Following Recent Decision, Courts May be Breaking Free from the 24-month Cap on Notice Period
One of the hotly contested issues in the area of employment law (and, trust me, there are many!) is whether an employee’s entitlement to pay in lieu of reasonable notice of termination should be capped. In other words, when an employer decides to terminate an employee’s job without providing them with prior notice, they must compensate them with a financial severance package providing them with the equivalent compensation had they been entitled to work during their notice period. The question is: how much is too much?
Should the courts cap (set a limit on) how many months of severance pay compensation the employee should be awarded?
General Rules for Determining a Fair Severance Package
The general rules around determining employee severance pay depend on whether the employee has signed an employment contract with a valid termination clause limiting their entitlement to severance pay. If not, and as long as the employee was dismissed “without cause,” an employment lawyer can help the employee obtain a fair and appropriate severance package, including their common law entitlements to full severance pay (or if all else fails, a wrongful dismissal claim).
In most cases, an employee’s entitlement to severance pay under common law (pay in lieu of reasonable notice) will exceed their minimum entitlements in an employment contract or minimum standards legislation. To calculate an employee’s severance pay, an employment lawyer will consider the following main factors (along with many others):
- the length of service
- the character of the employment
- the age at the time of dismissal, and
- the availability of similar employment (considering the employee’s experience, training and qualifications).
Generally, the courts will find that the older an employee is when their employment is terminated; the longer the employee worked for the same employer; the more managerial their job; the worse the economic situation at time of termination; and the less skilled, experienced or qualified the employee is when their employment is terminated, the more challenging it will likely be for them to find another comparable position. As such, many employees will generally be entitled to more severance pay under Ontario employment law.
Cap on Severance Package Notice Periods
A few years ago, in a case called Dawe v The Equitable Life Insurance Company of Canada, the Ontario Court of Appeal ruled that in wrongful dismissal cases, the courts should apply a 24-month “cap” to severance pay compensation awards – with the exception of “exceptional” cases. As a result, many employers in Ontario breathed a sigh of relief, as the court made it clear rarely will there be a wrongful dismissal case where an employee is deserving of more than 24 months of severance pay compensation. In the Court’s words, a 24-month notice period is the “high end of the appropriate notice period for long-term employees.”
In fact, prior to the Dawe appeal court decision, there were numerous instances where the courts were awarding notice periods in excess of 24 months, such as:
- Dawe v. Equitable Life Insurance – in the original decision, the court awarded the 65-year old, long-service executive of 37 years (who worked as a Senior Vice President at the time his employment was terminated without cause) 30 months of severance compensation.
- Markoulakis v SNC-Lavalin Inc., the court awarded a 65-year old senior civil engineer of 41 years of employment, a severance package notice period worth 27 months.
- In Keenan v. Canac Kitchens Ltd., the court awarded two employees (husband and wife) 26 months of severance pay compensation, who were 63 and 61 years old at the time of their termination without cause, and had worked for the employer 32 and 35 years, respectively.
- In Cardenas v. Kohler Canada Co., the court awarded a 43-year old shift supervisor 26 months of severance pay compensation after 27.5 years of service with the employer.
- In Hussain v. Suzuki Canada Ltd., the court awarded 26 month of severance pay compensation to a 65-year old warehouse supervisor with 36 years’ service.
However, in a recent decision called Currie v. Nylene Canada Inc., the Court saw fit to award a wrongfully dismissed employee a notice period in excess of 24 months of severance pay compensation, finding the facts in this particular were “exceptional” enough to warrant exceeding the cap set in Dawe. The Court specifically relied on the following:
- the employee left high school to start working at the plant, and spent her entire working life dedicated to working for this one employer – she “has known nothing else”
- the employee was 58-years old at the time of her termination – and “was in her twilight working years, closing in on the end of her career.”
- the employee had developed very specialized skills at the plant that would make finding comparable difficult
- since she began working for the employer in 1979, the employee’s experience was limited to one employer, in one type of environment (specialized manufacturing job), which made it very difficult to transfer her skills to a new employer as the work landscape had evolved and changed significantly over the years
- the employee’s age, limited education and skill set would make it difficulty for her to compete for other jobs against younger candidates with different skills sets – in the Court’s words, “the termination was equivalent to a forced retirement”.
As a result, the Court awarded the employee a 26-month reasonable notice period as severance pay compensation.
Take-Away Lesson
When the Ontario Court of Appeal said in Dawe that wrongful dismissal awards of more than 24-months of severance pay compensation could only be awarded in “exceptional cases,” it left open a clear lingering question – what constitutes an “exceptional case”? The court did not define what it meant, and it therefore left the door open for lower courts to set the parameters of when exceeding the 24-month cap is fair.
Fortunately, with the recent case of Currie, the courts have now started offering some guidance as to what be required to justify an employee receiving more than 24 months of severance pay compensation following a wrongful dismissal. Generally, as the above summary illustrates, the courts will likely focus on an employee’s tenure exceeding 30 years of service, age exceed 60 years old, and limited education, skills or experience.
Indeed, although the courts have previously stated that no one “Bardal” factor should overemphasized when determining common law severance package compensation, one obvious “exception” may very well be an employee’s extraordinary years of service dedicated working for only one employer, which should qualify the employee’s case as exceptional enough to warrant breaking the 24-month notice period.
As an employment lawyer, I have regularly helped employees negotiate severance packages (and pursue wrongful dismissal claims) after working many years for the same employer, a loyalty and dedication that has left them with a limited range of education, skills or experience working elsewhere or for another industry. For instance, I recently assisted an employee with nearly 39 years at an IT company, as well as another employee who had worked nearly 54 years (!) at the same financial institution. For these (and many other long-term employees), this new case of Currie provides tremendous support for our firmly held belief that their long-tenure puts them at a disadvantage, especially when considering their older age and limited range of experience justifies crossing the 24-month notice period barrier.
If you have concerns about your employment and severance package entitlements, please call to speak with an experienced employment lawyer who would be happy to assist you.
Call Today for Help
If you are an employer or employee, please contact Bune Law at 647-822-5492 arrange a consultation with an employment lawyer in the Toronto area, so that we can discuss your specific employment matter in detail, explain employment law as it applies to your situation, and then determine whether you need our assistance and how we can help.
If you have been fired from your job and feel you deserve fair compensation, call Bune Law for help. When you call, you will speak with an experienced employment lawyer assisting with severance package review and negotiation. Call today to learn about your legal rights.
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