Given the aging population, more wrongful dismissal cases involving sympathetic, long-term employees will inevitably make their way to courts
One of the inevitable results of an aging workforce and the abolishment of mandatory retirement at age 65 is that HR professionals will have to deal with more terminations of employees who have lengthy service records and lower re-employment prospects.
These employees will be entitled to maximum reasonable notice periods.
Traditionally, Canadian courts have imposed a “rough upper limit” — also known as a “cap of reasonableness” —which imposed a 24 month ceiling on damages in lieu of notice (not including damages for improper acts in the manner of dismissal).
Foundation of the rough upper limit
In Canada, we are no strangers to damage caps. We have an upper limit on personal injury damages for pain and suffering, even in the most severe cases. This conservative approach seeks to deter aggressive litigation, prevent windfalls and avoid unfairness.
In employment law, an early foundation for the rough upper limit lies in the Supreme Court of Canada decision of Wallace v. United Grain Growers, which stated that a 24 month notice period was “at the high end of the scale.”
While the approach to reasonable notice damages of Wallace has been modified in recent years by the Supreme Court in Keays v. Honda Canada, provincial courts have accepted and applied the 24 month cap, and entrenched the principle in provincial employment law.
In British Columbia, the principle is well established by the Ansari v. B.C. Hydro decision in which the court stated that “subject to exceptional cases where the degree of responsibility, age and years of service are very extensive, 18 to 24 months is the rough upper limit for reasonable notice,” and “other cases should be scaled downward from there unless there are extenuating circumstances.”
Similar approvals of the cap exist in varying degrees in other provinces and territories including Alberta, Ontario, and Nova Scotia.
The rationale for having a rough upper limit lies in the legal basis for reasonable notice. The primary purpose of notice is to provide employees with sufficient time to find reasonably equivalent alternative employment, so they do not have a gap in their employment and can keep food in the cupboard.
Damages in lieu of reasonable notice are based in contract, not in restitution. Thus, damages are for breach of an implied contractual notice term, rather than compensation for the actual harm suffered by an employee.
Some employees won’t be re-employable by virtue of factors beyond anyone’s control. Some jobs will be so good they are irreplaceable as there will be no comparable employment.
Neither of these circumstances should oblige an employer to employ that individual for the rest of their working lives. For this reason, the courts have made clear that, where an employee is near retirement age, though age is a factor to be considered, the employee is not entitled to reasonable notice up to the time of retirement.
Determining reasonable notice for senior workers
The non-exhaustive factors set out by the Supreme Court of Canada in Bardal v. Globe & Mail for determining reasonable notice are well established and well known — length of service, age and the availability of similar employment, having regard to the experience, training and qualifications of the servant.
In the case of senior workers, these factors will often be maximized. The workers will often have moved to a position of relative seniority, will be older, and will have fewer job prospects.
In many cases, they will not intend to become re-employed, or will not be desirable to future potential future employers. The employees will likely have non-transferable skills, tailored to the needs of their employer. If they have worked their way into a niche position ideally suited to their interests and skills, there may be no comparable employment available to them. Cases such as these pose a challenge to the rough upper limit.
The case of the Suzuki worker
The recent Ontario Superior Court of Justice case of Hussain v. Suzuki Canada serves as a good example. A 65-year-old Ontario assistant warehouse supervisor terminated by Suzuki was awarded more than two years’ pay as severance.
He was Suzuki’s longest serving employee in Canada, with 36 years of employment. He had immigrated to Canada from India in September 1974, and had worked for Suzuki for nearly all of his life in Canada.
He was terminated as part of restructuring by Suzuki, due to economic woes. Suzuki offered the employee 34 weeks’ salary as severance, and thus they ended up before the court.
The court held that, in Ontario, there is technically no “cap” on reasonable notice, but that 24 months is the high end of the range, absent exceptional circumstances. The court found it would be difficult for Hussain to find a new job, and awarded him 26 months’ notice based on his “exceptional circumstances.” The exceptional circumstances focused on his age, Suzuki-specific skill set and long service record. One can envision this same reasoning being repeated in an increasing number of similar cases.
Given the aging population and workforce, more wrongful dismissal cases involving sympathetic, senior, long-service employees will inevitably make their way to court. As in the case above, courts have the discretion to push above the rough upper limit, and will do so where exceptional circumstances exist.
Because court decisions are based on recent similar decisions, an incremental increase in reasonable notice periods may occur and, with it, the traditional 24-month cap may become a thing of the past.
Until recently, employers were able to require mandatory retirement for 65 year olds, without notice. It is a sign of things to come that there will be conflicts between older workers being pushed to retire by employers who would prefer to fill their positions with younger (and often lower paid) workers.
The challenge with this category of employees is that they will be particularly expensive to dismiss without cause.
The practical solution for employers in such cases is pre-planning. Remember, when terminating an employee without cause, an employer does not need to offer a severance package coupled with immediate termination — they must simply give the employee notice.
As long as the reason for the termination is not the employee’s age itself, which would be discriminatory, giving a long notice periods will generally fulfill an employer's obligation. Making long-range HR plans will allow employers to give lengthy notice periods to employees who they no longer wish to employ, without breaking the bank.
For more information see:
•Wallace v. United Grain Growers Ltd., 36, C.C.E.L. (2d) 1,
•Keays v. Honda Canada, 2008 SCC 39
•Ansari v. B.C. Hydro & Power Auth., [1986] 4 WWR 123; 13 CCEL 238; 2 BCLR (2d) 33
•Sorel v. Tomenson Saunders Whitehead Ltd. (1985) 9 CCEI 22 1985, Carswell BC 791 BCSC.
•Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont.S.C.J.)
•Hussain v. Suzuki Canada Ltd. (2011) 209 A.C.W.S. (3d) 101
Kieran Moore is an associate with Cohen Buchan Edwards in Richmond, B.C. He can be reached at (604) 231-3492, [email protected] or visit www.cbelaw.com for more information.
