When employees are terminated without just cause, they are entitled to some notice. An employer can limit the amount of notice an employee gets through an enforceable termination clause in the employee’s employment contract. To be valid, the termination clause must offer the at least the statutory minimum under either the Employment Standards Act (ESA) (if provincially regulated) or the Canada Labour Code (CLC) (if federally regulated). If there is no termination clause or the termination clause is invalid, the employee is entitled to common law notice.

The case law on the enforceability of the termination clause is constantly evolving. Courts tend to dislike limiting the termination pay to the statutory minimum. Courts will look for ways that they can kick the termination clause to the curb to provide the more generous severance under the common law. That is why it is so important for employers to have their employment contract, including the termination clause, reviewed annually. A termination clause that would have been enforceable three years ago is now likely outdated, meaning that the common law notice would apply to that contract. Common law notice is much more generous than the minimums under the ESA and the CLC.

To determine common law notice, courts often refer to the Bardal factors (from a 1960 decision called Bardal v Globe & Mail Ltd.). These factors consider the position held, the length of service, the employee’s age, and the availability of similar employment. From such an assessment, a decision maker will determine how long it will likely take the dismissed employee to find similar employment. That length is the amount of notice that the employer will have to pay the employee for terminating an employee that has done nothing wrong in the eyes of the law.

There is the assumption that common law notice is capped at 24 months notice or 2 years of salary. That assumption changed in the 2006 decision Lowndes v Summit Ford Sales Ltd., (2006 CanLII 14) where the Ontario Court of Appeal stated that there can be exceptional circumstances where an employee can be granted notice beyond the 24-month notice period, as there is no legal cap. The court found that Lowndes should be granted 28 months of notice due to the bad faith in the manner that his employer dismissed him.

Exceptional circumstances permitting a longer notice period on a wrongful dismissal has found in other cases since. This includes Keenan v Canac Kitchens Ltd., (2016 ONCA 79) which upheld a decision giving 26 months of pay in lieu notice, Cardenas v Kohler Canada Co., (2009 CanLII 17976) which gave one of the plaintiffs 26 months of pay in lieu of notice, Currie v Nylene Canada Inc., (2022 ONCA 209) which upheld a decision giving 26 months of pay in lieu notice, Markoulakis v Snc-lavalin Inc., (2015 ONSC 1081) which awarded 27 months of pay in lieu of notice, and McLean v Dynacast Ltd., (2019 ONSC 7146) which provided 28 months of pay in lieu of notice. These cases show that, though it is rare, there are cases that have exceptional circumstances permitting an extension beyond the assumed 24-month common law notice cap.

The most recent case to provide an award beyond the perceived common law 24-month pay in lieu of notice cap is found in the case of Milwid v IBM Canada Ltd. (2023 ONSC 490). This case is interesting because the judge awarded time beyond the 24 months of notice because of the circumstances caused by the COVID-19 pandemic.

In Milwid v IBM Canada Ltd, Gregory Milwid (the employee) worked for IBM Canada. Milwid had worked for different IBM locations since 1982. In May 2020, Milwid was terminated without just cause, amid the COVID-19 pandemic. At the time of dismissal, Milwid was earning approximately $170,000 annually and he rejected IBM’s initial dismissal package. Milwid had trouble securing a job in the 14 months between his dismissal and when the wrongful dismissal trial was held.

In Milwid v IBM Canada Ltd, the judge found that Milwid’s age (62), his length of service with the same employer (38 years), the managerial position he held at the time of termination, his compensation and benefits package in an uncertain economy, and the technical/skilled nature of his skills, which were geared towards the defendant’s business, all supported an award of 26 months of common law notice. It is relevant to note that these exceptional circumstances are seemingly similar to the regular Bardal factors. Regardless, the judge also awarded an additional month of notice due to the dismissal occurring during the pandemic, as that limited Milwid’s ability to secure a job. Therefore, the judge awarded Milwid a total of 27 months of pay in lieu of notice.

How Suzanne Desrosiers Professional Corporation can help

In light of these recent decisions permitting notice to extend beyond the once assumed 24-month limit, employers should consider revisiting their employment contracts to ensure that their employment agreement have enforceable termination clauses that avoid expensive common law notices. At our office, we have employment lawyers who can ensure that you have a valid and enforceable termination clause in your contracts. Our employment lawyers can also help you with your termination decisions and help limit the costs tied to dismissing an employee. You can reach one of our employment lawyers by calling us at (705) 268-6492 or emailing us at info@sdlawtimmins.com.