Is there a limit to the amount of notice an employee can be awarded – and if there is when will a Court award reasonable notice more than this amount?
Unless restricted by a term of contract, an employee is entitled to reasonable notice of dismissal or, more commonly, pay in lieu (what we usually refer to as “severance”). To determine what is reasonable, courts will consider several core factors:
- the employee’s age and length of service,
- the character of their job, and
- the availability of similar employment.
That is not an exhaustive list, and the Court can consider any other factors it finds relevant; the most common “fifth factor” is inducement, if the employee was previously lured away from secure employment into the role.
Upper Limit on Reasonable Notice
There is no formal upper limit on reasonable notice – but the Court sometimes acts as though one exists. In Strudwick v Applied Consumer & Clinical Evaluations Inc. the Court of Appeal for Ontario indicated that there was no upper limit, but that a notice period over twenty-four months should only be awarded in an exceptional circumstance.
What is an exceptional circumstance has not been made clear – but we know what happens without it, as the Court of Appeal for Ontario demonstrated in Dawe v Equitable Life Insurance Company of Canada.
Dawe involved the dismissal of a 62-year-old individual with 37 years of service for their employer. At trial his entitlement to reasonable notice was set at thirty months. On appeal the Court noted that this was not an exceptional set of circumstances, and that a twenty-four month notice period already recognized the lengthy service for the same employer.
After Dawe, the rule appeared to be simple: unless there were exceptional circumstances, the longest notice period that an employee could expect to receive was twenty-four months. Furthermore, it appeared that exceptional circumstances could not be made up of the factors that are already considered, such as age or length of service.
Then, in 2022, the Court of Appeal for Ontario released its decision in Currie v Nylene Canada Inc. Ms. Currie, a 58 year old individual, had been dismissed after 40 years of service for the same employer. At trial the Court awarded a notice period of twenty-six months. The employer appealed and was unsuccessful, with the Court of Appeal noting that the trial judge had found the circumstances of Ms. Currie’s dismissal were exceptional. The trial judgment listed these – Ms. Currie’s age, her long service at a single employer, a specialized skill set, and the prospect of re-entering the job market after a long period out of it were all deemed exceptional circumstances.
None of these are particularly exceptional and instead come with the territory for a long service employee. Based on the holding in Currie, it was not unreasonable to expect that future decisions breaching this upper limit were pending – and now one has arrived, in Milwid v IBM Canada Ltd.
Here, a 62-year-old employee with 38 years of continuous service for the same employer was dismissed without cause. The reader would be forgiven for confusing the facts in Milwid with those in Dawe – as these are almost identical.
The Court noted that the plaintiff’s age, length of service, his managerial role (Mr. Dawe, it can be noted, was an Assistant VP), his compensation and benefit package, and the technical/skilled nature of his skills geared towards the defendant’s business, were all exceptional circumstances – and supported an award in excess of twenty-four months. The Court awarded a notice period of twenty-six months.
The Court also took judicial notice of the impact of the Pandemic on the plaintiff’s ability to locate re-employment, and added a further month, for a total of twenty-seven months of reasonable notice. Like Dawe and Currie, we anticipate that Milwid may be appealed – there is just too much money at stake for an appeal not to be at least considered.
The differences between Dawe and Milwid are negligible – why was the dismissal of one 60-something year old employee with 30-plus years of service ‘exceptional’ and the other not? The answer is unclear and is not outlined in the case itself.
Maybe the decision in Currie was a quiet sea change in the assessment of what will be an exceptional circumstance. If that is the case, then Dawe can be disregarded in future – and a long service employee can expect an award of notice in excess of the twenty-four month cap.
Or maybe the court in Milwid got it wrong and Dawe actually is the law of the land, and there needs to be something beyond long service by an employee of advanced years present to justify a longer notice period.
Either way, “reasonable notice” is an ambiguous concept and people are well-advised to avoid this uncertainty by having clear severance entitlements set out in an Employment Agreement. That way, all the other factors are irrelevant and there is no need to try to guess what a Court might think is “reasonable”.
We assist both employers and employees in all aspects of the employment relationship,, and would be happy to assist you whether you are an employee whose employment has been terminated, an employer who has dismissed or is considering dismissing an employee, or someone drafting or in receipt of an employment agreement. Feel free to check out our FAQs and contact us for advice tailored to your situation.