This is the first of our two-part series on recent Ontario Superior Court of Justice decisions that employers need to be aware of before finalizing their next employment agreement. The decisions highlight the risk of failing to include an enforceable termination provision in the employment agreement. Absent such a provision, an employee dismissed without cause will be entitled to “reasonable notice” of termination at common law.

In this first part, we examine two recent decisions of the Court that suggest that the Court now favours longer notice periods for long service employees of advanced age: Dawe v Equitable Life Insurance Company, 2018 ONSC 3130 (Dawe) and Saikaly v Akman Construction Ltd., 2019 ONSC 799 (Saikaly). Until recently, 24 months was generally considered as the upper limit of notice entitlement that courts would award absent exceptional circumstances.

Key Takeaways

If the trend persists in courts awarding a “bump” in notice periods for older, long service employees, employers will face a decidedly uphill battle when negotiating settlements of wrongful dismissal claims by these employees, particularly where the prospect of re-employment is low. However, reprieve may be forthcoming since the Ontario Court of Appeal’s decision in Dawe is expected in the coming months. For now, employers can protect their interests by working with legal counsel to limit an employee’s entitlements upon termination without cause through the use of clear, unambiguous and enforceable termination provisions in their employment agreements.

Background

30 months’ notice awarded to 62 year old employee with 37 years’ employment

At the time of his dismissal without cause, Mr. Dawe was a 62 year old Senior Vice President with 37 years of service with his employer, Equitable Life. He earned $249,000 in base salary and a $380,000 bonus in the year his employment was terminated. The employer had unilaterally altered the company’s bonus plan during Mr. Dawe’s employment to specifically exclude entitlement to bonus payments beyond the last day of active employment. Mr. Dawe claimed that he intended to work for at least three more years beyond his termination date. He sought 30 months’ notice and bonus payments throughout the notice period in his summary judgment motion.

The Court acknowledged that, as a general principle, 24 months was the maximum notice period awarded in most cases. However, the Court went on to state that the former employee’s particular circumstances must be considered. In its departure from the norm, the Court pointed to “a change in society’s attitude regarding retirement”, noting that mandatory retirement was abolished in Ontario in 2006, and that “presumptive standards no longer apply” because many employees continue to work past the age of 65.

The Court considered all of the Bardal factors (age, length of service, character of employment and availability of alternate employment), but emphasized Mr. Dawe’s advanced age, noting that when there is no comparable employment available, termination without cause is “tantamount to a forced retirement”, and that Mr. Dawe should have been able to retire on his own terms.

The Court opined that, when combined, these factors resulted in exceptional circumstances warranting a “minimum 36-month notice period”. Ultimately, the court only awarded 30 months as this was all that Mr. Dawe had sought. The Ontario Court of Appeal heard the employer’s appeal on February 4, 2019 and the Court’s decision is expected in the coming months.

24 months’ notice awarded to 60 year old employee with 12 years’ employment

In Saikaly, the Court followed its decision in Dawe, awarding 24 months’ notice to a 60-year old office manager with 12 years of service. Even though Mr. Saikaly did not hold as high a level of position as Mr. Dawe, nor did he have the same length of service, the Court was satisfied that a 24-month notice period was justified, given Mr. Saikaly’s advanced age, dedication to his former employer, and lack of formal training rendering it difficult for him to find alternate employment.