During 2023, we saw the Ontario Court of Appeal uphold two decisions awarding notice periods beyond what was believed to be the “24-month cap” at 27 and 30 months respectively.
In another recent Ontario decision, the Court awarded 5.5 months of pay in lieu of notice to an employee with only 5 months of service prior to dismissal, which is significantly higher than the “one month per year” rule of thumb. These decisions create uncertainty for employers given the wide range of potential liability arising from wrongful dismissal claims. Fortunately, there are proactive measures employers can take to avoid this liability.
Common Law Reasonable Notice
Employees who are not limited by contract and are dismissed without cause can pursue common law reasonable notice through a wrongful dismissal claim. Courts will apply the “Bardal factors” to determine the common law notice period, which considers the employee’s age, length of service, the character of their employment, and the availability of similar employment. The court can also consider other factors when they determine necessary.
Long Service Employees Exceeding The “24 Month Cap”
Generally, courts have capped common law notice period awards at 24 months for senior employees; however, recently we have seen more “exceptional” cases in which the court exceeded the cap.
In Milwid v IBM Canada Ltd., 2023 ONCA 702, the Ontario Court of Appeal awarded 27 months of pay in lieu of notice to the employee; however, the following factors influenced this significant award:
- 38 years of service;
- Management level position with specific training on IBM’s unique products; and
- 62 years old at the time of dismissal.
In Lynch v Avaya Canada Corporation, 2023 ONCA 696, the Ontario Court of Appeal awarded 30 months of pay in lieu of notice based on the following characteristics of the employee:
- 38.5 years of service;
- Designed specific software for the employer; and
- 64 years old at the time of dismissal.
The significant length of service, proximity to retirement age, and niche and specialized positions performed by the employees in these cases justified these significant awards. In the court’s view, this makes it more challenging to seek comparable employment elsewhere.
Short Service Employees Receiving Significant Notice Awards
On the other end of the spectrum, we are also seeing uncertainty with notice periods for short-service employees.
In Grimaldi v CF+D Custom Fireplace Design Inc., 2023 ONSC 6708, the Ontario court awarded a 5.5-month notice period to an employee with just under 5 months of service as a senior project manager. The employee was 50 years old at the time of termination.
In justifying the lengthy notice period, the Court acknowledged that short-service employees who are terminated may have difficulty finding other employment, potentially suggesting that it will be difficult for an employee to explain why their prior employment came to an end so quickly to a new employer:
I find that the short nature of Mr. Grimaldi’s employment at CF+D likely affected how long it took him to find a new job. The short duration of his employment at CF+D, considering his age and past experience, would require him to explain to prospective employers why he was terminated so soon after being hired.
This recent decision follows a string of cases in Ontario, as well as in other provinces, that provide significant common law notice awards to short-service employees.
How to Avoid the Uncertainty of Common Law Notice
The uncertainty and significant liability for employers in the above cases could have been avoided with an enforceable termination clause that limited the employees to only the minimum entitlements in the Ontario Employment Standards Act, 2000 (“ESA”), which requires ESA notice of up to 8 weeks and potentially ESA severance of up of 26 weeks based on length of service.
In Ontario, termination clauses are especially challenging to enforce due to the different standards of cause in the ESA compared with common law. Ontario courts in recent years have routinely struck termination clauses based on the wording of the provisions and awarded common law notice.
If your employment contracts have not been updated recently by a knowledgeable employment lawyer, you likely have exposure to common law damages, as in the above cases. Get in touch with a SpringLaw lawyer to avoid this liability.