Williams HR Law LLP

EXCEPTIONAL CIRCUMSTANCES IN TWO ONTARIO COURT OF APPEAL DECISIONS JUSTIFY LENGTHY NOTICE PERIODS

November 3, 2023

Introduction

According to the most recent census, a record-high one in five working age Canadians were aged 55 to 64. Given the aging workforce, many Canadian employers will inevitably need to navigate the end of employment relationships with older employees, some of whom may have lengthy periods of service and either no employment agreement or one that does not have valid termination clauses. The entitlements of such employees to reasonable notice of termination under the common law can be substantial.

Two recent decisions from the Ontario Court of Appeal (“ONCA”) illustrate how courts approach the dismissal of older, long-service employees, and serve as useful reminders to employers of the potential consequences of failing to enter into employment agreements containing valid termination clauses.

Lynch Notice Period Assessment

In Lynch v Avaya Canada Corporation [Lynch], the employee was 63 years old at the time of dismissal and worked for the employer as a professional engineer for 38.5 years. Ultimately, the employee was awarded a notice period of 30 months.

The ONCA outlined some of the relevant principles for determining the appropriate reasonable notice period:

  • reasonable notice is designed to provide employees with time to search for and secure alternate employment;
  • the Bardal factors help to determine the reasonable notice period by assessing each employee’s characteristics, including their age, length of service, character of employment, and availability of similar employment having regard to the employee’s experience, training, and qualifications; and
  • while an absolute cap does not exist for notice periods, only “exceptional circumstances” support awarding a notice period beyond 24 months. For more information on such exceptional circumstances, please see our previous blogs on Currie v Nylene Canada Inc and Dawe v Equitable Life Insurance Company of Canada.

The ONCA upheld the motion judge’s determination that the following constitute exceptional circumstances warranting a notice period of 30 months:

  • the employee specialized in the design of software to control unique hardware manufactured by the employer;
  • the employee’s position was unique and specialized, and his skills were tailored to and limited by his very specific workplace experience with the employer; and
  • the city in which the employee lived throughout the entirety of his employment, Belleville, lacked similar and comparable employment.

Interestingly, the motion judge also considered the fact that the employee developed one to two patents per year for the employer, as well the employer’s designation of the employee as a “key performer” as relevant exceptional circumstances to justify a 30 month notice period.

Milwid Notice Period Assessment

The employee in Milwid v IBM Canada Ltd [Milwid] shared many similarities with the employee in Lynch. He worked for his employer for over 38 years and was 62 years old at the time of dismissal. His most recent title was Program Director Go to Market for Asset Performance Management.

The ONCA dismissed the employer’s appeal to reduce the 27-month notice period. Similar to Lynch, the ONCA in Milwid upheld the motion judge’s determination that exceptional circumstances existed to warrant a notice period greater than 24 months. Notably, the ONCA in both cases considered the fact that the employees lacked transferrable skills due to the specialized nature of their roles with their former employers.

Additionally, the ONCA in Milwid upheld the motion judge’s 27-month notice period on the basis that the COVID-19 pandemic represented a “truly exceptional circumstance.” As the employee was dismissed in May of 2020 and “lost his position right at the time the global economy was shutting down”, the ONCA agreed with the motion judge’s decision to award an additional month to the notice period in consideration of this factor alone.

Lastly, the employee was granted equity by his employer in the form of Restricted Stock Units (“RSU”), which would have vested on two dates post-dismissal – the first of which occurred within the 27-month notice period. Although the employer’s Long Term Performance Plan contained language purporting to limit the employee’s entitlements to RSUs in the event the employee was no longer employed, because the Plan did not unambiguously limit or remove the employee’s common law rights, the ONCA upheld the motion judge’s decision to award him the employee half of the RSUs which vested within the notice period.

Mitigation Assessment

The motion judges in Lynch and Milwid outlined the following mitigation principles:

  • dismissed employees have a duty to mitigate their damages by taking reasonable, not perfect, steps to obtain comparable employment; and
  • employers have the burden to prove the following on a balance of probabilities:
    • the dismissed employee failed to take reasonable steps to obtain comparable employment,
    • had the employee taken such reasonable steps, they would likely have found comparable employment, and
    • employment must be comparable to the position held at the time of dismissal with respect to status, hours, and remuneration.

The employee in Milwid made efforts to mitigate his damages over a period of 14 months, throughout the pandemic until the date of the hearing, and provided a spreadsheet of his 122 job applications for which he received no interviews. However, the employer argued in favour of reducing the employee’s notice period by one month on the basis that the employee’s mitigation efforts were unreasonable. The employer raised concerns regarding the employee’s willingness to apply to only 34 Offering Manager/Product Manager positions, even though the employee served in that role for six years. Further, the employer provided a list of jobs based on two LinkedIn searches.

The motion judge rejected the employer’s argument, as the employer failed to prove more Offering Manager/Product Manager positions existed at the relevant time, and that the employee would have been successful had he applied. The motion judge also disagreed that the LinkedIn job searches established a failure to mitigate, as the evidence was insufficiently detailed and did not prove the listed jobs were truly comparable employment.

Similarly, in Lynch, the ONCA upheld the motion judge’s findings regarding the employee’s sufficient efforts to find employment, holding that the employee’s reasons for not expanding his job search were acceptable.

Takeaways for Employers

The ONCA’s decisions in Lynch and Milwid reinforce the importance of employment agreements, as both employers would have avoided paying lengthy notice periods had they been able to rely upon enforceable termination clauses.

These decisions also illustrate how notice period assessments require consideration of each employee’s particular circumstances. For example, the employees in Lynch and Milwid were awarded lengthy notice periods because of their long periods of service, age, specialized roles, lack of transferrable skills, and timing of dismissal, among other individual circumstances.

Lastly, Lynch and Milwid exemplify how the courts will not hold employees to the standard of perfection when mitigating their damages post-dismissal. Rather, employees merely need to prove that they have made reasonable mitigation efforts when searching for comparable employment. Employers, on the other hand, need to provide extensive evidence of comparable employment, including detailed dates, remuneration, title, and that the employee would likely have been successful had they applied.

 

This blog is provided as an information service and summary of workplace legal issues.

This information is not intended as legal advice.

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