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BC AND ALBERTA PENSION PLAN ASSESSMENTS – DEADLINE APPROACHING

As part of the enhanced governance requirements under British Columbia’s Pension Benefits Standard Act and Alberta’s Employment Pension Plans Act, pension plan administrators in Alberta and British Columbia are required to conduct an assessment their plan every three years. The deadline to complete the first assessment is December 31, 2017.

December may seem far off with summer just getting into full swing, but if you administer a pension plan in Alberta or BC you should start the assessment process soon in order to meet the deadline.

Contents of the assessment

The scope of the assessment under the legislation is broad, covering the “administration of the plan”. The assessment should at a minimum cover the following areas and policies:

  • the plan’s compliance with the applicable pension legislation
  • the plan’s governance
  • the funding of the plan
  • the investment of the pension fund
  • the performance of the trustees, if any, and
  • the performance of the administrative staff and any agents of the administrator

The Alberta Superintendent of Pensions has issued draft guidelines stating that the use and completion of the CAPSA Guideline No. 4 Pension Plan Administrator Governance Self-Assessment Questionnaire is acceptable as the written assessment. The British Columbia Superintendent has not yet issued assessment guidelines, but we understand guidance is under development.

Administrators may also develop their own assessment framework or use one prepared by a third party. Regardless of which assessment framework you use, you should be satisfied that it is appropriate for your plan.

Does the assessment need to be filed?

No. You must complete and retain the written assessment and make it available to the relevant Superintendent of Pensions upon request.

Confidentiality concerns

Although required by statute to complete the assessment, you should be careful about what you include in the final written assessment. Much like pension committee minutes, the assessment may contain confidential information about your plan and is a potential source of liability. Further, an assessment in the hands of a Superintendent may be subject to a request under freedom of information legislation.

A review by a lawyer prior to finalizing a plan assessment can mitigate some of these confidentiality concerns and identify potential liability in the written assessment.

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BC AND ALBERTA PENSION PLAN ASSESSMENTS – DEADLINE APPROACHING

RECORDS OF EMPLOYMENT – NOT JUST FOR TERMINATIONS

The end of summer is (unfortunately) just around the corner, which for many employers means saying goodbye to student employees and seasonal workers. Most employers know that they need to complete a record of employment (ROE) when an employee terminates, but there are a number of other circumstances that require an ROE. Now is as good a time as any for a quick refresher on when employers need to complete a record of employment (ROE) for an employee and why it is important to do so correctly. My goal is not to give detailed instructions about completing ROEs; but to highlight the importance of properly issuing them and the potential liability from failing to do so.

ROE Overview

The ROE is the form employers complete when an employee receiving insurable earnings stops working such that he/she experiences an interruption of earnings. Service Canada considers ROEs to be the single most important documents in the Employment Insurance (EI) program.

When to Complete an ROE

You may have noticed I used the term “interruption of earnings” above and not “termination of employment” when describing when an ROE is required. That is because, as mentioned, ROEs are required in a wider range of circumstances (I will not get into the technical definition of “insurable earnings”, but suffice to say it includes most employees’ salary or wages).

An interruption of earnings occurs in the following situations:

  • when an employee has had or is anticipated to have seven consecutive calendar days with no work and no insurable earnings from the employer (the “seven-day rule”);
  • when an employee’s salary falls below 60% of his/her regular weekly earnings because of certain absences (illness, injury, quarantine, pregnancy, parental leave, compassionate care leave or family responsibility leave); or
  • when an employee starts receiving wage loss insurance payments.

In addition to the above interruptions of service, employers must also complete ROEs in the following instances:

  • when Service Canada requests an ROE for an employee;
  • when an employee’s pay period type changes (e.g., weekly to bi-weekly);
  • when an employee is transferred to another Canada Revenue Agency (CRA) payroll number;
  • when there is a change in ownership leading to a change in the employer;
  • when the employer declares bankruptcy;
  • when a part-time, on-call or casual worker is no longer on the employer’s active employment list or has not done any work or earned any insurable earnings for 30 days; or
  • when an employee is on a self-funded leave of absence.

The Importance of ROEs

There is not a great deal of litigation relating to ROEs, but incorrectly completing (or failing to complete) an ROE has attracted common law liability for employers.

One type of case occurs when an employer intentionally misrepresents the reason for the interruption of service or withholds an ROE from a departing employee. Allegations of misconduct on an ROE can disqualify an employee from eligibility for EI. If the allegations are untrue, or if an ROE is withheld, the employer can be liable to the employee for the resulting loss of EI payments and potentially for additional damages for bad faith conduct towards the employee.

Liability may also arise in cases where an ROE is used as evidence that a seasonal or fixed-term employee is in fact a permanent employee and therefore entitled to common law notice.  Courts have found that using the word “unknown” instead of “not returning” on an ROE for a seasonal worker indicated that the employment was permanent and that the seasonal return date was simply unknown at the time. Similarly, failing to issue an ROE at the end of each of a series of fixed-term contracts has been evidence that an employee was a permanent employee.

