Court of Appeal Confirms: Reasonable Notice Is Capped At 24 Months, Absent Exceptional Circumstances

Employers can breathe easy once again knowing that common law reasonable notice is still capped at 24 months, absent exceptional circumstances.

On June 19, 2019, the Court of Appeal for Ontario (Court of Appeal) released its decision in Dawe v. The Equitable Life Insurance Company of Canada, in which it overturned the lower court decision to award 30 months’ notice to a senior level employee and reduced the award to 24 months.

BACKGROUND

Michael Dawe worked for The Equitable Life Insurance Company of Canada (Equitable Life). and its predecessor, for 37 years, until his employment was terminated without cause. At the time of his dismissal, Mr. Dawe was 62 years old, held the position of senior vice president and in addition to his annual base salary, he was also eligible to participate in the company’s variable bonus plans.

Following the termination of his employment, Mr. Dawe brought a claim for wrongful dismissal, seeking 30 months of reasonable notice and the full payment of his bonus during that notice period.

On summary judgment, the motion judge determined that 30 months was a reasonable notice period and, in fact, was prepared to award a minimum of 36 months’ reasonable notice, had it been requested.

The motion judge also found that Mr. Dawe was entitled to receive bonus payments throughout the 30-month notice period on the basis that (i) the payments were an integral component of his compensation; and (ii) his right to bonus payments were not displaced by the termination provisions in the plans, which were unclear, confusing and not brought to Mr. Dawe’s attention at any time before his dismissal.

COURT OF APPEAL DECISION

The Court of Appeal disagreed with the lower court’s assessment of the notice period and reduced the award to 24 months.

The Court of Appeal agreed that the employee’s position, years of service, age and the availability of a comparable position were all factors that warranted a substantial notice period. However, the Court of Appeal also determined that a notice period of 24 months would appropriately account for these factors. There were no exceptional circumstances in this case that would warrant anything further. Moreover, the court noted that broader societal factors, such as a change in society’s attitude regarding the age of retirement, should not be factored into consideration.

The Court of Appeal also found that the terms of the bonus plans were unambiguous and would have clearly and unequivocally restricted Mr. Dawe’s entitlement to bonus payments during the common law notice period, had such terms been brought to his attention. While the Court of Appeal thought there was some evidence that Mr. Dawe was aware of such terms, it ultimately deferred to the motion judge and respected his conclusion on the facts. Accordingly, the Court of Appeal upheld the award of bonus payments throughout the 24-month notice period.

KEY TAKEAWAYS FOR EMPLOYERS

  1. Absent exceptional circumstances, the “high end” of reasonable notice remains at 24 months. Factors such as an employee’s long-term employment, senior position, age, and inability to find work elsewhere are all factors that may warrant a substantial notice period; however, they are not exceptional circumstances justifying an award in excess of 24 months’ notice.
  1. A carefully drafted termination provision in an employment agreement can create more certainty around an employee’s entitlements in the event of a dismissal without cause. An employee’s entitlements upon termination without cause can be limited in a written employment agreement, so long as the termination provision unambiguously alters or removes the employee’s common law rights.
  2. The terms of a bonus plan, including terms that deal with entitlements following termination of employment, should be brought to the employee’s attention. Posting a bonus plan on the company intranet, or even sending the employee a copy of the plan may not be sufficient to rely on the terms of such bonus plan. The employee must have actual knowledge of the terms or conditions.

For further information, please contact:

Laura Blumenfeld                      416-863-5250

or any other member of our Employment & Labour group.

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We would be pleased to provide additional details or advice about specific situations if desired.

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