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Reasonable notice: The sky’s the limit?

Courts may be moving away from 24-month limit for notice awards

By Jeffrey R. Smith

Employers always have to be careful when terminating the employment of long-term employees. Just cause is difficult to prove and if a veteran employee is being dismissed without cause, she’s going to be entitled to a pretty good package.

If there’s a danger of a wrongful dismissal allegation, the employer could be stuck paying a lot of money for a lengthy notice period.

However, for the most part, employers have largely been assured there were limits on what they might have to pay dismissed long-term employees. Though many wrongful dismissal awards are roughly in the range of the unofficial “rule of thumb” of about one month per year of service, courts and arbitrators have limited reasonable notice entitlements to a maximum of about 24 months — not including any bad faith damages — even for employees with more than 24 years of service with the same employer.

Even in cases where larger notice periods were awarded, they’ve often been lowered to the 24-month range on appeal.

Things may be changing on this front, though. The Ontario Superior Court of Justice recently found no reason to stick to a 24-month limit for reasonable notice for long-term employees.  In Abrahim v. Sliwin, 2012 CarswellOnt 13870 (Ont. S.C.J.),a group of employees of two closed sportswear stores with the same owner brought a claim for wrongful dismissal against the owner. Their length of service varied, but two of the employees had more than 35 years with the stores and were over the age of 63.

The employees, through their legal counsel, requested one month’s pay for each year of service for each of them. They acknowledged the commonly accepted 24-month cap and only requested that much for employees with more than 35 years under their belt.

The court found the employees were wrongfully dismissed and they were entitled to pay in lieu of notice. It also said there was no reason to accept a 24-month cap on notice for employees who have put in a lot of years with an employer and that approach was being questioned more often in the courts. The court also noted the character of employment was becoming less of a factor in determining reasonable notice compared to length of service. Since the employees didn’t request more notice for the 35-year employees in their claim, the court didn’t award more. However, it made a point of saying it might have awarded more had they asked for it.

These developments could be of concern to employers as, in the past, it’s been rare to see notice awards in excess of two years. If an employer was on the wrong end of a wrongful dismissal decision, it at least knew there was a limit to what it would pay. But now it looks like — perhaps — the sky’s the limit for dismissed employees with many years under their belts. Should long-term employees be entitled to a similar ratio of reasonable notice as shorter-term employees, or is it unfair to ask employers to shell out that much?

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. He can be reached at jeffrey.r.smith@thomsonreuters.com or visit www.employmentlawtoday.com for more information.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Jeffrey R. Smith

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective.
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