Has there been an increase in notice periods?

Sreya, May 31, 2019

The purpose of common law notice is to provide a bridge between jobs. To determine the length of that “bridge”, the courts assess how long it would take an employee to secure alternative employment. In making this assessment, courts primarily look at the employee’s age, length of service, character of employment and compensation. That is not an exhaustive list and other factors, such as a need to relocate, may lead to a longer notice period.

There are two notions about the length of notice to which terminated employees are entitled that have been increasingly chipped away at: the belief that employees are entitled to one month notice per year of service and the belief that the maximum notice period is 24 months.

Maximum of 24 Months No Longer Applies

For many years, it appeared that the maximum notice period an employee would be awarded was 24 months but there is a trend toward older, long-service employees receiving higher notice periods.

For example, last year in Dawe v. Equitable Life Insurance Company, a 62-year-old senior vice-president with over 37 years of service was awarded 30 months’ notice. Interestingly, the court said it would have awarded 36 months but Dawe had only asked for 30. That case is now under appeal.

One Month Per Year of Service is a Myth

The notion of one month per year of service is also a myth. For example, in Saikaly v. Akman Construction Ltd., the court recently awarded 24 months’ notice to a 60-year-old office-manager with only 12 years of service, effectively giving him two months’ notice for each year of service.

The court emphasised the following factors as significant in determining the notice period:

  • Mr. Saikaly did not have any formal designations, making it harder for him to find new employment
  • Mr. Saikaly was 60 years old
  • Akman had taken the position that it had cause to terminate Mr. Saikaly’s employment, making it difficult for him to find comparable positions in the tightly knit construction industry
  • Mr. Saikaly was well paid and would likely be unable to replace the salary and benefits he had received with Akman

This case may be an exception because Akman had, surprisingly, not defended the claim. That meant Saikaly could proceed by way of a default hearing to prove his damages, without Akman being able to contest his submissions. However, there are many cases in which employees have been granted more than one month per year of service, particularly in the case of short service employees.

The Importance of a Valid Employment Agreement

These cases highlight the importance of having valid employment agreements in place with your employees. Doing so enables you to limit the amount of common law notice you must pay. They must be done carefully but are well worth the investment.

 

To read these decisions in full, see below:
https://www.canlii.org/en/on/onsc/doc/2018/2018onsc3130/2018onsc3130.html?resultIndex=1
https://www.canlii.org/en/on/onsc/doc/2019/2019onsc799/2019onsc799.html

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