Employer's 'mind boggling' failure to contract long-standing employee breaks longtime limit; employment lawyer explains risks
A recent Alberta court decision in a wrongful dismissal case is a fresh reminder for employers: failing to have formal employment contracts, no matter what other circumstances may be in place, can have devastating financial consequences.
The decision, Lischuk v K-Jay Electric Ltd, 2025 ABKB 460, saw a long-serving employee awarded more than $1.5 million in damages, 10 years after his initial wrongful dismissal claim was filed.
The 26-month reasonable notice period awarded to the employee for “exceptional circumstances” breaks the long-held 24-month “rough upper limit”, an unofficial cap for the province established in a 1986 decision.
As Evguenia Iskra, associate professor of business law at the University of Calgary’s Haskayne School of Business, explains, it’s a circumstance that could easily have been avoided.
“The employer made a huge mistake, that throughout the life of this employee, never bothered to have a written contract,” says Iskra.
“This is mind boggling.”
Textbook example of ‘exceptional circumstances’
The facts of the Lischuk case are a wake-up call for employers. As Iskra explains, especially in the case of long-standing employees, the test for what are ‘exceptional circumstances’ might become more relevant as more baby boomers retire.
The Ontario Court of Appeal has outlined that in order for the upper limits of reasonable notice under common law to be reached, exceptional circumstances must be proven.
Examples of conditions that might lead to exceptional circumstances can include:
- The employee’s age
- Working for only one employer for the entirety of the employee’s working life
- The employee’s specialisation in specific knowledge or skills unique to the employer
- Termination that could be seen to be a forced retirement
- Being employed by a single employer for so many years that it impacts their future employability
In this case, the employee, Glenn Lischuk, who spent 34 years at K-Jay Electric, rose from helper to general manager and then part-owner as the company grew. When leadership of the company shifted from the owner to the owner’s son in 2013, Lischuk was terminated without cause at age 58; according to the decision, the two owners stated they’d wanted to “move away from Mr. Lischuk’s old school mentality.”
Without a contract limiting his entitlements, the court applied the common law reasonable notice doctrine, ultimately awarding Lischuk 26 months’ notice – two months beyond the long standing limit of 24 months, set in the 1986 decision Ansari v. British Columbia Hydro & Power Authority
Due to his age, length of service, and limited prospects for comparable employment, plus the comment by one of the owners that it was “time for him to retire”, it was determined that exceptional circumstances did apply to this case; damages were assessed to include Lischuk’s base salary, bonuses, benefits, and vacation pay, totalling over $1.5 million.
“If an employer fails to write a good contract, or, as in this case, doesn't have a contract at all, then the employee is entitled, under the common law, to the common law reasonable notice damages, which are significant,” Iskra explains.
“In cases where I have long-term employees, that's a horrible situation. I could be on the hook for a million bucks, over a million dollars, $1.5 million as in this situation … that could, in some situations, bankrupt the company.”
Iskra emphasizes that this outcome was entirely avoidable: “Basically, a contract allows the employer to contract out of the common law reasonable notice requirement to limit it to a certain amount that is much more certain and precise.”
Why relying on common law is risky
Many employers, especially those without dedicated HR expertise, assume that the courts will apply a standard formula or that verbal agreements suffice. But as Iskra explains, “They shouldn't be relying on the Bardal test at all. They should be writing contracts that contract out of the common law to avoid that lack of clarity and ambiguity, because it's always going to be a range.”
The so-called Bardal test (based on a 1960 Ontario Supreme Court decision) relies on age, role, length of service, and prospects for alternative employment to determine reasonable notice. They are designed to protect employees, but introduce significant uncertainty for employers.
“From an employer's perspective, do not rely on the Bardal factors. You want to avoid going to court,” Iskal says.
“What do you do instead? You write a really good contract, and make it clear what the employees’ entitlements are on termination.”
Commercial contracts not employment contracts
A common pitfall for business owners is assuming that employment contracts are no different from commercial contracts, Iskra warns.
“A commercial contract under the common law is deemed to have two parties or more that are of equal bargaining power. Because they're of equal bargaining power, they can agree to whatever they need, whether or not, from an outside perspective, it looks fair or not,” Iskra outlines.
“It is presumed that the commercial parties are of equal bargaining power, and they're not taking advantage of each other. Employment law contracts are different, and because of their special nature, the courts, over the years and centuries of evolution of the common law, recognize the imbalance of power between the employer and the employee, and so the common law has created these rules, like the reasonable notice requirements and the Bardal test, to try to offset this imbalance of power.”
Contract management: ongoing responsibility
Even the best contract is useless if it’s not followed or updated, Iskra cautions, explaining that contracts should change at the same pace of an evolving employment relationship.
“They might have this really nice contract, the employee signs that contract, but nobody actually follows the contract,” says Iskra.
Over years of evolving laws and employment conditions, such as promotions or different duties, or added bonuses or income, failure to adjust contracts accordingly can add up.
“That creates this new ambiguity, this uncertainty that we don't want. So create contracts, ensure that the contracts are followed, review those contracts regularly, amend them or change them as necessary as the relationship with the employee evolves,” she says.
Ultimately, both parties want to avoid having to go to court to enforce their rights and having to defend their position, Iskra says.
“This took over 10 years, so a properly drafted contract could have solved all of this and avoided the 10 year legal battle.”
Clarity around bonuses and incentives
The Lischuk decision also highlights the importance of clarity in bonus and incentive structures. Again, bonus payment structures were not documented or contracted by the employer, even though a significant portion of the employee’s income was in the form of bonuses (over $160,000 per year).
Iskra points out how bonus clarity is especially prescient in today’s market, as employers look to means other than standard salary to incentivise employees.
The Lischuk decision affirms that simply stating a bonus is “discretionary” or requiring “active employment” at the payout date is not enough to avoid paying bonuses after dismissal.
“In today's market, it's important for retention of skilled talent to offer incentives and benefits and bonuses, but the employer needs to sit down and really think through ‘Why am I doing this? What am I trying to achieve?’” Iskra says.
“In the event that the employee leaves, at what point do I stop paying the bonuses? How do I make that so clear that there's no doubt, that upon termination, the employee is not entitled to bonuses during the reasonable notice period, in case there's this dispute?”
