There is a fairly widespread myth that dismissed employees are entitled to one month of notice per each year of service. However, there is no formula for calculating common law entitlements, and the length of reasonable notice that an employee is entitled to depends on many different factors, not just the length of service. In some cases, the entitlement can be far more than you might think.
Shelp v. GoSecure Inc.
The court’s recent decision in Shelp v. GoSecure Inc. is a reminder that there is no formula. The employee, Mr. Shelp, was 51 years old, had the title of Vice President, Sales, for Ontario and Western Canada, and was employed for only 10 months. The court awarded Mr. Shelp a notice period of 6-months.
The court noted that the case law “reflects a remarkable range in notice periods awarded by courts to older senior executives with relatively short periods of employment”, and that each case turns on its own facts. This makes it difficult to predict, with any degree of certainty, the length of reasonable notice that an employee will be entitled to.
In this case, the defendant submitted that the proper notice period was 2-4 months, and the plaintiff submitted that the proper notice period was 12 months. The court landed somewhere in the middle, at 6 months.
There were some other noteworthy aspects of the decision:
1. Summary Judgment
The court granted Mr. Shelp’s motion for summary judgment, despite the fact that both parties did not agree that summary judgment was appropriate. When the court determines that a trial is necessary it may decline to grant summary judgment, or even decline to schedule a summary judgment motion.
In this case, the defendant sought a dismissal of the motion, arguing that the issues required a trial. The court disagreed, and cited a Court of Appeal decision which found that a straight forward claim for wrongful dismissal without cause is “usually amenable” to a summary judgment motion.
Summary judgment remains a useful tool which may be appropriate in some wrongful dismissal claims.
2. Inducement from Secure Employment
Mr. Shelp had argued he was entitled to a longer notice period, as he was induced to leave secure employment with his former employer, where he had been employed for 4.5 years. After considering the evidence the court found that it was “unable to conclude the plaintiff was induced or actively recruited to join” his most recent employer.
However, when determining the reasonable notice period, the court gave weight to “the seniority [the employee] gave up when he was hired away from his former employer.”
These two aspects of the decision appear to be somewhat contradictory, and it will be interesting to see whether the defendant brings an appeal on this basis.
3. The Calculation of Commissions
Mr. Shelp was entitled to his full compensation, including his base salary and commissions, for the duration of the 6-month notice period.
There was no reliable evidence of what Mr. Shelp would have earned in commissions in the 6 months after his employment was terminated (for example, by reference to the volume of sales made to the clients that Mr. Shelp would have serviced).
Accordingly, the court found:
the most reliable and fair estimate of the plaintiff’s projected commission earnings over the 6 months following his termination should be calculated using his average monthly commissions he earned during his 10 months employment with the defendant.”
This is consistent with the approach taken in many other court decisions on the subject, although sometimes the court will calculate commission entitlements differently.
Conclusion
This case demonstrates, once again, that there is no formula for calculating an employee’s entitlement to reasonable notice of termination. If you are an employer, you should not assume that a dismissed employee is only entitled to a short notice period just because they had a short period of service. We can assist employers in carrying out terminations and making reasonable offers to dismissed employees in order to limit the potential of litigation. We can also help by drafting employment contracts with enforceable termination clauses that can reduce the employer’s liabilities upon dismissal.
If you are an employee, we can help you estimate your entitlements upon dismissal and help you navigate a claim against your former employer for wrongful dismissal.
If you have any questions about your situation or if you would like to get legal advice, please feel free to contact us.
