A Settlement Amount was provided to current and former employees of the Employer to settle a grievance regarding the cancellation of various post-retirement benefits (PRBs) provided under a private health services plan and group term life insurance policy. The Settlement Agreement stated that the Settlement Amount was paid to them “in consideration of the loss of entitlement to PRBs, the alleged violation of their Charter rights and discontinuing litigation … as general damages for future loss of PRBs...” The Settlement Amount was generally calculated with reference to an employee’s pensionable years of service, up to a stipulated maximum, except that those with less than one year of such service were paid a flat amount.
CRA stated:
Since the Settlement Amount is being paid to both current … and former employees, it is unlikely that the Settlement Amount would be a retiring allowance. That is, the amount likely is not paid in recognition of the employees’ long service or in respect of loss of employment.