Court Clarifies ‘Exceptional’ Circumstances in Notice Period Awards

An employee is entitled to receive reasonable notice of the termination of their employment under common law unless that right has been limited by an enforceable contractual provision. While in the past, notice of termination at common law has generally been subject to an upper limit of 24 months, Courts have awarded more than 24 months in cases involving unique and/or exceptional circumstances. The Superior Court of Justice (“the Court”) in Dawe v Equitable Life Insurance Company recently provided greater clarity with respect to what will be considered “exceptional” circumstances for the purposes of awarding longer notice periods.

Employee with Nearly 40 Years of Service

The Plaintiff, a Senior Vice President with 37 years of service, was terminated without cause at 62 years of age. At the time of termination of his employment, the Plaintiff earned an annual salary of $249,000.00.

Following his termination, the Plaintiff brought a claim for wrongful dismissal in part arguing that he was entitled to 30 months notice of his termination.

Proximity to Retirement Key Factor in Decision

In its decision, the Court acknowledged that awarding a notice period in excess of 24 months requires “exceptional” circumstances and then went on to recognize “a change in society’s attitude regarding retirement” as a factor to be considered when determining whether “exceptional” circumstances exist.

The Court reasoned that “exceptional” circumstances warranting the granting of a longer notice period were present in the case, specifically pointing to:

• Changes in society’s attitude regarding retirement indicated by changes to pension plans affecting individuals across the province, the abolishment of mandatory retirement, and the fact that many employees continue to work past the age of 65;

• The Plaintiff’s commitment to work until at least the age of 65;

• The fact that the Plaintiff should have been “allowed to retire on his own terms”.

The Court also noted that there were no comparable jobs available to the Plaintiff that Mr. Dawe had dedicated the entirety of his working life to the Defendant employer and that by being terminated at age 62 the Plaintiff had effectively been forced to retire.

Given the existence of these “exceptional” circumstances, the Court found that it would have been justified in awarding 36 months of notice. However, as the Plaintiff had only requested 30 months, the Court awarded 30 months pay in lieu of notice of termination.

Important Takeaways for Employers

While the decision of the Court is being appealed, it may indicate an expansion of relevant considerations when determining notice awards and given this, employers should consider drafting clear and unambiguous termination clauses that effectively limit an employees’ entitlements at the time of termination and should require a release for entitlements above statutory minimums.

Employers should also note that even if an employee is close to 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 employment positions available.

If you require more information or have questions relating to the above, please contact Toronto employment lawyers at Sultan Lawyers by telephone at 416-214-5111, by here, or by filling out the form below.