Three-year employee in Ontario awarded 10 months' notice after pandemic 'bump'
“This is a great example of the downside of an employer playing hardball in a non-cause dismissal.”
So says Matthew Fisher, partner at Lecker & Associates in Toronto, in discussing a recent case where he represented a three-year employee who was awarded 10 months’ notice, having been dismissed in May 2020.
“The gentleman didn't do anything wrong — nobody was suggesting he did. They decided they didn't need him at an unfortunate time in the world, in the economy, but they really took a hardball approach in fighting this thing all the way to trial and to appeal.”
Ultimately, this was not a good idea, considering the amount of money and time that the company spent through a “very involved process,” including the executives examined for discovery and at trial, says Fisher.
“And for what? They spent much more than they had to, and they ultimately paid a notice period that realistically, in most cases, parties settle, they come to a resolution… this is an example of the dangers of playing hardball and saying, ‘I can fight this to the bitter end.’ Yes, you can, but you may not be happy with the score at the end of the game.”
‘Senior’ role at 125-employee company
Pylyp Pavlov was hired on June 12, 2017 as director of marketing and communications at the New Zealand and Australian Lamb Company (NZAL Co.).
Pavlov said he was recruited by a cold call from a recruiter, but eventually the company determined that it did not need anyone to fill the role and it would be cheaper to use outside agencies instead, so he was let go.
Pavlov was not a corporate director or officer, though he did have a “comparatively senior and important” role at the 125-employee company, reporting directly to the president and CEO, and then the COO in the U.S. and vice-president in Canada.
He was terminated without cause on May 28, 2020 when he was 47 years old and earned $131,943 per year plus a bonus.
Pavlov challenged the severance package and the Ontario Superior Court of Justice said the termination provisions were contrary to the Employment Standards Act, 2000 and, therefore, all provisions with respect to termination were null and void.
While NZAL did not contest this fact, it felt that there was “some contractual effect” in determining the length of reasonable notice that should apply.
But the document was “of little assistance in the determination of the appropriate length of reasonable notice, or pay in lieu thereof, to which Pavlov is entitled in these circumstances,” said Justice Elizabeth Stewart.
Read more: Waksdale strikes again
The list of factors to be considered when determining the length of reasonable notice is well-established, she said, and include the employee’s age and length of service along with availability of similar employment. When Pavlov was dismissed, the global pandemic was having an impact on industries of all sorts, including NZAL, said Stewart.
“It is a reasonable inference to draw from the evidence and the timing of the dismissal that the effects and uncertainties of the pandemic were obstacles to Pavlov's efforts to obtain alternate employment. These obstacles would, or should, have been known to NZAL Co. at the time of Pavlov’s dismissal.”
After termination, Pavlov applied for more than 100 positions, without success. While NZAL said these positions were not suited for him, the judge disagreed, saying his job search was “adequate and bona fide.”
“Accordingly, I do not consider that the applicable notice period or amounts otherwise owing to Pavlov should be reduced as there has been no failure by him to try to mitigate his damages.”
Pavlov was awarded 10 months’ salary and benefits in lieu of notice by the court in a November 2021 decision.
‘Realistic’ approach during pandemic
The court did what it is supposed to do, which is to take a realistic approach to the person who's terminated in the circumstances they find themselves in, says Fisher.
“Frankly, it would have been very unreasonable if they had taken a person who was terminated in May of 2020 and… just said, ‘No, it doesn't matter, you should find a job pretty quickly’ — a senior job that a company may only have one position of,” he says.
“I don't think you needed a crystal ball to realize that finding a senior role at that point is going to be very challenging. Employers were hunkered down trying to figure out what they were going to do.”
From a practical perspective, the employer didn’t need to know how bad the economy would be at the time of dismissal, says Fisher, as the case took a number of months to get to trial and it would have been apparent the pandemic was challenging for a job search.
“It's not as if the employer was fixed with the offer they made or the position they took at the time of termination,” he says.
Often, in mediation, Fisher says he tells the employer they would have been better off settling earlier.
“Putting aside the pandemic, when my client was first let go, he was optimistic, he thought he'd find a job very quickly. You decided to be cheap, and you decided to wait him out and to see, figure he'd find a job quickly. Well, he didn't. And everyday that passes, he gets more frustrated and more pessimistic. And now you're wondering why he wants so much at mediation.”
