But meaning of ‘exceptional circumstances’ still unclear for employers: experts
Many employers were probably breathing a sigh of relief recently when the Court of Appeal for Ontario decided 24 months — not 30 months — was adequate when it came to the notice period for a long-service executive.
Dawe v. The Equitable Life Insurance Company of Canada is good news for employers, says Susan Crawford, a partner at CCPartners in Brampton, Ont.
“It’s tough, these long-term employee situations… very difficult. So, it’s good to see that that cap has been re-established by the court of appeal.”
Frank Portman, an associate at Wilton Martin Litigation Lawyers in Toronto, agrees.
“It does help to reduce this phenomenon of notice periods always creeping upward, which separated notice periods from their theoretical rationale, which is giving employees sufficient time to secure a new employment. Once you get into these long, multi-year notice periods, the connection between those two things becomes much more thin. So, it’s a nice readjustment, from that perspective.”
Michael Dawe was employed as a senior vice-president at Equitable Life Insurance company of Canada and was terminated without cause after 37 years — at 62 years old.
He sued for wrongful dismissal and both parties moved for partial summary judgment on two issues relating to the damages: the proper notice period and Dawe’s entitlement under the company’s bonus plan.
For the notice period, the motion judge in his 2018 decision held that 30 months was the appropriate notice period. But the appeal court disagreed, saying 24 months was acceptable as there were no “exceptional circumstances” that warranted a longer notice period.
The motion judge, Donald Gordon, had referred to the 2006 decision Lowndes v. Summit Ford Sales Ltd., which said the determination of what constitutes reasonable notice is “case-specific” and while there is “no absolute upper limit or ‘cap’ on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months.”
This was endorsed in Keenan v. Canac Kitchens Ltd. in 2016 when the court declined to set aside an award of 26 months’ notice as the husband and wife had established exceptional circumstances based on their ages at the time of termination, their lengthy service and their positions.
However, Gordon didn’t base his conclusion on exceptional circumstances, said the appeal court judge, Gary Trotter, but on broader social factors that led Gordon to conclude that the “presumptive standards” in Lowndes were inapplicable.
“Society’s attitude regarding retirement,” was cited by Gordon, along with the abolishment of mandatory retirement in 2006 in Ontario and many employees choosing to work past 65. “Presumptive standards no longer apply,” he wrote.
In finding that Dawe was entitled to 30 months’ notice, Gordon ensured that Dawe would be fully compensated just beyond his 65th birthday — but this approach to reasonable notice was in error, said Trotter.
For one, mandatory retirement was known when the Lowndes decision was made in 2006. And “more recent authorities from this court have not altered the approach,” said Trotter.
“Neither decision suggests that the end of mandatory retirement in Ontario ought to alter the traditional approach to determining reasonable notice. It was not open to the motion judge to chart his own course in light of these authorities.”
As stated in the 2016 Strudwick v. Applied Consumer & Clinical Evaluations Inc., “an employer does not guarantee employment to retirement.”
In addition, Dawe initiated the process of his departure as he requested an exit strategy because of conflicts at work, said Trotter.
While his circumstances — including his senior position, long years of service, age and difficulty in finding new employment — warranted a substantial notice period, there was no basis to award more than 24 months, said Trotter.
As for the bonus, the appeal court said the terms were unambiguous and the termination provision would have been enforceable against Dawe had it been brought to his attention, but since it was not established that it was brought to his attention, the provision was unenforceable.
This is probably one of the more extreme cases in terms of having an employee who has so many years of service, is so senior at the organization, is far along into his career and is not bound to an employment contract, says Portman.
“It’s kind of a real unicorn of features to have in a plaintiff.”
But it’s important to remember that Canadian employers do have the unfettered right, with only a few restrictions, to terminate an employment contract, he says.
“And the balance there is that it be only terminated with reasonable notice, unless there’s just cause or an employment contract saying otherwise. And so the notion that an employee can be entitled to additional work, it really runs contrary to that fundamental bedrock notion.”
It’s an interesting position to suggest that people might be in the workforce longer because of the end of mandatory retirement, says Crawford.
And the motion judge sort of suggested that there’s a bias against older people, “which was not really based on anything. And I think that’s the main reason why he was overturned on appeal was that he really just didn’t point to any exceptional circumstances, that would have justified extending the... cap that had been placed by previous Court of Appeal decisions,” she says.
“In fairness to the trial judge, I think there were probably some cases that would have supported that; certainly, some lower court decisions we’ve seen in the last few years where people have been getting as much as 30 months’ severance awarded by the court. But I think the Court of Appeal really wanted to dial that back and make sure that it was truly exceptional circumstances that existed.”
If the dismissal had been for discriminatory reasons, the court could have compensated for that, but not by extending the notice period, says Crawford.
“Just having someone close to the retirement age would not be enough to extend the cap.”
Unless employers have made representations that they owe employees work until their retirement, they owe nothing of that kind, she says.
“That might be one of the exceptional circumstances, if there was proof that there had been some sort of guarantee of working to retirement, which would be… pretty extraordinary to see.”
Where the appeal court disagreed with the motion judge was this concept of society’s attitude — or the employee’s indication — of wanting to work until retirement as a factor to warrant exceptional circumstances, which would result in an award higher than the upper range of 24 months, says Avneet Jaswal, an associate at Fasken in Toronto.
“The Court of Appeal made it clear that an employee’s age and length of service is a factor that’s already considered when determining the upper range of 24 months — it’s something that’s already taken into account… But it wasn’t something that’s exceptional, that would warrant something higher than the 24-month period.”
But when the court refers to exceptional circumstances, it’s “confusing and convoluted,” says Portman.
In looking at the apparent exceptional circumstances in the Keenan case, the court relied on the couple’s length of service, age and seniority, “all of which actually the plaintiff in Dawe had in excess of the plaintiffs of Keenan.”
“On the one hand, the court has said, ‘Well, we have to look beyond just these traditional factors in fixing notice periods if we’re going to break the 24-month cap.’ But then they turn right around and say, ‘Keenan is an example of where that cap can be broken.’ But Keenan only looked at those very same factors. So… we don’t have really any guidance as to what those exceptional circumstances might be,” he says.
“I do think that there is another shoe to drop in terms of what exactly are or are not exceptional circumstances.”
Beyond having an enforceable employment agreement, employers can’t, by and large, control what an employee’s notice period is — that’s usually based on factors beyond their control, says Portman.
“But without knowing what exceptional circumstances are — perhaps exceptional circumstances could include factors that are within the employer’s control — and without that guidance, how are they going to know what trip wires to avoid?”
In talking about exceptional circumstances, all the factors Gordon was looking at weren’t particularly exceptional aside from the issue of mental impairment, says Crawford.
“I think the message in the court of appeal is: ‘The cap is really the cap and it’s capped for good reasons.’ And unless something really extraordinary happens, the court shouldn’t be awarding past the cap.”
As for exceptional circumstances, that could involve someone who’s quite ill, over 65 and no longer has access to long-term disability benefits, she says.
“To me, the clear message is it [had] better be pretty exceptional. And long service in a senior role is not going to get you there, which would be 90 to 95 per cent of the cases that we see when we’re advising clients who have very long-term employees.”