Wrongfully Dismissed Employee Awarded Retiree Travel Privileges Worth $1.8 Million

Written on behalf of Peter McSherry
Air Canada Plane
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Recent media stories have highlighted labour shortages at airlines and other employers during this stage of the pandemic. During COVID-19, travel restrictions have severely impacted the airline industry, which responded with significant layoffs and staff reductions. In a previous blog, we discussed how COVID-19 has impacted reasonable notice for terminated employees.

In a recent decision of the Ontario Superior Court of Justice, an Air Canada employee who was terminated during the pandemic was awarded a substantial amount of travel privileges after establishing that he had been wrongfully dismissed.

Air Canada director terminated as part of COVID-19 workforce reductions

Air Canada is a federally-regulated airline carrier that experienced significant business impacts from the pandemic and associated travel restrictions. Air Canada indicated it was the worst financial crisis in its 80-year history. In June of 2020, Air Canada significantly reduced its workforce through layoffs and dismissals, including the employee at the centre of this case, Ruel v. Air Canada.

The plaintiff was a director with Air Canada. As an executive, his managerial duties included the following:

  • Leading a team of 45 management operations professionals, overseeing 3500 Air Canada employees; and
  • Acting as the primary point of contact for all Air Canada projects with the Greater Toronto Airports Authority, Canadian Border Services Agency, and U.S. Customs and Border Protection.

At the time of his termination, the plaintiff had been with Air Canada for 24.5 years and was almost 52 years old.

Employee sought summary judgment of claim for damages

Shortly after being dismissed, the plaintiff brought a wrongful dismissal action seeking damages, including:

  • Pay in lieu of notice;
  • Damages in lieu of participation in a variety of benefits programs;
  • Participation in the retiree travel privileges; and
  • Pay in lieu of bonuses.

In the course of the action, he brought a motion for summary judgment on the issue of damages (i.e. for a determination of the damages that may be awarded if he is later successful at proving he was wrongfully dismissed). Air Canada argued that summary judgement was not appropriate because of the nature of the benefit and bonus claims.

Ultimately, the Court determined that summary judgment was appropriate and that the primary disputes involved interpreting various plans and policies.

Determining the amount of reasonable notice of termination

To determine the amount of notice of termination owed to the plaintiff, the judge reviewed what is commonly referred to as the Bardal factors. These factors require the Court to consider:

  • The employee’s age;
  • The character of their employment;
  • Their employee’s tenure; and
  • The availability of similar employment.

The judge noted that the Bardal factors are not exhaustive. Downturns in the economy or specific industries can also be considered when determining the amount of reasonable notice owed to an employee. In this case, the judge acknowledged that Air Canada’s witnesses admitted that the airline industry was “decimated” by COVID-19, and they did not know when operations would normalize. Air Canada had also conceded that the pandemic “significantly limited [the plaintiff]’s prospects of reemployment in the airline industry”.

In the end, the judge determined that even without COVID-19, a senior employee with over 24 years of service, who is over 50 years old, would be entitled to a 24-month notice period. The damages that represent this notice period totalled over $234,000, less statutory deductions.

Compensation for lost bonuses & benefits

Aside from the issue of reasonable notice, the Court had to determine whether the plaintiff was entitled to compensation for various lost benefits, stocks, pension accrual and privileges during the applicable notice period. The Court noted that the “purpose of damages is to place the employee in the same financial position they would have been in had [reasonable notice] been given”. The Court found that this includes “all losses and benefits that the employee would have earned or received during the notice period”.

With respect to Air Canada’s “Annual Incentive Plan” (AIP), the Court found that the plan’s language, while ambiguous, did not unambiguously take away the plaintiff’s common law right to those benefits during the notice period. The plaintiff had also pointed to media reports indicating Air Canada awarded $10 million in bonuses to executives and managers after receiving $5.9 billion in government aid.

The plaintiff was therefore found to be entitled to an AIP bonus for 2021 if one was paid, although the actual amount would be determined at a summary trial. The issue of whether the plaintiff was also entitled to any COVID-19-related bonuses was also saved for a future summary trial.

Following this logic of making the plaintiff whole, the Court also held that he was entitled to the lost value of other benefits, including:

  • $23,412 in group health benefits;
  • $73,361 in lifetime retiree benefits (to be reduced by 9.74% to reflect the loss in value caused by the plaintiff’s relocation from Ontario to British Columbia);
  • Long-Term Incentive Plan benefits accrued during the notice period;
  • $160,148 in accrued pension benefits and $27,629 in spousal survivor benefits

Specific performance of $1.8 million in retiree travel privileges ordered

The plaintiff also sought damages in the amount of his lost retiree travel privileges. The Court noted that Air Canada’s own witness conceded that had the plaintiff reached 25 years of service, he would have qualified for these privileges. He would have reached this milestone during the notice period.

Expert evidence from the plaintiff valued the retiree travel privileges at $1.8 million. The Court decided that damages in lieu of these privileges were not appropriate given the fact that travel privileges are subject to modification, amendment, and termination by Air Canada. Instead, the Court held that the plaintiff was entitled to specific performance of these privileges. This was supported by Air Canada’s argument in its legal factum, which acknowledged that specific performance would be appropriate if the Court found that the plaintiff was entitled to receive the retiree travel privileges.

Contact Peter A. McSherry Employment Lawyer in Guelph for Trusted Advice on Reasonable Notice & Severance Packages

The amount of reasonable notice owed on termination can be affected by many common law factors, over and above the requirements of employment legislation. There can also be several other components to consider in addition to lost wages, like health benefits, pension accrual, and bonuses.

Employment lawyer Peter A. McSherry assists employees seeking advice on their entitlement to an extended reasonable notice period and can review proposed severance packages to ensure the client’s financial interests and legal rights are properly secured. To schedule a consultation, contact us online or by phone at 519-821-5465.