The decision by the Ontario Court of Appeal in Love v. Acuity serves as a reminder for employers that caution should be exercised when setting a notice period. The simple rule to follow is that you need to tailor-make each individual notice period to the specific circumstances of the employee.
Love v. Acuity
In this case, Love was a 52 year old Senior Vice President, one of a few shareholders, earned $650,000 per year and had 2.5 years of service. The trial judge initially awarded Love five (5) months’ notice. Many employment lawyers likely felt that this was a fair result, given that Love had only completed 2.5 years of service and was awarded more than one month per year of service, which is what the unofficial “rule of thumb” provides employees.
However, the Ontario Court of Appeal overturned the decision and increased the notice period from five (5) months to nine (9) months. The Court of Appeal’s decision in this regard provides an important lesson in how notice periods should be calculated.
First, there is no “rule of thumb” that the Court applies. While it is common for calculate notice periods based on this rule of thumb of one month per year of service, doing so is in direct conflict with the Bardal test, which specifically requires consideration of four factors: age, length of service, character of employment and chances of re-employment.
Second, a company policy that defines what notice an employee is entitled to is not binding on the Court. The Court will apply the notice period that it considers to be reasonable in the circumstances.
Third, the company practices, or the notice the company provides to other employees in the company, is not determinative of the amount of notice that a specific employee is legally entitled to at common law.
Fourth, the concept of “ballpark damages” does not apply. Using an approach that determines the range of notice and then applying the low end of the range does not prevent a Court from determining what the notice period should be in a particular case. Courts will always impose what they consider to be the appropriate reasonable notice period not considering loose numbers.
Fifth, and finally, “near cause” does not apply in Canada. Entitlement to reasonable notice is an all or nothing proposition. If there is no just cause, then the notice period cannot be reduced on account of poor performance or misconduct by the dismissed employee.
In Love, the Court of Appeal applied the Bardal factors and made it clear that all four factors must be considered in setting the appropriate notice period. The Court of Appeal found that the trial judge had incorrectly placed too much weight on Love’s short length of service and too little emphasis on the character of Love’s employment and chances of re-employment. Essentially, the Court of Appeal found that Love was a senior executive, not a salesperson, and was a shareholder who earned a significant income, and therefore it would be more difficult for him to secure alternative employment. All of this justified a higher reasonable notice period.
This case emphasizes that all four Bardal factors should be considered in setting a notice period. What this means is that, depending on the facts of the particular case, a short service employee may be entitled to a lengthy notice period that is greater than the “rule of thumb” of one month per year of service, and a long service employee may be entitled to less than the “rule of thumb” in certain circumstances.
The foregoing is for informational purposes only, and should in no way be relied upon as legal advice.