Earlier this year, a trial judge concluded that a 62 year Senior Vice President who was terminated after 37 years service was entitled to 30 months notice of termination. In fact, the judge stated he would have awarded a 36 month notice period if asked.
This case sent shock waves through the employment law community.
Lucky for employers this case was appealed.
The Ontario Court of Appeal (the “OCA”) overturned the trial judge and followed one of its 2006 decisions. In that decision this court concluded that while there is “no absolute upper limit or ‘cap’ on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months”.
The OCA rejected the trial judge’s decision to recognize a change in society’s attitude regarding retirement including the elimination of mandatory retirement at age 65. The court reduced the notice period from 30 to 24 months.
Lessons to be Learned
- When determining the appropriate reasonable notice period in a case the Ontario courts have been applying the factors set out in Bardal since 1960.
- One of the factors considered is length of service.
- Unless there are exceptional circumstances, Ontario judges will not generally award more than 24 months notice period.
- An employer can avoid the obligation to provide reasonable notice by including a termination clause in an employee’s contract.
- An employer can limit the amount of variable compensation that is paid to an employee during the applicable notice period by including clear and ambiguous language in an employee’s contract.
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The issue of whether a termination clause limits an employee’s entitlement to the minimum notice set out in the Employment Standards Act may be the most litigated issue in employment law over the past 5 years.