Is there an upper limit to an award of notice/severance? If so, what criteria will Courts use to assess whether it will award reasonable notice in excess of this upper limit?

Unless restricted by contract, an employee is entitled to 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 list is not exhaustive, and the Court will consider any other relevant factors.

There is no formal upper limit on reasonable notice – but a Court may act as if there is. In Strudwick v Applied Consumer & Clinical Evaluations Inc., the Court of Appeal for Ontario (the “ONCA”) indicated that there was no upper limit, but that a notice period over twenty four months should only be awarded in an exceptional circumstance.

So what are “exceptional circumstances”? Long service for a single employer is not enough – for example, in Dawe v Equitable Life Insurance Company of Canada, a sixty two year old employee with thirty seven years of service saw his initial thirty month notice period reduced to twenty four on appeal. The ONCA noted that a twenty four month notice period already recognized advanced age and long service.

What criteria will a Court consider exceptional and justifying an award of notice over this threshold? The ONCA provided guidance in Currie v Nylene Canada Inc. There, a fifty eight year old employee with forty years of service was awarded a twenty six month notice period. The trial judge noted Ms. Currie’s age, long service, and skill set in a specialized field. The ONCA upheld this on appeal, noting that these factors provided “ample support for the trial judge’s award”.

Now, in two recent decisions the ONCA has provided further guidance on when an award of reasonable notice above twenty four months will be appropriate. Building off the holding in Currie, the focus appears to be the niche nature of the employee’s skills.  

New cases exceeding the “twenty four month cap”

In Milwid v IBM Canada Ltd. the employee was sixty two years old with thirty eight years of service. At trial his notice period was set at twenty six months, plus an additional month to account for the impact of the pandemic on the job market. This was upheld on appeal, with the ONCA noting that beyond the employee’s age and length of service, the technical nature of his skills and that these were geared towards the employer’s business justified a notice period above this threshold. 

In Lynch v. Avaya Canada Corporation the employee was sixty four years old with thirty eight and a half years of service. At trial, his notice period was set at thirty months. The Court noted that the employer described the employee as a “key performer” and that he had consistently developed several patents yearly for his employer. The Court also found that the employee’s ability to find similar work would be impacted by his location – there were fewer technical roles in Belleville, where he had lived throughout his tenure. The trial judge cited the specialized nature of the employee’s job – designing software to control the employer’s hardware. His skills were “tailored and limited by his very specific workplace experience.”

The decision was upheld on appeal, with the ONCA finding the factors cited “provided the requisite support for the trial judge’s determination that Mr. Lynch’s circumstances were “exceptional’” and merited a notice period over this threshold.  

The common thread between Currie, Milwid, and Lynch is the niche nature of the employee’s skills. Reasonable notice is not a windfall, but a bridge to support an employee until they find comparable employment. In all three of these cases the Court found that the employee’s skills were either usable only in the employer’s niche industry (Currie) or only directly for the employer (Milwid and Lynch). The longer notice period is the Court’s acknowledgment that the difficulties an older, long service employee would already face in finding another job would be compounded by their hyper niche skill set.  

Takeaways

With these two cases bolstering the holding in Currie, the twenty four month “cap” looks more vulnerable than it did only four years ago in Dawe. These three decisions provide some clarity in terms of what will assist to move a notice entitlement past this “cap”. With increased labour market mobility and the concept of a “job for life” seeming to be a thing of the past, it remains uncertain if we will see many more cases of this nature.

This case is a good reminder for employers to ensure that their employment agreements are up to date. Each of these cases could have been avoided by having an up to date employment agreement in place between the employer and employee limiting the employee’s entitlements on dismissal to a reasonable figure (statutory minimums or otherwise). 

While this is purely speculative, it seems as though some of these cases are less about reasonable notice and more focused on punishing an employer for forcing an employee into an early retirement (the Court acknowledged the early retirement in Currie). None of these individuals are likely to find employment due to their age and the bias against hiring an employee of an advanced age. The employer, by not making a reasonable offer on dismissal, sentenced each to a long, fruitless search for employment to show that they had fulfilled the “duty to mitigate”. In a different light, the Court’s award of the notice period may be compensation for the impact on the employee’s dignity for having to transition from a long career to an abrupt return to the job market, being met with a series of unsuccessful job applications and a silent phone.