The type of notice period that the employer was seeking — three or four months — was unrealistic, even in the best of times, says Fisher. Originally, NZAL offered $5,000 on top of the statutory minimum entitlements.
“It’s not just the pandemic that was unique. When somebody is terminated shortly before the Christmas season, when they're terminated at the beginning of the summer when everyone's about to go on vacation, this has an effect. We're trying to bridge people to new employment, we have to look at the context.”
The trial judge was blunt and deliberate in attributing a significant bump in the notice to COVID, says Kelsey Orth, a partner at CCPartners in Brampton, Ont.
“In decades past, we would see for Wallace damages, you get an extra month… But here, the trial judge kind of lumped everything together and said, ‘Well, this is another reason why it should be higher,’ so you’re left to wonder what the factor of increase is based on COVID.”
(The Supreme Court’s decision Wallace v. United Grain Growers Ltd. in 1997 cited the power imbalance in the relationship between the employer and the employee, and said employers should be held to an obligation of good faith and fair dealing in the course and manner of dismissing employees.)
Ultimately, it’s unfair to tag this employer or any employer with outsized expectations and awards, he says.
“I — and many of my colleagues on this side of the bar — may find it unrealistic, but because it's a finding of fact and there's no specific law saying, ‘For every year of service, you get an extra week if it's COVID’ — that doesn't exist, there's no formula. So that's how we get the Court of Appeal saying, ‘Well, it’s not unreasonable so...’”
Short-term employees
In the interest of fairness, it might have made more sense to split the amount of the award down the middle, since the pandemic was tough on the employer as well, says Orth.
“There aren't any particularly egregious factors that would lead you to think, ‘Oh, yeah, this is a massive notice award, even though it's only a three-year employee,’” he says.
“We do know that, in recent years, the case law around short-term employees has varied significantly in terms of a much wider range in terms of reasonable notice periods.”
Many employers don't realize that short-service, relatively senior employees can be owed lengthy notice periods, says Fisher.
“I relied on cases where people with similar factors — similar age, length of service and position — were awarded between nine and 12 months, and every single case I relied upon was pre-pandemic. So it certainly would have been reasonable to make a similar, if not the same, award without the pandemic… This is the reality for senior-level employees, only exacerbated by the pandemic.”
The perils of appeals
NZAL appealed the decision, and lost again in a Sept. 20, 2022 decision:
“We see no merit in the appellant’s main arguments on appeal. The aspects of the trial judge’s decision challenged by the appellant were all findings of mixed fact and law entitled to deference. The appellant has raised no palpable or overriding error (or error of any kind) in relation to the trial judge’s analysis or conclusions.”
Fisher says he was surprised that the company went to trial in the first case considering the vast majority of non-cause dismissals are settled where the question is reasonable notice,
“It would have been certainly in the employer’s best interest, I would think, to have said, ‘Let's find a compromise, even if it is more than we would have liked voluntarily.’”
It’s a situation that probably shouldn't have gone to trial in the first place, says Orth, but it likely did because the two parties were so far apart when it came to agreeing on a notice period.
“When you've got somebody who is making, $130,000 plus bonus, you're talking gaps of 10s of 1000s of dollars, even if you cut it down the middle between the highest of what the employer was saying and the lowest of the plaintiff’s argument,” says Orth.
“It's a concerning original award, and a cautionary lesson about appeals.”
When you get to the Court of Appeal, it's a pretty high bar to overturn, he says, adding that probably three-quarters of employers disagree with any award that comes out, considering them too high.
“A clear written decision might have actually been easier to appeal, even if the results were the same, because the more you put out there in the decision, the easier it is to tie it to specific elements of the law and say, ‘This is an error in law…’ But the way the [trial] decision was written didn’t leave a whole lot there to appeal, knowing what we know about the thresholds and standards of appeal.”
It’s also another cautionary tale to make sure your employment agreements are enforceable and the termination language is up to par, says Orth.
“Notwithstanding various employer counsel thoughts on Waksdale and whether it should be applied as directly and mechanically as people seem to think, it seems to be pretty much the norm now that if you don't have exactly what Waksdale says you need for language, your termination clause isn't going to hold up.”
