Court Grants 27-Month Notice Period Due to “Exceptional Circumstances”Written on behalf of Peter McSherry
The COVID-19 pandemic has significantly impacted Canada’s employment landscape and the effects will be discussed for years to come. An area of employment law that has come into greater focus as a result of the pandemic is that of common law reasonable notice, which the Ontario Superior Court recently weighed in on.
Tech firm manager loses his job during the pandemic
In Milwid v. IBM Canada Ltd., the plaintiff was employed with IBM Canada for most of his working career. He was hired by IBM South Africa in 1982 and continued his employment with IBM Canada upon immigrating to the country in 1998.
In May 2020, the plaintiff was terminated without cause in the midst of the global pandemic. At the time, he was a high-level manager with IBM’s Cloud and Cognitive Software business unit.
At the time of his dismissal, the plaintiff’s compensation package consisted of:
- a base salary of around $170,000;
- a pension, to which his employer made annual contributions;
- a comprehensive group insurance plan;
- participation in IBM’s equity incentive plan; and
- a modest yearly bonus.
Employee received 11 weeks’ working notice and severance pay
At the time of the termination, the defendant employer terminated the plaintiff’s employment and offered him a separation package which he rejected.
On May 21, 2020, the employer gave the plaintiff 11 weeks’ working notice. Subsequently, it gave him one extra week of pay in lieu of notice and 26 weeks of severance pay and accrued vacation.
Employee commenced a claim for wrongful dismissal
Following his termination, the plaintiff started a claim against IBM Canada for wrongful dismissal. The matter proceeded as a motion for summary judgment, with the plaintiff claiming damages during the reasonable notice period, including salary, incentive compensation, pension, group health and other benefits.
Employee submits that 30 months’ notice would be reasonable
At the hearing, the plaintiff submitted that a reasonable notice period of 30 months would be appropriate. Notably, this exceeded the “cap” of 24 months for reasonable notice at common law.
The plaintiff highlighted that the COVID-19 pandemic was an exceptional circumstance that warranted a departure from the historical 24-month cap. In addition, he pointed to:
- his lengthy tenure at IBM;
- his seniority at the company; and
- his advanced age (62) at the time his employment was terminated.
On the other hand, the defendant submitted that a reasonable notice period of 20 to 22 months was appropriate, subject to a reduction for unreasonable mitigation efforts and a contingency.
Court acknowledged that pandemic can factor into calculation of reasonable notice
In deciding on an appropriate reasonable notice period, the Court found that the COVID-19 pandemic was not an “exceptional circumstance” that warranted a departure from the 24-month common law cap. However, the Court noted that the pandemic had been considered when extending the reasonable notice period beyond the “non-pandemic” limit in other cases. The Court further recognized that economic circumstances can be considered in the reasonable notice period analysis.
Court found that a reasonable notice period was 27 months
The Court affirmed that, while there is no absolute upper limit on what constitutes reasonable notice, notice periods greater than 24 months will only be justified in exceptional circumstances.
Referring to the Ontario Court of Appeal’s decision in Dawe v. Equitable Life Insurance Company of Canada, the Court highlighted several factors that suggested a lengthier notice period was appropriate:
- the plaintiff’s age;
- his length of service (38 years with the defendant);
- the fact that his employment was technical but specialized towards his work at IBM; and
- the plaintiff’s uncontradicted evidence that he applied to 122 positions in the 14 months prior to the hearing and received no interviews.
The Court also took judicial notice of the declaration of the pandemic in March 2020 and the government’s emergency measures which were implemented to manage the spread of the virus. The Court acknowledged that the resulting restrictions on commerce would have impacted the plaintiff’s ability to mitigate his damages.
A similar case with a different result
Given the Court’s decision in Milwid v. IBM Canada Ltd., it is instructive to examine another recent decision of the Ontario Superior Court for comparison.
The facts in Russel v. The Brick Warehouse LP were similar to those in Milwid v. IBM Canada Ltd., in that the plaintiff employee was terminated without cause in July 2020, during the pandemic. At the time of his dismissal, the employee was 57 years old and had been working for the defendant employer for 36 years. The employee was in a senior supervisory position and following his dismissal, he had trouble finding another job because of the pandemic.
In this instance, the Court concluded that these did not constitute extraordinary circumstances warranting a reasonable notice period above the 24-month common law cap. The Court dismissed the employee’s claim and decided that the 18 months’ notice he received was sufficient.
The question remains as to what constitutes “exceptional circumstances”
After the Court’s decision in Milwid v. IBM Canada Ltd., it remains unclear what constitutes “exceptional circumstances” warranting a notice period greater than 24 months.
This case also provides more evidence of what has been coined the “COVID-bump”, which refers to the idea that courts are willing to bump up the reasonable notice employees are entitled to, factoring in the economic downturn and labour market uncertainty brought on by the pandemic.
Contact Peter McSherry Employment Lawyers in Guelph for Advice on Wrongful Dismissal and Notice Periods
At Peter A. McSherry, we recognize that losing a job often leads to emotional and financial stress. If you believe you have been wrongfully dismissed, or you did not receive the notice or severance you are entitled to, we are here to help. No matter your employment law issue, our experienced employment law team will advise you on your rights and help you weigh your options. Contact us online or by phone at 519-821-5465 to schedule a confidential consultation.