Long-time employee's notice period capped at 24 months, then reduced

'I don't think the courts view an employee's wish to change career direction as a reasonable basis not to mitigate'

Long-time employee's notice period capped at 24 months, then reduced

The British Columbia Supreme Court has found that a worker who was terminated after 35 years of service when her office closed during the pandemic is entitled to the upper limit of reasonable notice, but she should have some of it deducted because the worker made no attempt to look for another job until five months after her notice of termination.

“The duty to mitigate requires an employee to take reasonable steps to mitigate or reduce loss by taking steps to obtain replacement work,” says Leanne Walsh, an employment lawyer and founder of West Coast Workplace Law in Vancouver. “The employer has the burden to prove that the employee has not adequately mitigated those losses and the employee is given quite a bit of latitude with respect to that.”

“But I don't think the courts view an employee's wish to change career direction as a reasonable basis not to mitigate.”

Pandemic shutdowns

The worker was manager of the Vancouver Global Centre for Cathay Pacific Airways, the Hong Kong-based airline. The 61-year-old was hired by the airline in 1986 and served in the sales and customer service departments for her entire 35-year career with Cathay. She reported directly to Cathay’s head office in Hong Kong.

In January 2020, the worker signed an employment contract that she would continue to receive her current compensation and benefits, which could be amended. The contract also stated that Cathay reserved the right to “unilaterally remove, suspend, substitute, and/or introduce any discretionary or ex-gratia payment and benefits without notice in its sole discretion,” which would not breach the contract.

Like the rest of the travel sector, Cathay’s business was hit hard by the COVID-19 pandemic. In February 2020, the airline implemented a “special leave scheme” (SLS) in which employees received three weeks’ leave that was deducted from their salary.

In June, Cathay implemented a second SLS that reduced employee salaries. The worker received a seven-per-cent pay deduction, scheduled to be in effect until December.

However, in October, Cathay informed the worker that it was closing the Vancouver Global Centre and terminating her employment effective Dec. 11. During the two-month working notice period, the worker was tasked with handling the transfer of operations to an office in the Philippines, training the staff there, and terminating the 71 employees who reported to her.

Cathay offered the worker a severance package that included a refund of her SLS contributions and outplacement assistance. The worker advised that she wanted to use the outplacement assistance, but after Cathay said it could start in the second quarter of 2021, neither the worker nor the airline took any additional steps.

Walsh says that Cathay’s attempts to limit the effects of the pandemic on employees were reasonable, through the SLS, strong communication about the changes, and offering outplacement services once the worker was terminated.

“Keeping staff apprised of what's happening is really important and I think they did that here,” says Walsh. "And when people are severed from employment, offering outplacement assistance is a really important.”

“But what the court said [Cathay] should have done more was to ensure the employee understood what services were available – it's a common error.”

The worker didn’t accept the severance package, so Cathay paid her the three-month severance required under the Canada Labour Code. The payment included her salary, but not the equivalent of the 10-per-cent pension contribution normally provided with her pay.

Read more: An advanced age can reduce, but not eliminate, a worker’s duty to mitigate.

The worker sued for wrongful dismissal, claiming damages for unpaid wages prior to her termination from the first two SLS programs – she said that her employment contract didn’t allow Cathay to unilaterally change her salary – special damages to compensate for the cost of outplacement assistance services, and damages in lieu of 24 to 26 months’ reasonable notice.

The court found that, regardless of the worker’s employment contract, the worker accepted and signed off on the SLS programs in exchange for her continued employment during the pandemic. Although Cathay offered to refund her SLS contributions as part of her severance package, this wasn’t a contractual obligation and there was no expectation that the salary reductions would be reimbursed, said the court.

The court noted that it has been established that the upper limit for reasonable notice damages is 24 months, absent exceptional circumstances. The worker in this case was “a long-term valued management-level employee” who was in her 60s, but that didn’t constitute exceptional circumstances, the court said in finding that 24 months was an appropriate notice period.

Cathay argued that the worker didn’t make reasonable efforts to mitigate her loss from termination. The evidence showed that the worker had difficulty coming to terms with her termination and the court found it was unreasonable to expect the worker to have looked for other work during her two-month working notice. However, the worker’s lack of motivation continued after her termination and she did nothing until February 2021 – the worker admitted that she was finished with the airline industry and didn’t pursue opportunities that were available. The court agreed that the worker failed to mitigate her losses and reduced the notice entitlement by three months.

Duty to mitigate despite stress from job loss

The courts recognize stress related to job loss and in this case, the court acknowledged that the worker was 61 years old and coming to terms with losing a job she had for 35 years, says Walsh. However, there is still a duty to mitigate within a reasonable amount of time.

“Even with the [end of] long-term employment, the employee has that duty to act reasonably and her admission that she did nothing to search for new employment informed the court,” she says.

Read more: A worker who started his own business instead of looking for work didn’t reasonably mitigate his losses from termination, the BC Supreme Court found.

The court also found that there was a possibility that the worker would find employment before the end of the notice period, so it included a contingency discount of 15 per cent on the damages. However, it said that Cathay should have followed up with the outplacement services once the worker had expressed interest, so it added the cost of such services that the worker had used – more than $1,700.

In total, Cathay was ordered to pay the worker 16 months’ salary and benefits, plus the cost of outplacement counselling the worker used and minus the contingency discount, for total damages of more than $168,000.

Noting how the case centred around the length of reasonable notice entitlement, Walsh says that valid employment agreements can help reduce liability for wrongful dismissal damages.

The decision also highlights that 24 months is the established upper limit for such damages absent special circumstances, and a lengthy term of employment and the crisis of the pandemic weren’t enough to stray from that upper limit, she says.

“The court didn’t regard this employee as having special circumstances, likely because, despite her age and number of years of service, employment was available elsewhere, she would likely replace her employment within the notice period, and her position was not at the level which warranted additional damages.”

See Okano v. Cathay Pacific Airways Limited, 2022 BCSC 881.

Latest stories