributions and 8% for lost benefits. The court also awarded partial indemnity costs to the plaintiffs.
Nogueira v Second Cup
2017 ONSC 6315 (CanLII) · 2017-10-20Termination Without Cause: 4-Month Notice Period Awarded
A case involving the termination of an employee after 8 ½ months of employment. The court determined a 4-month notice period based on the employee's age, position, and duration of employment, and ruled that an ambiguous termination clause did not limit the common law right to reasonable notice. The employer was required to pay one month's pension contribution during the notice period.
Ryan v Peel District School Board
2017 ONSC 2331 (CanLII) · 2017-04-18Employment Contract Dispute: Pension Contributions and Limitation Periods
A court case involving a dispute over unpaid pension contributions under an employment contract. The plaintiff alleged non-payment for periods between 1992 and 2011, while the defendant argued the claim was statute-barred. The court ruled that the plaintiff’s claim was not barred by the two-year limitation period and denied the defendant's motion for summary judgment.
Day v. JCB Excavators Limited
2011 ONSC 6848 (CanLII) · 2011-11-23Wrongful Dismissal: 14.5-Year Manager Awarded 17 Months Notice and Pension Compensation
A wrongful dismissal case where a senior manager with 14.5 years of service was terminated. The court determined a reasonable notice period of 17 months, awarded compensation for lost pension contributions, and denied reimbursement for post-termination expenses. No damages were awarded for bad faith dismissal.
Amalgamated Transit Union, Local 279 v. Ottawa (City)
2009 CanLII 60406 (ON SC) · 2009-09-22Employment Contract Dispute: Pension Contributions During Informal Contract Extension
A labour and employment case involving a union seeking leave to appeal an arbitrator’s decision regarding pension contributions during an informal contract extension. The arbitrator found no explicit obligation for pension contributions under the memorandum of agreement, and the court upheld this decision, finding it involved questions of fact or mixed fact and law.
Sublett v. Facit-Addo Canada Ltd.
1977 CanLII 1302 (ON SC) · 1977-08-16Wrongful Dismissal: Senior Salesman Awarded Nine Months Notice
A wrongful dismissal case involving a senior salesman employed for seven years who was terminated without cause. The plaintiff was awarded nine months’ notice based on age, length of service, and employment circumstances, with the Bardal factors applied. The case also addresses whether unemployment insurance benefits should be deducted from wrongful dismissal damages and whether pension contributions should be excluded from damages calculations.