The Cost of Terminating Older Employees Is Increasing

Oct 11, 2016

Since the elimination of mandatory retirement in Ontario, employers have been required to manage the costs associated with terminating older employees. The costs can be significant because many of these employees did not sign employment contracts with termination clauses; these employees are entitled to “reasonable” notice of termination which can be 24 months or longer.

Recent cases suggest that older employees are obtaining higher wrongful dismissal damage awards, and it appears that judges may not expect these terminated employees to look for alternative work as seriously as younger employees. This blog discusses one of these cases.

The Case: Ororio v. The Canadian Hearing Society

Ms. Ozorio was terminated after 30 years’ service as a result of a re-organization when she was 60 years old.

The judge appears to have taken the following facts into account when awarding Ms. Ozorio 24 months pay in lieu of notice of termination:

  • She was divorced and the primary caregiver for a sick son who needed medication, and she also cared for her elderly mother who lived with her,
  • The employer’s initial settlement offer was 12 months pay and 2 months’ benefit continuation whereas at trial the employer argued that the reasonable notice period was considerably more (i.e. in the 18 to 20-month range),
  • The employer only paid her the minimum termination pay and severance pay she was owed under the Employment Standards Act,
  • The employer did not offer a reference letter,
  • The employer did not offer outplacement counselling,

When discussing the rationale for awarding 24 months notice the judge noted “Generally, a longer notice period will be justified for older long term employees…”

Who Is An Older Employee?

The judge on this case referred to two other cases which noted that a 60-year employee or an employee in their 60s face “extremely stiff competition with much younger applicants for the same kind of employment”, and a 60-year-old employee did not face a good prospect of re-employment “competing with younger, more recently trained and less likely expensive talent”, respectively.

Are Older, Long Service, Non-Executive Employees Entitled to Lengthy Notice Periods?

The short answer is yes. The judge referred to several cases where other judges concluded that older and long term employees in non-executive positions were entitled to pay in lieu of 24 months’ notice.

Lessons to be learned:

  1. If you are terminating a long service employee who is 60 years old or more think long and hard before making a low ball, initial settlement offer.
  2. If you are terminating an employee without cause and performance is not an issue then offer to provide the employee a reference letter. It can help the employee find work more quickly and therefore reduce damages. And it looks bad. My guess is that some judges increase the notice period because it seems hard-hearted not to provide a no cost reference letter to someone who could benefit from it.
  3. If you are terminating an older, long-term employee with no work experience outside her service with your organization then seriously consider offering the employee outplacement counselling. It can – and often does – help the employee find work more quickly and therefore reduce damages. The facts in this case suggest the employee was a perfect candidate for outplace counselling.

For over 25 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]

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.


  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."



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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