November 6, 2023
by Israel Foulon Wong LLP

Summary

It is a general principle in Ontario’s common law that most employees who are entitled to reasonable notice of termination at common law will only be able to receive a maximum of 24 months of notice, depending on various Bardal factors such as age, tenure, character of the employment and the availability of similar employment. However, Ontario’s Court of Appeal has previously affirmed that a court may consider exceptional circumstances in addition to the Bardal factors to award a notice period exceeding 24 months. In two (2) recent decisions released by the Court of Appeal, we have received further guidance on the types of circumstances that might entitle an employee to reasonable notice of termination in excess of 24 months.

Milwid v. IBM Canada Ltd., 2023 ONCA 702 (“Milwid”) – 27 Month Award Upheld

In Milwid, a 62-year-old managerial employee with 38 years of service brought an action for wrongful dismissal. The plaintiff’s position was at a director level, immediately below the defendant’s executive team, and he claimed a notice period of 30 months based on his lengthy tenure, the senior nature of his role, his advanced age (62 years old) at the time of termination, and the COVID-19 pandemic as an exceptional circumstance warranting a notice period in excess of 24 months. This action was heard by way of summary judgement motion.

At the hearing of the motion, the motion judge found that the plaintiff’s position was technical and geared towards the defendant’s specialized business operations. The motion judge awarded the plaintiff 27 months of notice, finding that the plaintiff’s advanced age, specialized role and comprehensive compensation package entitled him to 26 months of reasonable notice at common law, which award was increased to 27 months due to the timing of the plaintiff’s termination (during COVID-19, and in an unstable economy).

On appeal, the employer’s position was that there were no exceptional circumstances that warranted a notice period exceeding 24 months. The Court of Appeal noted that the motion judge’s award of 27 months of notice to the plaintiff was based on the plaintiff’s Bardal factors, the fact that his employment was terminated during the COVID-19 pandemic, and the fact that that the plaintiff’s technical skills were geared towards the employer’s business.

The Court of Appeal affirmed that there is “nothing impermissible” in any court relying on Bardal factors in addition to some exceptional circumstance to award a notice period exceeding 24 months. The Court of Appeal confirmed that it is indeed an exceptional circumstance where an employee’s skills are not transferrable to any other role because they relate “almost exclusively to the [employer’s] products.” The Court of Appeal also confirmed that the COVID-19 pandemic was a “truly exceptional circumstance” that was well-supported by the evidence presented. As a result, the Court of Appeal affirmed the motion judge’s decision and dismissed the employer’s appeal of the 27-month notice period.

Lynch v. Avaya Canada Corporation, 2023 ONCA 696 (“Lynch”) – 30 Month Award Upheld

In Lynch, a professional engineer with 38.5 years of service brought an action for wrongful dismissal. The plaintiff claimed a notice period of 26 months in his Statement of Claim, but at the determination of his action at a summary judgement motion, the plaintiff sought a notice period of 36 months instead. This action was heard by way of summary judgement motion.

The motion judge found the plaintiff was entitled to 30 months of notice, but in her reasons, she did not specify the factors she considered exceptional circumstances capable of justifying such a lengthy notice period. The employer appealed the motion judge’s award, taking the position that the motion judge’s failure to identify distinct factors amounting to “exceptional circumstances” warranted a reduction in the overall award of 30 months of notice.

In its decision, the Court of Appeal did direct that lower court judges should specifically identify any factors relied upon as “exceptional circumstances” for the purposes of their notice period analysis. However, the Court of Appeal ultimately affirmed the award of the 30-month notice period by parsing the motion judge’s reasons.

The Court of Appeal found it was “possible to discern” the following as exceptional factors relating to this case:

• The plaintiff specialised in designing software that would be implemented in hardware unique to the employer and produced in only the employer’s Belleville premises.
• The plaintiff’s job was unique and specialized, and his skills were tailored to and also limited by his specific workplace experience for this employer.
• During his lengthy tenure, the plaintiff employee developed one or two patents each year for the employer.
• The employer identified the plaintiff as a “key performer” in one of his last performance reviews.
• Though comparable reemployment was available, opportunities would be far from Belleville, where the plaintiff employee had lived through almost four decades of employment.

The Court of Appeal found that the above factors were sufficient to support the motion judge’s finding that the plaintiff’s circumstances were exceptional, and that these factors could justify an award in excess of the general 24-month cap. As a result, the Court of Appeal affirmed the motion judge’s decision and dismissed the employer’s appeal of the 30-month notice period.

Takeaways for Employers

The above cases conform with an earlier case from 2022, Currie v. Nylene Canada Inc., 2022 ONCA 209 (“Currie”), in which the Court of Appeal dismissed an employer’s appeal of a 26-month notice period awarded to a 58-year-old Chief Operator with 40 years of service. In that case, the plaintiff employee had worked with the employer since leaving high school, and the trial judge found that terminating her employment amounted to a forced retirement due to the plaintiff’s age, limited education and few transferable skills. In Currie, the Court of Appeal affirmed the trial judge’s findings that these constituted exceptional factors warranting an increased notice period.

Milwid, Lynch and Currie are prime examples of how the common law concept of reasonable notice applies to individuals whose prospects of reemployment after a lengthy tenure with the terminating employer are not favourable. The purpose of common law notice is to give terminated employees the time they need to find a new job, but employees who have spent their entire career with the same employer in a role involving non-transferable experience will face considerable challenges in finding reemployment with a new employer, especially if the employee is of an advanced age. The common law may recognize such employment/termination circumstances (each case is decided on its own facts) as exceptional and warranting a notice period in excess of the traditional upper limit of 24 months.

As a result, employers should always consider whether any particular employee’s termination would involve exceptional circumstances relating to an employee. If any such circumstances or substantially similar circumstances exist, employers will want to tailor their offers and negotiation strategy accordingly to ensure the best chance of a mutually agreeable resolution. As a proactive measure, employers should also have their contract templates reviewed to ensure that there are termination-related provisions that will validly limit employees’ common law entitlements upon termination. Even existing employees whose employment agreements currently contain invalid termination provisions (or no such provisions at all) can be moved to enforceable contracts with valid termination-related provisions – assuming consideration is provided and the contract implementation is done correctly. Our team would be happy to review your employment agreement templates and advise you as to the best path forward to limit termination-related liability in your workplace’s specific circumstances.