If your job description includes responsibility for communicating pensions and benefits to fellow employees, then you’ll already know that with each new communication comes potential increased legal liability for your organization.
Canadian courts and arbitrators have shown an increasing propensity to award damages to employees in cases of employer communications found to be untrue, inaccurate, misleading or ambiguous or that omit important details otherwise relevant to those making important and often irrevocable decisions related to health, welfare or retirement.
Cases involving negligent misrepresentation, for example, have resulted in awards for a retiring employee (Gauthier v. Canada (Attorney General)), a terminated employee (Allison v. Noranda Inc.) and the spouse of a deceased employee.
Benefits miscommunications can cost your organization in other ways, too. Numerous Canadian court decisions demonstrate how ambiguous communications about an employer’s right to change post-retirement benefits can derail efforts to reduce costs.
While eliminating all benefit communications might appear to be a logical means of reducing potential legal liability, there are many sound business and legal reasons for regular communications to employees about their benefits. Your pension and benefits programs are expensive and are part of your efforts to attract and retain valuable employees. If you don’t tell employees about your excellent programs, why would you bother having them in the first place?
In some cases, you have no choice and must issue benefits-related communications. For example, the law imposes an obligation on pension plan administrators to provide ongoing communications to plan members about their entitlements.
The challenge for employers, therefore, is how to effectively communicate the excellent pension and benefits programs available to employees while minimizing potential legal liability and ensuring the phantoms of past communications won’t hamper proposed future changes.
While there’s no single step that will cure all past benefits miscommunications, the path to overcome the challenge requires a comprehensive policy based, in part, on past court decisions that highlight the legal hurdles.
An effective policy should ensure that future benefits communications:
- Are thoroughly vetted so as to eliminate any untrue, inaccurate or misleading statements or omissions;
- Are clearly written and devoid of ambiguous or vague terminology;
- Do not predict future events, unless thoroughly qualified;
- Do not project future investment outcomes, unless thoroughly qualified; and
- Where appropriate, include customized language, unique to each organization, reserving to the employer’s the right to make future changes to its benefits programs, even following retirement.
A benefits communications policy should become an integral part of your organization’s risk management strategy and should align with existing procedures and human resource capabilities. Of course, your policy won’t be worth the paper it’s written on if the executive isn’t on side. Approval by the board of directors may, therefore, be essential to the success of your policy and a single executive should be accountable for it to ensure the organization allocates the necessary resources for its implementation and adherence.
While a well-designed, successfully implemented and strictly enforced benefits communications policy won’t cure past miscommunications, it should significantly decrease the risk of future legal claims against your organization and increase the likelihood that ambiguous communications won’t derail upcoming cost-saving measures.