26 (Months) is the New 24: No “Hard Cap” on Reasonable Notice Periods
What is the maximum amount of notice that an employee is entitled to upon termination? In Dussault v Imperial Oil Limited, 2018 ONSC 1168, the Ontario Superior Court of Justice confirmed there is no cap on the length of reasonable notice of termination. Indeed, Dussault is an example of the expansion of the upper range of notice periods that has recently emerged in Ontario jurisprudence (see also: Keenan v Canac Kitchens Inc, 2016 ONCA 79, in which the Ontario Court of Appeal affirmed that 26 months was a reasonable notice period). Additionally, Dussault provides cautionary lessons to employers surrounding the particulars of a duty to mitigate and offers of re-employment.
The case concerned the notice period of two employees: Mr. Dussault and Ms. Pugliese. Mr. Dussault, age 63, was terminated after over 39 years of service with Imperial. He had held a variety of positions including that of a Business Analyst, Service Station Automation Manager and Eastern Canada Merchandising Coordinator. At the time of termination, Mr. Dussault was working as Manager, Real Estate Development Ontario, a position he had held for almost 26 years. Mr. Dussault earned a base salary of $190,200.00, benefits, contributions to a savings plan, a defined benefit pension plan, and reimbursement for car costs related to business use (insurance, parking, tolls, etc.).
Ms. Pugliese, age 57, was terminated after 36 years of service with Imperial. She held a number of technical positions before moving into the retail side of Imperial’s business, working in a number of management positions. Ms. Pugliese was Territory Manager at the time of termination, earning a base salary of $156,700.00, benefits, contributions to a savings plan, a defined benefit pension plan, and reimbursement for car costs related to business use.
In early 2016, Imperial reached an agreement to sell its Ontario retail operations to Mac’s Convenience Stores Inc. Imperial indicated Mac’s would offer employment to certain employees with a "gratuitous lump sum payment" meant to offset the difference between the benefit plans offered by Mac's and Imperial for a period of 18 months. If employees did not accept Mac's employment offers, Imperial advised their entitlement to severance pay would be substantially reduced or eliminated to reflect the fact that they "passed up an opportunity for continued employment".
Both plaintiffs’ received offers of employment from Mac’s, which provided their base salaries would remain the same for 18 months, at which point they would decrease significantly – in the neighbourhood of $100,000.00. Additionally, the offers explicitly stated that the plaintiffs’ years of service with Imperial would not be recognized in ascertaining seniority or entitlements upon termination from Mac’s. Neither plaintiff accepted the offer of employment. In August and September 2016, Mr. Dussault and Ms. Pugliese were terminated and paid their minimum statutory entitlement pursuant to the Ontario Employment Standards Act, 2000.
At the summary judgment application, the plaintiffs argued they were each entitled to 32 months of notice. The defendant argued the plaintiffs had received sufficient working notice. Imperial further argued that 24 months is the maximum notice period available, except in exceptional circumstances, which were non-existent in this case.
The Court held the appropriate notice period was 26 months for each of the plaintiffs. In reaching this conclusion, the Court considered each of the Bardal factors (character of employment, length of service, age, and availability of similar employment). Both plaintiffs occupied positions with significant levels of responsibility. The Court noted that Imperial was the only employer of both plaintiffs since their respective graduations from university or college. Accordingly, their skills and experience were geared to one particular employer, which created difficulty in the transferability of such skills. Further, the Court held that Mac’s employment offers evidenced the difficulty the plaintiffs would have in finding similar employment, particularly given the inferior salaries and benefits. Notably, the Court held the notice period started to run when the plaintiffs received their respective termination letters from Imperial, rather than an earlier date when the plaintiffs ought to know their employment was in jeopardy.
Imperial argued that the plaintiffs failed to mitigate their damages by rejecting Mac’s offers of employment. The Court held it was unreasonable to require the plaintiffs to accept the Mac’s offers for several reasons:
- The offers were made prior to the termination of the plaintiffs’ employment and were not re-offered after the actual termination;
- The requirement to sign a release in exchange for a mysterious lump sum payment effectively required the plaintiffs’ to renounce their right to sue for any shortfall in entitlements;
- Given the sale of Imperial’s retail operations to Mac’s, it was unreasonable to require the plaintiffs to accept offers that did not recognize their years of service with Imperial;
- Having to hide their higher pay from other employee’s at Mac’s would make for a potentially difficult working environment and the duty to mitigate does not include an obligation to work in an atmosphere of hostility and embarrassment; and
- There are sufficient differences between the terms of employment with Imperial and Mac’s to make rejecting the offer reasonable, including the inferior salary and benefits.
Alberta employers are not immune from the trend in jurisprudence that there is no 24-month “cap” on notice periods. In exceptional circumstances, such as long-service (25+ years) or older employees (age 55+), employers may be required to provide more than 24 months of notice. As always, the determination of an employee’s entitlement will depend on his/her particular circumstances, specifically the character of employment, length of service, age, and availability of similar employment.
If you are considering terminating employees or selling all or part of your business, the importance of the process of termination cannot be understated. In this case, Imperial was ordered to pay significant notice periods, commencing as of the date of the termination letter (rather than earlier discussions of termination), and without deduction for mitigation based on offers of employment with the successor employer. Dussault serves as example that getting the process of termination wrong can have costly consequences.
The lawyers in Field Law’s Labour and Employment Group have extensive experience assisting organizations with termination issues and are available to answer your questions about how this decision and other considerations may impact you and/or your organization.