How to determine what's reasonable notice of dismissal
Question: How much notice is reasonable to give to a dismissed employee to avoid legal trouble? I have heard roughly one month per year of service is a safe assumption, and have seen court decisions approximating that amount.
Answer: There are two types of legal trouble an employer can get into when dismissing a non-unionized employee without cause. One type is for failing to fulfill employment standards obligations. The extent of those obligations can easily be ascertained and varies from province to province, depending mostly on years of service.
The other type of trouble is failing to provide reasonable notice or compensation in lieu, based upon common law principles. Unfortunately, there is no magic formula for determining an employee’s entitlement to reasonable notice. Court awards are fact-specific and a myriad of factors are considered. The most pervasive factors tend to be the employee’s years of service, age, circumstances under which the employment arose and employability.
Many employers mention a “one month for every year of service” guideline as being a safe assumption. However, that is not safe for short service employees and far too generous for long service employees. Typically, employees with up to three years’ service tend to be awarded about two months per year of service. However, employees with more than 24 years’ service seldom receive a month for every year of service. In fact, the average Canadian award for an employee in their early 60s with at least 24 years’ service is 20.5 months. When that person is in her early 50s, on average, 18 months is the norm.
Most employers do not pay out to the extent of their potential liability. Therefore, most often, there is an assessment of potential liability and then a “shading back” from that, recognizing the benefit an employee enjoys by receiving actual working notice, salary continuance or lump-sum payment without the time and trouble of litigation.
Often, employers will structure notice based on a minimum number of months’ notice, a maximum number of months’ notice and a multiplier of a certain number of weeks for each year of service. For example the minimum might be 2 months, the maximum 20 months and the multiplier 2.5 weeks per year of service. The result might be less than potential liability but is usually acceptable.
One month per year of service may appear safe, but it is not for short service employees and it is excessive for long service employees.
