“Retiring Allowances” and the Taxation of Wrongful Dismissal Damages

(c) istock/MattZ90

Lawyers are often loathe to guarantee anything. However, it is said that two things in life are guaranteed: death and taxes.

This “guarantee” raises an important issue for the settlement of any wrongful dismissal case, the taxation of wrongful dismissal damages. While employers and employees can and often will agree to a favourable characterization of such damages, as the case of Ferhman v Goodlife Fitness Centres, Inc., 2017 ONSC 4348 (CanLII) demonstrates, sometimes that is not done and employees can end up receiving a lot less money – net of taxation – than they anticipated.

Beware the Innocuous Termination Provision

(c) istock/miluxian

It is often said that, “a magician never reveals his secrets.” If that is true, then it is a good thing that I am not a magician.

There is a phrase employed in countless employment agreements, which, on its face, appears innocuous. As will be explained below, notwithstanding the fact that this one simple, seemingly benign phrase can cost workers literally thousands, if not tens or even hundreds of thousands of dollars, few employees will ever give a second thought to accepting such a contractual provision.

While I suspect that many employment lawyers know exactly to what I refer, I would suspect that few outside this union of magicians would have any clue to what I am making reference.