August 6, 2019

Ontario Court of Appeal Confirms the 24-Month Cap for Common Law Reasonable Notice Periods Absent Exceptional Circumstances

Decision

In Dawe v The Equitable Life Insurance Company of Canada, 2019 ONCA 512, the Court of Appeal for Ontario overturned the 30 month reasonable notice period awarded by a trial judge to a 62 year-old Senior Vice-President with 37 years of service, reducing the notice period to 24 months. However, the Court of Appeal dismissed the appeal concerning the trial judge’s finding that the employee was entitled to his bonus during the applicable reasonable notice period.

With regard to the applicable notice period, the Court of Appeal held that the trial judge erred by not following previous Court of Appeal jurisprudence that established that 24 months was the cap on notice periods absent exceptional circumstances. The trial judge’s award of 30 months did not rest on the presence of exceptional circumstances, but rather his perception of broader societal factors (e.g., the abolishment of mandatory retirement) and the resulting belief that “presumptive standards” no longer applied. The Court of Appeal held that, while Mr. Dawe was entitled to a substantial notice period in the circumstances, “there was no basis to award Mr. Dawe more than 24 months’ notice.”

Regarding the issue of bonus entitlement, while the Court of Appeal disagreed that the termination clause in the bonus plan was “unclear and confusing”, it agreed with the trial judge’s finding that the termination clause was unenforceable “because it was imposed unilaterally and was not brought to Mr. Dawe’s attention by Equitable Life at any time before his termination.”

In the result, Mr. Dawe was entitled to 24 months common law reasonable notice, including his bonus entitlement during this period.

Implications

The Court of Appeal’s decision confirms that 24 months remains the standard cap for common law reasonable notice periods, absent exceptional circumstances. Employers should be aware that there are a very limited number of cases where employees have been awarded in excess of 24 months’ notice (e.g., Keenan v. Canac Kitchens Ltd., 2016 ONCA 79, in which 26 months’ notice was awarded).

While termination clauses and bonus plan language may be used to limit entitlements upon termination, such clauses are highly scrutinized by courts and the case law changes rapidly. Therefore, employers should seek advice prior to implementing termination clauses or bonus plans for either new or existing employees.

The Court of Appeal’s decision also highlights the importance of having employees review and agree to a bonus plan’s terms and conditions. Even if a bonus plan’s language clearly disentitles an employee from receiving a bonus during the reasonable notice period, such a provision may be unenforceable if it is not brought to an employee’s attention and reviewed and agreed to by the employee.

LEGAL DISCLAIMER: This article is for informational purposes only and is not intended to provide legal advice, which in all circumstances must be tailored to the specific facts of any problem. You should obtain a proper legal consultation in order to determine how this article applies to your specific situation.
Please feel free to contact Israel Foulon LLP to learn more at 416-640-1550.

Notable Events

Latest Legal Articles