Is an “executive” really an Executive?
March 16, 2023
The question of whether an “executive” is legally considered an executive has been raised many times in Ontario employment cases.
Courts have been clear that an “executive” title does not make someone an executive for legal purposes. The employee’s job title alone is not enough to determine their legal position for assessing how much notice they should receive upon termination.
This issue came up in a motion for summary judgment in George v. Laurentian Bank Securities Inc., 2020 ONSC 5415.
Mr. George was hired by the bank as a “Vice President, Equity Trading” in November 2018. He was fired without cause 4 months later in March 2019. At the time the motion was heard, 18 months after the termination, he had not secured a new job.
Mr. George’s asked the court to rule that, as a senior manager/executive who had been wrongfully dismissed, he was entitled to a minimum of 12 months’ notice irrespective of his length of service.
Despite his impressive sounding title, the court found that Mr. George did not hold a senior manager/executive position.
In coming to this decision, the court looked at Mr. George’s role and made these observations:
- he did not have any role in supervising coworkers in his department
- he was not responsible for oversight or strategic decision making in his department
- all employees in the Equity Trading division held the title of “Vice President, Equity Trading”. The title did not denote senior management or executive positions within the bank; and
- Mr. George was not part of Laurentian Bank’s Executive Team. He was 3 levels removed from it.
Since Mr. George’s primary duties were not managerial, despite his title, the court found that he was not an executive or a senior manager. Accordingly, the court determined that the appropriate notice period for Mr. George was just 2 months’ notice – well below what he was seeking.
As a side note, the court also rejected Mr. George’s assertion that an executive is automatically entitled to 12 months’ notice regardless of the length of their service with the company.
The distinction between an executive and a non-executive has increased importance with the recent ban on non-compete clauses for non-executives.
The Employment Standards Act now says that an employer cannot enter into an agreement with an employee that is or contains a non-complete agreement. There is an exemption however for employees that are “executives”. Under the Act, executives are defines as employees who holds one of several specific “chief officer” roles or the role of president.
A court may determine that, despite an employee’s title, they are not actually performing the executive role and therefore not executives. If that were to happen, the non-compete clauses in contracts entered into since late 2021 may be void. In such a situation, the employee would be free to compete with their former employer following a termination despite there being a non-compete clause in their contract.
It will be interesting to see if a court will take a position like they did in this case and ignore the executive title when parties are not truly conducting the duties of an executive.
This distinction is also relevant for overtime considerations. Executives are usually considered managers. Generally, managers are not entitled to receive overtime pay. However, if a court were to find that, despite the title, an “executive” did not act as a manager, it might also rule that the “executive” is entitled to overtime pay, even if they are regularly paid a fixed salary. This entitlement is one that is often overlooked by employers and is even more likely to be overlooked for someone with an executive title.
To reduce the risk of these types of issues arising, it is important that employers do their best to properly characterize the nature of an employee’s employment from the outset and whether they are true executives or employees with a misleading title.
If you have questions or concerns about whether you or your employee is properly characterized, please reach out to one of the employment lawyers at our office who can help you make this determination.