A recent wrongful dismissal decision from the Ontario Superior Court of Justice (the “ONSC”) serves as an important reminder that exceptional circumstances can justify reasonable notice periods beyond the typical 24-month upper range.

In Panchbhaya v. Vulsay Industries Ltd.[Panchbhaya], the ONSC awarded a long service employee with a 26-month notice period following a without cause termination of employment. The decision highlights how an employee’s age, lengthy tenure, and specialized experience can significantly impact the assessment of reasonable notice. The case also reinforces the challenges employers face when alleging a failure to mitigate damages, particularly where the employer provided little assistance to support the employee’s job search following termination of employment.

BACKGROUND

The employee worked for the employer for approximately 40 years as a laboratory manager, which represented the entirety of his Canadian work experience. In this role, he was responsible for quality assurance functions and oversight of the employer’s quality management system. He also participated in group hiring decisions, assisted in training new employees, and reported directly to the Assistant General Manager.

In June 2023, the employer advised employees that they intended to close the laboratory. To encourage employees to remain until the closure date, the employer offered retention bonuses to the employee and other staff. The employer also suggested that alternative work opportunities may become available to the employee following the laboratory closure.

Despite these communications, the employee was dismissed without cause on November 3, 2023, at 65 years old. Upon termination, the employer provided only the employee’s minimum entitlements under Ontario’s Employment Standards Act, 2000. The employer also declined to provide the employee with a letter of reference or offer outplacement support or services.

The employee commenced a wrongful dismissal claim seeking a 30-month reasonable notice period. The employer argued that reasonable notice should fall within the range of 12 to 18 months.

DECISION

The ONSC was tasked with determining the appropriate reasonable notice period.

In assessing reasonable notice, courts consider the well-established factors outlined in Bardal v. Globe & Mail Ltd., including:

• the character of the employment;
• the employee’s length of service;
• the employee’s age; and
• the availability of similar employment, having regard to the employee’s experience, training, and qualifications.

These factors are non-exhaustive and that the weight assigned to each factor will vary depending on the circumstances of the particular case. Here, the ONSC placed significant emphasis on the employee’s age and extraordinary length of service.

Age Favoured a Longer Notice Period

Citing Hussain v. Suzuki Canada Ltd., the ONSC recognized that older employees can face additional disadvantages when competing in the job market against younger candidates. At 65 years old, the court accepted that the employee would likely face greater difficulty securing comparable employment, particularly given that some employers may view employees of a similar age as approaching retirement.

Seniority Reduced Employment Mobility

The ONSC also emphasized the employee’s exceptionally long tenure with the employer. The employee had worked continuously for the employer for four decades and had been hired shortly after immigrating to Canada. Importantly, he had no meaningful practical work experience outside of the employer.

The court reiterated the long-standing principle that long-service employees can experience greater difficulty securing new employment because prospective employers may perceive them as less adaptable to change or more closely tied to a single workplace environment.

Industry-Specific Experience Limited Employment Opportunities

The ONSC found that the employee’s specialized experience further limited his re-employment prospects. Although the employee worked in quality assurance, his experience was developed within a highly specialized chemical industry. He lacked experience in other sectors where quality assurance positions are more commonly available, such as the medical, pharmaceutical, or food industries.

That said, the employee’s role was not highly senior or executive in nature. While his position involved supervisory responsibilities and ranked above front-line or clerical work, the court did not consider the role so senior that comparable employment opportunities would be exceptionally rare.

The Employer Failed to Establish a Failure to Mitigate

The employer argued that the employee failed to reasonably mitigate his damages following termination. Among other things, the employer submitted that there was no evidence that the absence of a reference letter or outplacement services negatively impacted the employee’s job search efforts.

While employers don’t have a legal obligation to provide reference letters or outplacement support, the ONSC criticized the employer for advancing a mitigation argument despite having done little to assist the employee in securing new employment.

The employer also argued that because employees were informed months earlier that the laboratory would be closing, the employee should have begun searching for new employment before termination. However, the court rejected this argument and highlighted the employer’s mixed messaging. Although the employer advised employees that the laboratory was closing, it simultaneously suggested that alternative positions may become available and offered retention bonuses to encourage employees to remain employed until the closure.

The employee, meanwhile, provided evidence demonstrating substantial mitigation efforts. Over a 15-month period, he applied to more than 100 job postings across a variety of roles but was unsuccessful in obtaining alternate employment. Importantly, the employer was unable to identify any specific job opportunities that the employee unreasonably failed to pursue.

The ONSC reiterated that to successfully establish a failure to mitigate, an employer must demonstrate that the employee’s mitigation efforts were unreasonable when viewed as a whole. Merely identifying imperfections or isolated deficiencies in an employee’s job search efforts is insufficient.

Ultimately, the court found that the employee’s mitigation efforts were reasonable. See our previous blog for a more detailed discussion of the duty to mitigate and the challenges employers face in establishing a failure to mitigate.

The court reaffirmed that while 24 months is often viewed as the upper end of reasonable notice, exceptional circumstances may justify a longer notice period. In this case, the ONSC found that the employee’s age and 40 years of continuous service constituted exceptional circumstances warranting a notice period beyond 24 months.

Based on the entirety of the circumstances, the court awarded the employee 26 months of reasonable notice, together with compensation for benefits and pension contributions throughout the notice period.

TAKEAWAYS FOR EMPLOYERS

Exceptional Circumstances Can Push Notice Periods Beyond 24 Months: While courts often refer to 24 months as the general upper limit for reasonable notice, that ceiling is not absolute.Age, lengthy service, limited transferable experience, and specialized industry knowledge may collectively justify extended notice periods beyond 24 months.

Mitigation Does Not Need to Be Perfect: Employees are required to take reasonable steps to seek comparable employment following termination. However, the burden rests on the employer to demonstrate that the employee failed to mitigate their damages, and this is often a difficult evidentiary burden to satisfy.An employer’s ability to identify gaps or weaknesses in an employee’s job search efforts will not necessarily establish a failure to mitigate. Courts generally expect employers to provide concrete evidence showing that suitable opportunities existed and that the employee unreasonably failed to pursue them.

Reference Letters and Outplacement Support May Help Reduce Risk: Panchbhaya suggests that courts may look unfavourably on employers who aggressively challenge mitigation efforts after providing little or no assistance to support the employee’s re-employment efforts.Providing practical transition support may therefore be both a strategic and cost-effective step in appropriate circumstances.

Employers Should Be Careful with Mixed Messaging During Workplace Closures: Employers considering future closures, restructurings, or operational shutdowns should ensure that communications with employees remain clear and consistent.Where employers encourage employees to remain until a future closure date through suggestions of possible future opportunities, courts may be reluctant to find that employees had an obligation to begin mitigation efforts earlier.

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

This information is not intended as legal advice.