'The court is trying to look in its crystal ball to estimate how difficult it will be for a dismissed employee to find their next job'
“The more that job opportunities are limited by virtue of geography, population, and industry, the more vulnerable the employer is to a more robust calculation of reasonable notice.”
So says Victoria-based labour and employment lawyer Michael Penner of Levitt LLP, after the Northwest Territories Supreme Court ruled that a municipal management worker who was fired after 18 months of service is entitled to eight months’ pay in lieu of notice.
The worker, now 78, was hired by the Town of Hay River, NWT, in March 2014 to be the town’s director of finance and administration. He had years of experience at the senior management level with Canadian healthcare facilities and one in the US. He had also previously lived in Hay River from 1975 to 1984, working as an accountant.
The worker’s position involved responsibility for the management and administration of the financial and administrative functions of the town and he reported directly to the senior administrative officer (SAO). He had been in a similar position with another town for three years when Hay River invited him to apply for its position.
The worker’s offer letter incorporated a town by-law governing management personnel employment, which set severance pay for a “layoff” at “two weeks’ pay for the first complete year of continuous employment and one week’s pay for each succeeding complete year of continuous employment,” up to a maximum of 28 weeks.
Employee strike in NWT
On Feb. 5, 2015, employees of the town went on strike. The worker, who wasn’t part of the collective bargaining unit, continued working. He was helped by another management employee who wasn’t on strike, with the two of them carrying out duties that would normally have been shared with four other employees.
The worker’s workload was increased during the strike, and there were communication issues that caused confusion over who was responsible for certain key functions. The town council was concerned about a lack of timely financial reporting and other financial management issues.
The strike lasted more than six months, ending on Aug. 14. About three weeks later, on Sept. 7, the SAO praised the worker for his efforts during the strike but advised that his position was being restructured and the town would be advertising for the new position of director of corporate services. The SAO didn’t say that the worker was being fired, but he suggested that it would be “a good opportunity to look for work elsewhere.” The worker understood this to mean he was being replaced and his employment with the town was ending.
The conversation between the CAO and the worker was the town’s first misstep, according to Penner.
“[The CAO] essentially constructively dismissed him in the conversation, but he tried to paint a picture that this was somehow a positive conversation,” he says. “But the message was pretty clear: we're changing your job and we're not hiring you to do the changed job that basically captures most, if not all, of your functions.”
Termination letter
Over the next few weeks, the worker inquired about his employment status, but he didn’t receive any significant information until Oct. 13, when he received a letter terminating his employment without cause “based largely on your request to be terminated by the town.”
The worker applied for positions in other communities in the Northwest Territories and inquired about other jobs. He didn’t look for employment in Hay River because it was “emotionally too difficult.” However, he didn’t have any luck finding employment.
The worker filed a wrongful dismissal action, asserting that the seniority of his position, his relatively advanced age of 69 at the time of termination, and that he was induced from his prior position justified a higher notice period of 18 months. He also claimed aggravated and punitive damages.
The town argued that six weeks’ notice was appropriate based on the by-law incorporated into the employment agreement, and it disputed that there was any inducement. It also argued that the worker’s efforts at mitigating his damages were insufficient.
The court noted that the by-law didn’t define “layoff,” so it assumed the normal meaning of “a temporary suspension of the employment relationship… which suspension might become permanent.” It also found that the severance amounts in the by-law were similar to those in the Northwest Territories Employment Standards Act, but it wasn’t clear that the intention was to exclude common law notice entitlements.
Without cause
The court found that the termination letter made it clear that the town terminated the worker’s employment without cause and the by-law didn’t refer to severance pay for a without-cause termination, said the court.
The court also found that, although the town suggested the worker invited or requested the termination, the worker’s inquiries into his status – particularly after the CAO suggested that he look for other employment opportunities – were reasonable and not an indication that he wanted to be dismissed.
The court considered that the worker was a senior level manager with significant responsibilities, and he had extensive experience in other senior level positions. Although he was only employed by the town for 18 months, his position, experience, and age made it difficult to find similar employment – as evidenced by the worker’s inability to find work following his dismissal, the court said.
“[The worker’s] age was an impediment, his particular skill set was very rare, and there's not a lot of jobs with that level of authority,” says Penner. “The town tried to bring up some mitigation issues, but it didn't really have the evidence - there was the age factor, there was where he was in his career with his credentials, and there really aren't a lot of opportunities, either in Hay River or in the area - those were the two biggest factors.”
No inducement
The court disagreed with the worker’s claim of inducement, finding that the invitation for him to apply for the position and the subsequent interview wasn’t a promise that he would get the job.
“It could have been that the information existed to show inducement, but [the worker] failed to present it in a compelling way,” says Penner. “The court understood that he was working in a similar position in a nearby community and he had a conversation with a representative from Hay River, but that conversation fell short of a promise of a job without competition.”
The court determined that an eight-month notice period was appropriate for the worker. It also found that the worker took reasonable steps to mitigate his damages by applying for positions in other communities and inquiring about job opportunities. Although the worker didn’t seek employment in Hay River, there was no evidence of available positions within the town that he had failed to pursue, said the court.
There was one other factor that likely played into the decision, according to Penner.
“In the North, typically when you see professionals at that level they’re often transplants from southern Canada who come up for the short term,” he says. “This individual had very significant ties to the community of Hay River going back to the ‘70s - he had spent a good chunk of his of his career working and living in Hay River, so I think the court recognized that this was a true local.”
“With being in a small community, he would be known by nearly every person who would have an opinion on why he was let go,” adds Penner. “There's a compounding effect where he felt very reticent to try to find other jobs in Hay River because he was humiliated.”
No bad faith
The court acknowledged that the town’s handling of the situation was “unfortunate and poorly managed,” but found that there was no evidence of bad faith, malice, or outrageous conduct that would warrant aggravated and punitive damages.
The town was ordered to pay the worker damages equivalent to eight months’ salary and benefits.
Given the infrequency of court decisions – and even fewer employment law decisions – in the Northwest Territories, this case represents a landmark decision relating to reasonable notice entitlements in the jurisdiction, says Penner.
“I think any employer that operates in a rural jurisdiction should take note, because if you’re an enterprise in an isolated community where you know the opportunity to mitigate is going to be very limited, you can expect that the court is going to use that as a multiplier effect when considering reasonable notice,” he says. “Similarly, if you’re an employer whose workforce has very particular and unique skills that are limited to your particular industry, you're going to have that same kind of compounding effect, where the court is trying to look in its crystal ball to estimate how difficult it will be for a dismissed employee to find their next job.”
