When an employee in Ontario is wrongfully dismissed, they may be entitled to damages. These are determined based on an employment contract if one exists, or the minimum severance provisions outlined in the Employment Standards Act, 2000 (ESA). Under the ESA, terminated employees are entitled to severance pay calculated as a set number of weeks per year of service.

However, in some instances, employers offer less than what is legally required under the ESA or the terms of the employment contract, leaving the employee inadequately compensated. In such cases, the employee may pursue common law damages, commonly referred to as reasonable notice damages, to address the financial impact of wrongful dismissal.

This blog examines how courts calculate reasonable notice damages, the key factors they consider, and how these elements affect the final award, referring to a recent case from the Ontario Superior Court of Justice.

Senior Employee Terminated Without Cause After Three Years

The case of Timmins v. Artisan Cells provides insight into how courts assess reasonable notice damages. In this case, the plaintiff was hired as Vice President of Cell Technologies in November 2019. He was promoted twice, first to Executive Vice President in March 2021 and then to Chief Development Officer in August 2021.

His compensation package was substantial, amounting to approximately $476,000 annually, including stock options, benefits, and bonuses. His employment contract specified that in the event of termination without cause, he would be entitled to either three months’ pay or the Employment Standards Act minimum, whichever was greater.

In March 2023, the employer terminated his employment without cause and offered only one week’s pay—far less than the three months outlined in his contract. Additionally, the employer required him to sign an extensive release waiving all employment-related claims in exchange for more compensation. The employee refused and argued that the employer had repudiated the contract, entitling him to reasonable notice damages.

Repudiation of Contract and Award of Common Law Damages

After reviewing precedent cases, the Ontario Superior Court of Justice determined that the employer had repudiated the employment agreement, rendering it unenforceable. As a result, the employee was no longer bound by the contract’s termination provisions and was entitled to damages based on reasonable notice under common law.

Reasonable notice damages are designed to compensate employees for the time expected to take them to secure comparable employment. The goal is to provide financial continuity rather than a windfall, ensuring the employee is placed, as closely as possible, in the position they would have occupied had they not been wrongfully dismissed.

Factors Influencing the Calculation of Reasonable Notice

In determining the appropriate period of reasonable notice, courts consider several factors, including:

• Age of the Employee: Older employees typically receive longer notice periods as they may face greater difficulty securing new employment.
• Length of Service: Employees with longer tenures generally receive extended notice periods, as their limited experience with other employers may hinder job prospects.
• Character of Employment: Highly specialized or senior positions often lead to longer notice periods due to the challenges in finding comparable roles.
• Availability of Comparable Employment: The ease or difficulty of securing a similar job within the employee’s industry and geographic region significantly impacts the notice period.

Each factor is weighed equally, and the court evaluates them based on the employee’s specific circumstances. There is no fixed formula—each case is decided on its unique facts and merits.

Employer’s Seniority and Niche Industry Supported 9 Months’ Reasonable in Notice

In this case, the court considered several key factors. The employee was 44 years old when terminated and had been with the employer for 3.5 years. His role was senior in status and highly specialized. In fact, only six companies in Canada were operating in the same niche industry, three of which the employee had already worked for. As a result, his job prospects were limited.

Additionally, the employee earned a substantial compensation package of over $450,000 per year, which has historically led to longer notice periods due to the difficulty of securing comparable pay.

Considering these circumstances, the court concluded that a reasonable notice period of nine months was appropriate and awarded the employee damages accordingly.

Takeaways for Ontario Employees and Employers

The Court’s decision in Timmins v. Artisan Cells reinforces the importance of reasonable notice damages in wrongful dismissal cases, particularly for employees in senior, specialized roles with high compensation packages. Employers must carefully adhere to employment contract terms, as any deviation—such as attempting to impose additional conditions on severance—can result in the loss of contractual protections and increased liability under common law.

For employees, this decision highlights the potential for greater compensation through reasonable notice damages when an employer fails to honour termination provisions. Understanding these legal principles is essential for both parties navigating employment disputes.

Grosman Gale Fletcher Hopkins LLP: Providing Dynamic Employment Law Advice in Toronto

The innovative employment lawyers at Grosman Gale Fletcher Hopkins LLP understand the complex financial, emotional, and operational issues that collide in wrongful dismissal cases. For over 40 years, we have helped Ontario employees and employers navigate complicated workplace disputes and are known for delivering results for our clients. We provide robust legal solutions for all aspects of employment law (non-unionized workplaces) and labour law (unionized workplaces). To schedule a consultation, please call us at (416) 364-9599 or reach out online.