Pensions, Benefits & Executive Compensation Newsletter ' August 2020

• Published date: 31 August 2020
• Subject Matter: Corporate/Commercial Law, Employment and HR, Retirement, Superannuation & Pensions, Employee Benefits & Compensation, Executive Remuneration
• Law Firm: Blake, Cassels & Graydon LLP
• Author: Blakes Pensions, Benefits & Executive Compensation Group

Welcome to the 28^th issue of the Blakes Pensions Benefits & Executive Compensation Newsletter. This newsletter provides a summary of recent jurisprudential developments that affect pensions, benefits and executive compensation and is not intended to be legal advice.

IN THIS ISSUE

VESTING DURING THE REASONABLE NOTICE PERIOD

• Battiston v. Microsoft Canada Ltd., 2020 ONSC 4286

BENEFICIARY DESIGNATIONS

• Boulos v. Duca Financial Services Credit Union Ltd. 2020 ONSC 1946

FAMILY LAW

• Lorimer v. Lorimer, 2020 ONSC 1923
• Van Delst v. Hronowsky, 2020 ONCA 329

JURISDICTION OF A PENSION PLAN

• Canada (Attorney General) v. Picard, 2020 CAF 74

HEALTH AND WELFARE BENEFITS

• Toronto (City) v. Toronto Professional Firefighters' Association, Local 3888, 2020 CanLII 31921 (ON LA)

CALCULATION OF ANNUAL REFERENCE SALARY

• Roy v. Retraite Québec, 2020 QCTA 227 (Me Pierre-Georges Roy)

VESTING DURING THE REASONABLE NOTICE PERIOD

Battiston v. Microsoft Canada Ltd., 2020 ONSC 4286

Francis Battiston was an employee at Microsoft Canada (Microsoft) for almost 23 years prior to his termination without cause. In addition to his base salary, Mr. Battiston received benefits every year, including merit increases, cash bonus and stock awards under Microsoft's Rewards Policy. These benefits comprised about 30 per cent of Mr. Battiston's total compensation. One issue at trial was whether Mr. Battiston was entitled to the vesting of his previously awarded stock bonuses during the notice period.

Microsoft communicated the award of the stock bonus to employees by e-mail. The e-mail directed the employee to the My Rewards website to complete the online acceptance process, where a record would save indicating that the employee had read, understood and accepted the stock award agreement (Agreement) and accompanying plan documents. The e-mail indicated that failure to read and accept the Agreement and other plan documents may prevent the employee from receiving shares from the stock award in the future. The e-mail concluded by directing the employee to a human resources webpage for more information regarding the stock awards. Mr Battiston's self-described practice was to accept the stock plan without reading the Agreement, given its length. The Agreement contained a termination provision which provided that unvested awards would be forfeited on termination of employment. Mr Battiston testified that he had not read the Agreement, nor did Microsoft draw his attention to the termination provisions, and further claimed that he was under the impression that he would be eligible to cash out his granted but unvested stock awards in the event that he was terminated without cause.

In deciding that Mr. Battiston was entitled to damages relating to the termination of unvested stock awards that would have vested during the notice period, the Ontario Superior Court of Justice (Ontario Superior Court) held that, though the Agreement unambiguously excluded Mr. Battiston's right to vest his stock awards after he was terminated without cause, Mr. Battiston was entitled to damages for the unvested stock awards that would have vested during his notice period had he not been terminated, as the termination provisions were unenforceable. The Ontario Superior Court refused to enforce the termination provisions in the Agreement as they precluded Mr. Battiston's right to have unvested stock awards vest if he had been terminated without cause. The Court further accepted Mr. Battiston's evidence that he was unaware of the termination provisions in the Agreement and that such provisions were not brought to his attention by Microsoft noting that Microsoft's e-mail communication that accompanied the notice of the stock award each year did not amount to reasonable measures to draw Mr. Battiston's attention to the termination provisions.

Ontario Superior Court Decision

BENEFICIARY DESIGNATIONS

Boulos v. Duca Financial Services Credit Union Ltd., 2020 ONSC 1946

Nazha Boulos, the estate trustee of her late husband, Edward Joseph Boulos, brought an application for an order declaring that Mr. Boulos' estate is the beneficiary of three Registered Retirement Investment Fund (RRIF) accounts in the name of the late Yura Khagek, a close friend of Mr. Boulos. Mr. Khagek was the sole annuitant under three Registered Retirement Savings Plan (RRSP) accounts (RRSP Accounts), and Mr. Boulos was the designated beneficiary of each RRSP Account. Upon Mr. Khagek reaching the age of 71, in the absence of any direction from Mr. Khagek, Duca Financial Services Credit Union converted the RRSP Accounts to RRIFs in accordance with Section 146(2)(b.4) of the Income Tax Act (Canada). Mr. Khagek had not signed beneficiary designation forms for the RRIFs. Mr Khagek later passed away and appeared to die intestate, with no will or testament found. Shortly thereafter, Mr. Boulos passed away. Mrs. Boulos is the executor and sole beneficiary of Mr. Boulos' estate.

In arriving at its decision that Mr. Boulos was the designated beneficiary of the RRIF accounts, the Ontario Superior Court looked to the Succession Law Reform Act (SLRA) and jurisprudence regarding the relationship between RRSP accounts and RRIFs. Pursuant to section 51(1) of the SLRA, which provides that a plan participant may designate a person to receive a benefit payable on the participant's death by a written designation or by a will, Mr. Khagek had designated Mr. Boulos as the beneficiary of the RRSP Accounts through a written designation.

Further, in determining that the RRSP designation also applied to the RRIF accounts, despite no explicit designation having been made under the RRIF, the Ontario Superior Court followed the judgment of Ashton Estate v. South Muskoka Memorial Hospital Foundation, 2008, which held that "RRIFs are connected to or derivatives of the RRSP from which they have been converted." The Ontario Superior Court found that the RRSP designation made by the late Mr. Khagek would follow the conversion of the funds into a RRIF, absent Mr. Khagek revoking the designation.

For these reasons, the Ontario Superior Court granted the application and ordered the funds in the RRIFs to be transferred to Mr. Boulos' estate.

Ontario Superior Court Decision

FAMILY LAW

Lorimer v. Lorimer, 2020 ONSC 1923

Mr. and Ms. Lorimer married on October 6, 1979, and separated on June 1, 2007. In 2011, Mr. Lorimer was ordered to transfer one-half of his pension to Ms. Lorimer and pay Ms. Lorimer spousal support (2011 Order). On January 1, 2018, Mr. Lorimer retired after almost 37 years of service. Mr. Lorimer filed for divorce around this time.

At issue was whether Mr. Lorimer's pension was to be included in his income for spousal support purposes notwithstanding that the portion of the pension entitlement that accrued to Mr. Lorimer during the marriage was equalized by the 2011 Order. Mr. Lorimer submitted that Ms. Lorimer received the benefit of one-half of his employment pension accrued during the marriage as an asset, and accordingly his pension income should not be considered in the calculation of spousal support. Mr. Lorimer also submitted that Ms. Lorimer had an obligation to use the divided assets to provide for her own pension, but chose to deplete her assets in order to live beyond her means and to provide for her independent adult children. Ms. Lorimer acknowledged that the reduction in Mr. Lorimer's income upon his retirement represented a material change in circumstances. However, Ms. Lorimer submitted that, although she received a division of Mr. Lorimer's...