Air Canada employee gets 24 months' pay, benefits, bonus totalling more than $500,000

Incentive, pension, bonus plans didn’t clearly exclude notice period from eligibility

Air Canada employee gets 24 months' pay, benefits, bonus totalling more than $500,000

A long-time senior management employee for Air Canada at Toronto’s international airport is entitled to more than $500,000 in wrongful dismissal damages for not just loss of salary, but also bonuses and various benefits that he would have earned over his 24-month notice period, the Ontario Superior Court of Justice has ruled.

It’s a decision that should remind employers that pay in lieu of notice doesn’t just cover salary, says Paulette Haynes, an employment lawyer in Toronto.

“The purpose of a wrongful dismissal award is to put the employee in the position they would have been in had they continued to work to the end of their working notice,” says Haynes. “The other point is that the employment contract is not treated as terminated until after the reasonable notice period expires.”

“If we have an employee terminated without notice, they're entitled to the bonuses and other types of compensation that they would have earned during the common law period – subject to any removal or restriction of the employee’s common law rights by unambiguous, clear language in any agreement or contract.”

24-year employee

The 53-year-old worker was an executive at Air Canada for 24-and-a-half years. He oversaw 3,500 employees in the airline’s operations centre at Toronto’s Pearson International Airport. The worker’s compensation package included a base salary, discretionary annual bonus, participation in Air Canada’s Long-Term Incentive Plan (LTIP) with stock options, a pension plan, and health benefits.

Air Canada, and the travel industry as a whole, suffered significant losses when the COVID-19 pandemic hit. As a result, it was faced with having to make staff cuts. On June 15, 2020, the airline terminated the worker after providing two weeks’ notice and the minimum amount of statutory pay for his service under the Canada Labour Code. It also offered the worker a severance package.

The worker declined the severance package and began a wrongful dismissal action, claiming 24 months’ reasonable notice along with damages for lost bonuses, lost accrual of pension benefits and spousal survivor benefits, lost group health benefits, and retiree health benefits and flight privileges for which he would have become eligible after 25 years of service – which would have been less than six months after his termination date. He also filed a motion for summary judgment, contending that there was no genuine issue for trial.

Air Canada argued that appropriate notice would be in the range of 16 to 17 months and the worker wasn’t eligible for any pension, stock options, group benefits, and other privileges once he was terminated.

Competitive disadvantage

The court found that the worker’s lengthy service, position of high responsibility and managerial level, age, and experience pointed towards a longer notice period of 24 months. Although his skills and experience were transferrable, he was at a competitive disadvantage because prospective employers might see him as set in his ways from his time with Air Canada, said the court.

The pandemic was a factor the court considered in calculating the notice period but ultimately didn’t add much due to the fact that the notice period was already close to the accepted maximum, says Haynes.

“The court made the decision in favour of [the worker] for 24 months without taking into consideration the pandemic, given all the other Bardal factors – which is, even pre-COVID, on the high, almost maximum, range of things,” she says.

“The pandemic played out in the sense that they took into account Air Canada’s evidence about the significant downturn in the air travel sector and the limited prospects of re-employment in the airline industry – [the court] says it in the language of the decision that the 24-month reasonable notice period was justified.”

Entitlements, accruals still applicable

The court also found that the annual bonus plan was ambiguous and didn’t prevent his eligibility during the notice period. The plan stated that the worker must be performing employment duties on the payout date, but there was no definition of payout date – although it was normally paid out in March of each year. There was no bonus paid out in 2021, but the 2022 payout would occur during the worker’s notice period if there was one, said the court.

The LTIP provided that shares stopped accruing and vesting on the date of termination and were calculated on a pro-rated basis, but the court found that the employment contract was not terminated until after the reasonable notice period expired. As a result, the worker’s LTIP benefits should be calculated on a pro-rated basis at the end of the common law notice period, as should the pension accrual, said the court.

“The provisions in the plan failed to indicate that an employee with reasonable notice is not entitled to continuous participation in the plan,” says Haynes. “Courts are looking for clear, unequivocal, and unambiguous language that would say the employee is deprived of benefits that they otherwise would have earned or received during the reasonable notice period.”

Read more: The pandemic can be a factor in reasonable notice calculations, write two employment lawyers.

As for lifetime retirement health benefits, the worker would have become eligible after 25 years of service, along with spousal survivor benefits. The policy didn’t address what would happen if the milestone occurred during a notice period for termination, so the court determined that they should be included in the worker’s loss calculation, as the purpose was to restore the worker to the same place as they would be had they not been terminated.

The worker would also have become eligible for retiree travel privileges after 25 years, so the court agreed with the worker’s alternative remedy of reinstatement into the program – no monetary damages were appropriate as the program was subject to change or cancellation, said the court in granting a summary judgment for 24 months’ pay and benefits.

Preparation is key

The fact that summary judgment was granted despite the various elements involved should serve as a warning to employers to be prepared with evidence proving their position right from the start, says Haynes.

“The [Ontario] Rules of Court say the court must grant summary judgment if it is satisfied that there is no genuine issue requiring the trial – what that means is, employers cannot just rely on denying the allegations of the plaintiff; they can't just rely on pleadings,” she says.

“So one of the things I think employers should be aware of is that if the plaintiff brings a motion for summary judgment looking for a speedier, less-costly way to bring a conclusion to the case, employers really have to have all their ducks in a row where the evidence is concerned. They need to put their best foot forward.”

Read more: Employment lawyer Laura Williams explains four key factors in calculating reasonable notice entitlements.

Haynes points to the issues relating to the worker’s entitlement to a bonus or pension during the notice period, noting that Air Canada didn’t put forth any language in the plans or calculations supporting its position.

“They needed to advance the specific evidence to prepare for a summary judgment motion, as though they were preparing for the trial and bring all evidence to bear,” says Haynes. “The court said that the employer did not advance countervailing evidence, or did not demonstrate when it came to the wordings of the policy any language that would disentitle the [worker] to the various benefits that the employer of course wanted to curtail over a 24-month period.”

Air Canada was ordered to pay the worker 24 months’ pay in lieu of notice, compensation for loss of health benefits during the notice period, lost LTIP, pension accrual, and stock options during the notice period, lost retiree and spousal survivor benefits, and any bonus paid out during the notice period. The total damages amounted to more than $500,000.

See Ruel v. Air Canada, 2022 ONSC 1779.

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