Employee Challenges Severance Package Offered by Employer

Written on behalf of Peter McSherry

Being terminated from a job can create many unknowns, particularly financial ones. This process can be made more stressful if the employer and employee cannot agree on a reasonable severance package. There are several factors which can contribute to the amount of severance (or payment in lieu of notice) is appropriate. These considerations can include, among other things, the employee’s position, how long they worked in that position, their age, and any action taken to mitigate damages. 

A recent decision from the Ontario Superior Court of Justice provides an example of how the courts balance competing opinions with respect to the contributing severance factors, particularly as they relate to an employee’s failure to mitigate and whether or not someone can be considered a “senior” manager.

Golf course manager is terminated when outside management is brought on

In the case of Teljeur v. Aurora Hotel Group, the employee had been working as the general manager of a resort and golf course. In December 2021, two senior executives met with the employee to advise that his employment was being terminated. No cause was given to the employee regarding his termination. However, the employer hired an outside management company to manage the property.  

The employee and employer disagreed on several issues, including:

• reasonable notice;
• damages for loss of fringe benefits;
• whether the employee failed to mitigate his job loss;
• and whether the plaintiff’s claims for damages for bad faith were warranted. 

Court deems employee a senior manager

With respect to his job title, the employee told the Court that he was responsible for overseeing and managing all operations of the resort. These included daily operation oversight, hiring staff, coordinating schedules, and managing staff-related issues. He also said that he was responsible for marketing and social media management. The employee stated that he took on additional duties, which include managing customer complaints.

Based on the evidence, the Court concluded that the employee should be considered a “senior manager” within the corporation. 

Employee’s reasonable notice calculation period interrupted due to break in employment

The Court noted that the employee had worked for the employer over two separation periods, including May 2015 to September 2016, which the employer claimed ended due to the employee’s termination. However, the employee was hired as general manager on October 1, 2018, and maintained this position until his termination in December 2021. While the employee claimed that he signed an employment agreement when he was hired back in October 2018, the agreement was never produced.

The Court determined that the employee’s employment in 2016 did not count towards his seniority or the calculation of reasonable notice following his termination in 2021.

Reasonable notice period of seven months awarded

The employee relied on the case of Pavlov v. The New Zealand and Australian Lamb Company Limited, in which an employee in a similar role was awarded a 10 month notice period after working for only three years. However, the Court noted that, in that specific case, the employee in question had been asked to leave his former job by the employer who then terminated his employment which weighed in favor as a contributing factor. 

On the other hand, the employer’s position was that the appropriate notice period should be between 3.5-5 months, given that the employee was employed for just over three years. 

The Court pointed out that the length of employment is only one of several factors considered; therefore, duration alone is not the sole factor in notice period calculation. When the Court weighed all of the factors, including that the employee was 56 years old, held a senior management position, and had difficulty finding similar employment, it determined that a seven-month notice period would be appropriate in the circumstances. 

Court awards compensation for loss of fringe benefits

Having calculated an appropriate notice period, the Court then turned to the employee’s claim for lost fringe benefits, primarily through the employer’s benefits plan. Following the precedent set out in the case of Russell v. The Brick Warehouse LP, in which the employee was awarded compensation equivalent to 10% of the amount awarded in lieu of notice, the Court awarded the employee in this case the same percentage.  

Employer’s claims that employee failed to mitigate his damages goes unsupported

The employer argued that the period of reasonable notice should be reduced due to the employee’s failure to mitigate his losses, however, the employer failed to provide evidence to show what the employee could have done to increase his likelihood of finding employment. 

The Court heard that the employee submitted resumes to various online job sites and intended to apply for appropriate positions when they became available. The Court was satisfied that there was no evidence to suggest that a comparable job was available to the plaintiff. 

Finally, the Court considered the employee’s request for moral damages of $20,000 based on an allegation of bad faith by the employer. 

The Supreme Court of Canada established the criteria that must be satisfied for an award of moral damages in the case of Honda Canada Inc. v. Keays, stating that: 

“Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in contact during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”.”

Employee successful in claim for moral damages

The Court also referenced the Employment Standards Act, which states that an employer who wishes to terminate the employment of someone who has been continuously employed for at least three years must give that employee written notice of their termination. The employee in this case did not receive such written notice despite multiple requests. Further, the employer failed to give the employee his record of service within the seven prescribed days they had to do so. The employer also failed to reimburse over $16,000 that it owed to the employee for expenses he paid out of pocket. 

Based on these factors, the Court decided that $15,000 in moral damages would be appropriate. 

Contact Peter A. McSherry Employment Lawyer for Trusted Advice on Termination and Severance Packages

Losing a job can be devastating, coupled with the added uncertainty of whether or not you have been properly compensated for lack of notice. Therefore, working with an experienced employment lawyer is critical to ensure you do not agree to unfair terms. At Peter A. McSherry Employment Lawyers, our skilled employment lawyers can advise you on the merits of your claim for wrongful termination, as well as whether the terms of your severance package are fair so that you can make an informed decision for your future. To speak with a member of our team, call us at 519-821-5465 or reach out to us online.