Ontario court awards fired IBM employee 27 months' notice

'The court is considering the investment of time that this employee made'

Ontario court awards fired IBM employee 27 months' notice

An Ontario court has awarded a former IBM employee who was fired early in the pandemic after 38 years of service 27 months’ pay in lieu of notice.

“There are some factors that really stood out in this case, like the [worker’s] length of service and his age, but I think it's clear from the decision that the court looked at all of the relevant factors, including his duties, his compensation, and the pandemic to come to the conclusion that the [worker] was entitled to 27 months,” says Rich Appiah, an employment lawyer at Appiah Law in Toronto.

The 65-year-old worker was an employee of IBM Canada, a provider of technology-based solutions to business enterprises. IBM initially hired him in 1982 in South Africa and he moved to the Canadian branch in Ottawa in 1998. IBM recognized his combined service in the two countries.

By 2020, the worker was an offering manager in IBM’s cloud and cognitive software business unit. His level was Band 10, just below executive level. His compensation included a base salary, an annual contribution to his pension, and a group insurance plan. He also received an annual discretionary bonus for a few years.

In November 2018, IBM provided the worker with 888 restricted stock units (RSUs) under the company’s long-term performance plan. Half of the RSUs were to vest in November 2020 and the other half in November 2022.

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Fired early in pandemic

On March 11, 2020, the World Health Organization declared the COVID-19 pandemic and the Ontario government subsequently declared a provincial emergency, leading to restrictions on business and gatherings.

On May 21, IBM gave the worker 11 weeks’ working notice of termination plus a week of pay in lieu of notice. At the end of the 11 weeks, IBM offered him a separation package, but the worker rejected it. As a result, IBM paid the worker another 26 weeks of severance, which was the minimum amount required under the Ontario Employment Standards Act.

The worker sued for wrongful dismissal, claiming damages for 30 months’ reasonable notice. He argued that his advanced age and the difficulty to find new work essentially forced him into retirement and the economic shutdown due to the pandemic created special circumstances that made it particularly difficult to find alternate employment, justifying a longer-notice period.

The worker indicated that he applied to 122 positions over a 14-month period and received no interviews.

IBM argued that the worker was not an executive and anything more than 22 months’ notice was normally reserved for senior executive positions.

A BC court found a 35-year employee was entitled to 20 months’ notice, but deducted three months for the worker’s lacklustre mitigation attempts.

Factors pointing to long notice period

The court noted that there were several factors pointing to a longer period of reasonable notice – the worker’s age of 62 at the time of dismissal, his 38 years of service, his high salary that would be hard to replicate, the fact that he worked for one employer for his entire career, and the economic circumstances of the pandemic.

The court also noted that previous decisions recognized that employes who served one employer for a long time may be viewed by potential new employers as “set in his ways and not as adaptable to change.”

As for the worker’s position at IBM, it was technical, specialized, and geared towards IBM, which would also make it harder to find comparable employment, said the court, adding that even though he wasn’t an executive, he had significant managerial responsibilities.

“This decision makes clear that the character of someone's employment will be seen liberally and I think the trend is generally in the favour of the employee when considering an employee's notice entitlement,” says Appiah. “The employer made references to some factors to diminish the scope of the employee's responsibilities and the character of his employment, but the court made clear that character of employment is one factor for consideration and will not be overemphasized, particularly to reduce an employee's notice entitlement.”

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Long service with one employer

The worker’s 38 years of service with one employer was a particularly significant factor in the court arriving at the 27-month notice entitlement, according to Appiah.

“The court observed, referring to other case law, that having served one employer for a lengthy period of time, a new employer may view this worker as set in his ways and not as adaptable to change,” he says. “The court is considering the investment of time that this employee made into IBM Canada and the difficulty that he would have transitioning to new employer because of the perception a new employer might have on his ability to pick up new skills, learn a new system, or learn new business.”

The court agreed with the worker’s argument that his termination was essentially a forced retirement, as all the factors pointed towards it being difficult to find comparable employment – as demonstrated by the worker’s 122 applications without getting a single job interview. It also found that, although the worker wasn’t a senior executive, his position was managerial and just below executive-level.

The court determined that the worker’s age, lengthy service with the same employer, his managerial position, the technical nature of his skills that was geared towards IBM’s business, and his high compensation combined to create exceptional circumstances that warranted a notice period of 26 months.

“High compensation has a tendency to make it difficult for an employee to find new work at the same compensation level,” says Appiah.

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Additional month

The court also found that the social and economic restrictions in place early in the pandemic, at the time of the worker’s dismissal, deserved an additional month of notice to put the worker’s entitlement at 27 months.

“The courts have taken judicial notice of the fact that there was a pandemic with emergency measures put in place, including a shutdown and restrictions on commerce and gathering,” says Appiah. “So the court added an additional month of notice taking into consideration the impact that the pandemic would have had on this employee's job search.”

In addition, the court determined that the worker was entitled to compensation for half of the RSUs that vested in November 2020 during the notice period. The purpose of common law damages is to put the employee in the position they would have been had they continued to work through the notice period, so the RSUs that would have vested in that time should be part of the worker’s compensation, said the court, adding that the RSUs were an integral part of the worker’s compensation package

The court also found that the long-term incentive plan’s termination clause – which stated that unpaid awards would be cancelled “if the employment of a participant terminates” – was not clear enough to rebut the common law entitlement. The plan’s terms and conditions also stated that unvested RSUs were cancelled “in the event you cease to be an employee.” Neither clause specified when exactly employment was considered terminated, which could be considered the end of the reasonable notice period, said the court.

The court declined to award damages for a small discretionary bonus that he had received for a few years, as no bonuses were paid in 2019 or 2020 and it was not an integral part of the worker’s regular compensation package.

IBM argued that the worker didn’t take proper steps to mitigate his damages, pointing to a list of potential jobs, but the court disagreed. IBM didn’t present any evidence on when the jobs were posted or available or whether they were comparable to the worker’s position. However, the worker’s evidence that he applied for 122 jobs indicated that he conducted an active job search, despite his age and the pandemic lockdowns, said the court.

IBM was ordered to pay the worker damages equivalent to 27 months’ salary benefits, and pension contributions, plus the value of half of the RSUs that vested during the notice period.

See Milwid v. IBM Canada Ltd., 2023 ONSC 490.

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