Employees are entitled to reasonable notice when they are terminated without cause. As mentioned in a previous article, reasonable notice can take two forms – a minimum statutory period of reasonable notice and a longer common law notice period, applicable to some employees.

While the maximum period of statutory notice is eight weeks for workers who have been employed for at least eight years, there is no absolute cap on the amount of common law notice. However, courts have required the presence of exceptional circumstances to justify an award of more than 24 months salary.

This blog post looks at the concept of exceptional circumstances in the context of common law reasonable notice. It also reviews a recent decision of the Ontario Superior Court of Justice, in which an employee brought an action for wrongful dismissal seeking a notice period of 30 months.

Which employees are entitled to common law reasonable notice?

Employees may be entitled to common law reasonable notice if they have not waived this right in their employment agreement. A previous blog post was written about the trend of the courts in not enforcing certain types of termination provisions which seek to remove this entitlement.

It is important to note that employers sometimes include pay in lieu of notice beyond the statutory minimum amount in a severance package in an attempt to avoid a wrongful dismissal claim.

How is the common law reasonable notice period calculated?

As mentioned before, courts apply the so-called Bardal factors in order to determine a unique notice period for each individual employee. These factors require consideration of:

  • the age of the employee – with longer notice periods normally given to older employees;
  • the length of service with the employer – a longer period of employment may warrant a longer notice period;
  • the character of the employment – senior management or specialized employees might receive longer notice periods; and
  • the availability of similar employment – the employee’s experience, training and qualifications are considered to determine whether similar employment is likely to be available.

These factors tend to provide longer notice periods to employees that are likely to have difficulty in finding new employment.

Some cases have found that the COVID-19 pandemic, which has created an economic downturn in some industries that has negatively impacted re-employment prospects, has been relevant in determining the period of notice.

What constitutes exceptional circumstances?

The Court of Appeal for Ontario has held that exceptional circumstances are needed for a court to award a common law notice period of more than 24 months. 

The Superior Court said in the case of Russell v The Brick Warehouse LP that: 

“While there does not appear to be any definitive list of exceptional circumstances identified by the jurisprudence to date, the case law tends to require some extraordinary measure to have been taken by the employer which either makes reemployment by the terminated employee more difficult, involved terminated employees who held highly compensated positions, or where some measure of an employer’s high-handed conduct occurred.”

Plaintiff was terminated without cause two months into the pandemic

Turning to the recent decision of Milwid v IBM Canada Ltd., the plaintiff was terminated without cause in May 2020 and was provided with twelve weeks’ notice and severance as required under the Employment Standards Act. He rejected the employer’s separation package and started an action for wrongful dismissal. He was terminated at the age of 62.

The employee started working for IBM South Africa in 1982. He came to Canada in 1998 and continued working for IBM, albeit the Canadian entity. He was paid a base salary of almost $170,000 per year, and had IBM equity in the form of restricted stock units.

Until 2019, the plaintiff was the Program Director of Operations Optimization and managed five employees. After restructuring by the employer, he became a different Program Director. 

Plaintiff sought 30-month notice period

The plaintiff argued for a notice period of 30 months arguing that he had been effectively “forced into retirement.” He claimed that the shutdown of the economy in response to the COVID-19 pandemic was an exceptional circumstance that warranted a notice period longer than 24 months.

The employer sought a 20 to 22 month notice period, arguing that the plaintiff did not hold an executive role, did not manage employees, and had transferable skills which were not limited to the information technology sector.

COVID-19 pandemic not an exceptional circumstance

Justice Ramsay decided that the case law did not identify the COVID-19 pandemic as an exceptional circumstance for the purpose of deciding the length of a reasonable notice period. However, some cases have considered economic factors, including a downturn in the economy or in a particular industry, as a relevant factor in determining the notice period.

Her Honour explained that the evidence supported a lengthy notice period for the plaintiff, including because of:

  • the fact the plaintiff worked for IBM for 38 years, which was his only employer in Canada;
  • the plaintiff’s age at termination; 
  • the nature of the plaintiff’s work, which was specialized and geared towards the defendant’s company; and
  • the plaintiff was a management employee at the director level, which entailed significant responsibilities.

Court decided there were exceptional circumstances; awarded 27-month notice period

Justice Ramsay noted authority for the point that an employee’s difficulty in obtaining employment should not unreasonably increase the notice period. However, her Honour thought that there were exceptional circumstances in this case to justify a notice period longer than 24 months. These were the plaintiff’s age, lengthy service with the same employer, managerial and technical position, and his compensation which included equity awards.

Justice Ramsay decided that a reasonable notice period was 26 months. However, her Honour increased this by one month to account for the impact of the pandemic on the plaintiff’s ability to find new employment.

Contact Grosman Gale Fletcher Hopkins LLP in Toronto for Advice on Termination Entitlements 

The experienced employment lawyers at Grosman Gale Fletcher Hopkins LLP advise both employers and employees on the termination process, including advising on severance packages and wrongful dismissal claims. To speak with a member of our employment law team, reach out to us online or call us at 416.364.9599 to schedule a confidential consultation.