If your job description includes responsibility for communicating pensions and benefits to fellow employees, then you must already know that with each new communication comes increased potential legal liability for your organization. However, unlike the production of a defective widget, where each new sale increases potential liability by one, each defective benefit communication increases potential liability by a multiple equal to the number of recipient beneficiaries. Hence, years of benefit miscommunication has an overwhelming impact on an organization's potential legal liability.
Canadian courts and arbitrators have shown an increasing propensity to award damages, or provide restitution, to employees where it can be shown that employer communications are untrue, inaccurate, misleading, ambiguous or omit important details otherwise relevant to those being asked to make important (often irrevocable) decisions related to health, welfare or retirement.
Benefit miscommunications can cost your organization in other ways too. Numerous court decisions in Canada demonstrate time and again how employer cost-savings programs, based on reducing post-retirement benefits, can be derailed by ambiguous communications about the employer's right to change those benefits following retirement from employment.
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 employer's pension and benefit programs are expensive and were implemented, in part, to attract and retain valuable employees. If you don't tell employees about your excellent programs, why 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 on pension plan administrators an obligation to provide on-going and ad hoc communications to plan members about their entitlements.
The challenge for employers, therefore, is how best to effectively communicate the excellent pension and benefit programs available to employees while minimizing potential legal liability and ensuring that proposed future changes to those programs won't be hampered by the phantoms of past communications.
While there is no single step that will cure all past benefit miscommunications, the path to overcome the benefit communication challenge must first be paved with a comprehensive Benefit Communications Policy (BCP) based, in part, on past court decisions which highlight the legal hurdles to be surmounted.
An effective BCP must ensure that future benefit communications that may be relied upon by employees to make important decisions:
- 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 the right to make future changes to its benefit programs, even following retirement.
A BCP 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 BCP will not be worth the paper it's written on if there is no C-suite buy-in. A Board of Directors stamp-of-approval may, therefore, be essential to the success of your policy and a single executive should be made accountable for the BCP to ensure that necessary resources are allocated to its implementation and adherence.
While a well-designed, successfully implemented and strictly enforced BCP will not cure past benefit miscommunications, it should significantly decrease the risk of future legal claims against your organization and increase the likelihood that upcoming cost-saving measures, which include changes to pension and benefit programs, will not be derailed by ambiguous employee communications.
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