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Labor & Employment Law

: Thoughts from a Management Lawyer

Damages in Wrongful Dismissal Cases - Part I

By Michael Fitzgibbon

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I will be writing a series of posts on damages issues that arise in wrongful dismissal cases. Today's post discusses some some general principles.

General Principles

In the absence of a legally enforceable contractual provision to the contrary an employee can be terminated for just cause or in the absence of just cause upon being provided with reasonable notice or pay in lieu of reasonable notice at common law.

The presumption of reasonable notice can be displaced through a legally enforceable contractual provision to the contrary (a topic for another day). Canada does not ascribe to the American concept of employment at-will.

What is (or are) the underlying purposes of this reasonable notice period?

The Court in Whelehan v. Laidlaw Environmental Services Ltd. said that:

The law requires employers to provide dismissed employees with compensation for an adequate period of time to enable them to pursue suitable re-employment without unreasonable financial disadvantage.

In Gregg v. Freightliner Ltd. it was put as follows:

The purpose of reasonable notice is to provide the employee with time to find other employment.

In Ontario, the purpose was described in Portugal v. Car Park Management Services Ltd. as:

The purpose of reasonable notice is to give the dismissed employee an opportunity to find other employment.

How Do You Determine the Period of Reasonable Notice?

So how do we go about deciding on what the period of reasonable notice is in a particular case? In determining what constitutes reasonable notice of termination, the courts have generally applied the principles articulated by McRuer C.J.H.C. in Bardal (a case decided in 1960):

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

See more recently Keays v. Honda Canada.

There are many other factors that have crept in and out of the mix over the years, but the court is trying to assess in a non-scientific, non-formulaic way, the "time to find another job". As was said in McKay v. Eaton Yale Ltd.:

The determination of the appropriate notice period for dismissed employees is an exercise which involves more art than science. The general principles to be applied emerge readily from well-established case law, but the application of those principles to any given fact situation is not a precise or mathematical process. All of the relevant factors must be weighed in the balance in order to individually tailor a notice period based on certain personal and employment characteristics of the plaintiff.

And so, determining the period of reasonable notice will yield a range rather than a precise number in any given case. Courts have resisted, and in fact rejected in most cases, and in most provinces, any rule (such as the month-per-year-of service rule of thumb, rejected in, for example, Minott v. O'Shanter Development Company Ltd.) that would restrict or limit the courts discretion to fix the reasonableness of the notice period. As was said in Minott:

Determining the period of reasonable notice is an art not a science. In each case trial judges must weigh and balance a catalogue of relevant factors. No two cases are identical; and, ordinarily, there is no one "right" figure for reasonable notice. Instead, most cases yield a range of reasonableness.

This being the case, a court of appeal should only intervene where the trial judges assessment falls outside of the ?acceptable range or unless, in arriving at the figure, the trial judge erred in principle or made an unreasonable finding of fact?.

Is there a Cap on Reasonable Notice?

Is there a "cap" on reasonable notice? It depends. In Ontario, the Court of Appeal in Lowndes v. Summit Ford Sales Ltd. has held that there is a "soft cap" on reasonable notice of 24 months which may only be exceeded in "exceptional circumstances". The New Brunswick Court of Appeal in rejected the "cap" principle and held that "there is no absolute maximum period of reasonable notice". The same result followed in Valley Forest Products Ltd. v. Dey.

The Lowndes case emphasizes what Canadian courts have generally accepted as a governing principle, namely that the maximum notice period that should be awarded in the ?standard" wrongful dismissal case is 24 months.

Summary

In summary, then, the period of reasonable notice of termination is decided on an individual, case-by-case basis by the Court considering factors and criteria that have developed over the past 50 years. The Court will take a non-scientific, non-formulaic approach when determining the period of reasonable notice and this will yield a range rather than a precise number. There is a general view that the soft-upper limit on reasonable notice is 24 months save for exceptional cases.

Full post as published by Thoughts from a Management Lawyer on June 12, 2009 (boomark / email).