30 months and counting

Feb 11, 2019

As we have written before, a wrongful dismissal occurs when an employee is terminated without just cause and the employer does not provide adequate notice of termination. An employee can claim damages equal to the remuneration the employee would have earned during the applicable notice period. For a long time, 24 months was recognised as the informal ceiling for notice periods. However, in recent years, judges have been willing to award notice periods longer than 24 months, particularly when older employees are involved.

In Dawe v Equitable Life Insurance Company, Mr. Dawe was terminated from his position as Senior Vice President of the Equitable Life Insurance Company after 37 years of service for both Equitable Life and its predecessor company. Mr. Dawe was 62 years old at the time of his termination, earned a base salary of $249,000 and a STIP and LTIP bonus totalling $379,585. Mr. Dawe sued Equitable Life for wrongful dismissal.

The judge commented that although Mr. Dawe was possibly close to retirement age, he should have been allowed to retire on his own terms.

The judge accepted there were no comparable jobs available to him, and noted that Mr. Dawe had dedicated the entirety of his working life to Equitable Life. Being terminated at age 62 was tantamount to being forced to retire. The judge awarded 30 months’ notice, which is what Mr. Dawe had requested. However, the judge commented that he would have awarded him 36 months.

Lesson to be Learned

Even if an employee is close to retirement and has commenced planning their retirement, unilaterally accelerating that process can prove to be an expensive decision, particularly if the employee can show that because of their age, there are no comparable positions.

Due to the length of notice in this case, and the judge’s comment about 36 months being a reasonable notice period in the circumstances, we anticipate wrongful dismissal damages claimed will increase for long term employees who are over 60 years old.

If you are considering terminating a long service employee, it is important to consult an employment lawyer so you can obtain an assessment of your potential legal liability.

If you would like to speak to a lawyer at MacLeod Law Firm, you can reach us at [email protected] or by phone at 647-204-8107.

There are many ways to attack the termination clause in an employment contract. 

I am now surprised if employee counsel does not claim that their client’s  termination clause is not legally enforceable - usually because the termination clause does not allegedly comply with the Employment Standards Act.

This blog considers a case, McKercher v Stantec Architecture Ltd., 2019 SKQB 100, where an employee successfully attacked the termination clause in his contract because he did not explicitly agree to it after being promoted. 

The Facts

In 2006, Mr. McKercher commenced employment as a staff architect. The termination clause in his employment contract stated: 

Termination other than for cause will be with notice or pay in lieu of notice, based on your length of service. If the Employer terminates your employment for other than just cause you will receive the greater of:

  1. a)   Two weeks notice or pay in lieu of notice during the first two years of employment increasing by one week for each additional completed year of employment to a maximum of three months notice or pay in lieu of notice.

      or

  1. b)   The minimum notice of termination (or pay in lieu of notice) required by applicable statutes.

Eleven years later, when Mr. McKercher was employed as a Business Centre Sector Leader, his employment was terminated. The employer paid him the three months termination pay he was owed under his employment contract.

 

Another way to attack a termination clause: What is the changed substratum doctrine?

An Ontario judge in a 2012 case, MacGregor v National Home Services, 2012 ONSC 2042 (CanLII), described this legal doctrine as follows: "The changed substratum doctrine … provides that if an employee enters into an employment contract that specifies the notice period for a dismissal, the contractual notice period is not enforceable if over the course of employment, the important terms of the agreement concerning the employee’s responsibilities and status has significantly changed."

 

The rationale for this doctrine has been described by one judge, Schmidt v AMEC Earth & Environmental Ltd., 2004 BSCS 2012 (CanLII), as follows: "In my view, it was incumbent on the defendants to advise Mr. Schmidt that they intended to continue to rely upon the termination provision set out in the Agreement when substantial changes in his employment occurred. This would have allowed him to consider the matter and to negotiate for other terms. If the defendants wished to continue to rely on the termination provisions there ought to have been a ratification of the provisions as the nature of Mr. Schmidt’s employment changed."

 

Decision

The judge hearing this case relied on the following factors when deciding not to enforce the termination clause in the employment contract: ”...there is no evidence that (the employer) made it clear to the (employee) that the notice of termination provisions were intended to apply to the positions to which he was promoted. The employment agreement contains no express wording to this effect, nor does it contain any wording to support the inference of such an intent. Further, and in keeping with the analysis in Schmidt, the Court received no evidence that, as it promoted the plaintiff, SAL reasserted its understanding and expectation that the notice of termination limit would remain in effect.”

 

Lesson to be learned:

An employer should make it clear that the termination clause in an employment contract applies when an employee is promoted. This expression of this intent should be in writing and should be clear and unambiguous. I recommend that an organization’s employment be reviewed by an employment lawyer every year or two. If your employment contract does not address this issue then think about doing so the next time it is reviewed.

 

For 30 years, Doug MacLeod of   the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

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