Court refuses to award pension-related damages to retired employee

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In Brousseau v. La Cité collégiale et al. (June 2021), the former Vice President of Human Resources of La Cité collégiale (“La Cité”), who retired in 2012, sought just over $1.8 million in damages for the alleged breach of a verbal agreement between him and the College’s former President to pay for all costs to transfer his pensions with previous employers to the College’s pension plan. He also claimed damages for negligent misrepresentation, arguing that he relied upon an erroneous estimate received from another employee about his monthly pension payments when deciding to retire. Emond Harnden’s André Champagne and Sophie Gagnier successfully represented La Cité over the course of the three-week virtual trial.

 

Background and Issues

Shortly after Mr. Brousseau was hired as La Cité’s Director of Human Resources in August 2002, he sought to transfer his pensionable service with two former employers to La Cité’s pension plan, which was administered by CAAT. In 2004, Mr. Brousseau considered a return to the federal sector and La Cité wished to retain him.  La Cité therefore offered Mr. Brousseau a promotion, assistance in obtaining the pension plan’s approval to negotiate reciprocal transfer agreements with his former employers and, if necessary, to pay for the costs of the transfer to La Cité’s Base Pension Plan. The President of La Cité and Mr. Brousseau entered into a verbal agreement regarding the above.

The 2004 verbal agreement was put into writing in 2010. At that time, La Cité paid Mr. Brousseau $170,000, which covered the repurchase of years of pensionable service to the Base Pension Plan, as well as income tax on that amount. In La Cité’s view, the payment satisfied the terms of the agreement.

However, Mr. Brousseau claimed that the agreement required La Cité to also transfer his past pensionable service to its Supplementary Pension Plan or, failing that, to set up a fund that would ensure that he would receive the same pension amount that he would have if such a transfer had been made. At trial, an expert actuarial witness assessed that amount at approximately $1.8 million.

Mr. Brousseau also claimed that La Cité owed him damages for negligent representation because of the error of one of its human resources clerks, who provided him with an inaccurate estimate of the monthly pension income that he would receive. The clerk was unaware of the difference in terms between the Base Pension Plan and the Supplementary Pension Plan. She therefore advised Mr. Brousseau that his monthly pension income would be $13,728.55, rather than the correct amount of $9,714.80. Mr. Brousseau claimed that he relied on that information when deciding to retire.

 

The 2004 Verbal Agreement

The Court found that there was no agreement for La Cité to transfer Mr. Brousseau’s service with his past employers to the Supplementary Pension Plan. In the circumstances, his evidence regarding the agreement was not in line with what “a practical and informed person would readily recognize as reasonable” in the circumstances.

The terms of the Supplementary Pension Plan clearly prohibited such transfer of pensionable service from previous employers. Mr. Brousseau had requested and received a copy of the Supplementary Pension Plan and was therefore found to be aware of the prohibition against transferring pensions from previous employers to CAAT’s Supplementary Pension Plan. The Court found that Mr. Brousseau’s testimony that he was unaware of the existence of a separate Supplementary Pension Plan was not credible.

The Court found it highly unlikely that the President of a Community College would have verbally promised to set up a special fund of an unspecified amount, which turned out to be in the order of $1.8 million dollars, to supplement Mr. Brousseau’s retirement pension without first determining the actual cost involved for La Cité and obtaining approval from the Executive Committee and the Board of Directors. The Court also found it highly unlikely that the Board of Directors would ever approve of a special arrangement with such a high cost for one employee.

Additionally, the Court found that if the President had promised to transfer Mr. Brousseau’s prior years of pensionable service to the Supplementary Pension Plan or pay him the amount to ensure he received the same retirement pension income as if his prior pensions had been transferred to the Supplementary Pension Plan, Mr. Brousseau would have confirmed such an important promise in writing. Mr. Brousseau also did not advise the actuary who was hired to assist him with the transfer of his past pensionable service that he wanted to transfer his service to the Supplementary Pension Plan, nor did he provide the actuary with details of the Plan.

The Court found that the $170,000 payment by La Cité fulfilled the terms of the 2004 agreement with Mr. Brousseau, and he was therefore not entitled to damages.

 

Negligent Misrepresentation

The Court found that there was no negligent misrepresentation.

Mr. Brousseau had claimed that the clerk, at one point, had provided him with an estimate of his pension payments on a Post-It note, but the Court did not accept that claim.

The Court determined that La Cité owed Mr. Brousseau, its employee, a duty of care to advise him about his pension entitlements. The representation (the estimate) made by the human resources clerk was inaccurate because it failed to distinguish between the two pension plans. While the Court found that the mistake was innocent, La Cité, as the clerk’s employer, was nonetheless vicariously liable.

However, the Court did not accept that it was reasonable for Mr. Brousseau to have relied on the clerk’s estimate of his retirement income. Mr. Brousseau had an MBA, had many years of service as La Cité’s Vice President of Human Resources, and was much more knowledgeable than the clerk about pension issues, including the Supplementary Pension Plan and repurchasing pensionable service. He knew the clerk was not a pension expert.

Furthermore, Mr. Brousseau had received pension statements regarding his years of service under the Supplementary Pension Plan. He would have known that the number of years of service credited to his Supplementary Pension Plan were different and much less than the number of years of service credited to CAAT’s Base Pension Plan. It would have been reasonable for him to ask the clerk to contact CAAT, or for him to contact CAAT himself, in light of the large discrepancy between her estimate and what was shown on his pension documents.

Since Mr. Brousseau did not reasonably rely on the inaccurate estimate, the Court found that he did not suffer damages as a result of the estimate because he was aware from receiving his annual pension statements of the correct estimates of his retirement pension income. The Court also found that Mr. Brousseau had already decided to retire prior to receiving the erroneous estimate of his pension income. The negligent misrepresentation claim against La Cité was therefore dismissed.

 

In Our View

This case serves as a reminder of the critical importance of documenting agreements reached with employees, especially those dealing with compensation.  It can be a difficult and costly task to attempt to piece the story together without supporting documentation when disagreements arise, potentially many years later.

For further information, please contact André Champagne at 613-940-2735 or Sophie Gagnier at 613-940-2756.