ROEs may be a hassle to complete, but it is important that employers keep track not only of when they need to be issued, but to ensure that they are completed correctly and accurately. For more information about completing ROEs, the CRA provides a helpful guide (Guide) and, of course, you may get in touch with a member of Dentons’ Labour and Employment group.

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RECORDS OF EMPLOYMENT – NOT JUST FOR TERMINATIONS

CPP Expansion

Retirement savings in this country has been a hot topic of late, and yesterday evening in Vancouver the federal government and (most of) the provinces announced that they have reached a deal to expand the Canada Pension Plan. The deal must be approved by July 15 of this year.

The proposed changes will roll out over seven years, beginning in 2019, and mean both a bigger benefit to retirees and bigger monthly contributions by employers and employees.

Under the current CPP, employers and employees each contribute 4.95% of income between $3,500 and $54,900. The proposed plan would see that annual pensionable income increase up to $82,700 by 2025. For example, contributions for a typical worker earning about $55,000 would initially increase by $7 a month in 2019, eventually increasing to $34 a month in 2025. Employers would match those contributions.

The current CPP replaces 25% of earnings up to $54,900, with a maximum CPP benefit of $13,110. The average annual payment is $7,974.84. The expanded CPP would aim to replace one third of income up to the new $82,700 ceiling. The maximum annual payout would increase by about one third to $17,478.

CPP reform requires the approval of the federal government and seven of the provinces containing two thirds of Canada’s population. All of the provinces except Manitoba and Quebec have signed on to the agreement announced yesterday. Quebec Finance Minister Carlos Leitao said he supported the agreement but that Quebec would be proposing an alternate version of the expansion in Quebec.

What about the ORPP?

Ontario’s Finance Minister, Charles Sousa, has announced that this new deal will signal the end of his government’s proposed Ontario Retirement Pension Plan.

What does this mean for you?

These changes raise many important issues for unionized and non-union employers across Canada. We will be providing further insights as things develop and more details become available. In the meantime, if you have any questions about what an expanded CPP means for you, please contact us.

CPP Expansion

Limiting Liability: Incentives and Benefits on Termination of Employment

You’ve terminated an employee without cause, what do you owe them? It may be more than you think.

As a starting position, employees are entitled to compensation for what they would have earned during a reasonable period of notice, unless that right is limited by specific agreement. This includes all elements of an employee’s compensation.

Employment agreements often set an agreed notice period in the event of without-cause termination, limiting the broad and unpredictable common law notice period to some other (presumably shorter) length of time, such as the minimum notice period under employment standards legislation. In any event, if the employer wants to provide payment in lieu of working notice, what must be paid?

Not all of an employee’s compensation is contained in the four corners of the employment agreement. The entitlements under any benefit or incentive plan (such as a bonus, stock option or registered pension plan) need to be accounted for when determining damages arising from termination without cause. For instance, what is the terminated employee’s entitlement to options that vest during the notice period? What about scheduled bonuses? Is an employee entitled to remain a member of the pension plan throughout any notice period?

The answer lies in the text of the relevant agreement, be it a stock option agreement, a particular stock option grant, a bonus plan, a pension plan or some other agreement. Just as with employment agreements, the terms of a benefit or incentive plan can limit an employee’s post-termination entitlement – including restricting participation to periods of active employment – but only to the extent that the plan terms are clear and unambiguous, and are brought to the employee’s attention when they are introduced. The general legal principles are:

  • An employee’s rights and obligations are generally governed by the terms of the agreement.
  • If an employee’s entitlement is limited, but the limiting language is ambiguous, a court will typically resolve the ambiguity in the employee’s favour. This is especially true if the agreement was imposed by the employer without negotiation.
  • If the agreement is unambiguous and clearly states that the employee’s rights are limited in a specific way, including on a dismissal without cause, the agreement should govern, as long as (1) the employee was provided with a copy of the plan and/or advised of the plan language during employment, such as through a benefit booklet; and (2) the plan otherwise complies with employment standards legislation.

So a plan/agreement may rebut the principle that the benefit continues during the common law notice period, as long as it clearly and unambiguously states that any right to participate in the plan ends on the later of (i) the day active employment ends (i.e., does not continue into the notice period); or (ii) the end of the minimum period during which benefits must be continued by legislation (for instance, Ontario’s Employment Standards Act, 2000 requires that employers maintain a terminated employee’s benefits during the statutory notice period).  In that case, the agreement will stand and plan participation will end accordingly. However, if the language of the plan is unclear, the employee will be entitled to any benefit that would have accrued during the notice period.

It is important to keep in mind that the threshold for clarity is high and can be difficult to meet in cases of termination without cause. For example, Canadian courts have, in certain circumstances, decided that the terms “termination for any cause” or “involuntary termination” were not sufficiently clear or unambiguous to prohibit continuation during the reasonable notice period, because it was not clear in the plan whether employment was “terminated” as of the last day of work, or at the end of the common law notice period.

If you are looking for clarity and predictability in settling severance packages, you should set clear and unambiguous parameters on notice periods and post-termination entitlements, not only in your employment agreements, but also in the documents that make up your benefits and incentive programs.

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Limiting Liability: Incentives and Benefits on Termination of Employment