Wrongful Dismissal Awards for Pay-in-Lieu of Reasonable Notice: 2018 Year in Review
Employees in Ontario are entitled to “reasonable notice” of dismissal (unless a written contract validly says otherwise). Employers often offer equivalent pay instead of actual notice. But, if the employee thinks it’s not enough, she can sue the employer for “wrongful dismissal.” Then a judge will determine the length of the “reasonable notice period” and make a corresponding order for pay-in-lieu of notice.
Judges decide what is “reasonable” by looking at several standard factors (the “Bardal Factors”). In general, older, longer-serving, high-level employees tend to get more notice than younger, shorter-serving, low-level employees.
Below is a plot of all 41 reported, Ontario wrongful dismissal cases in 2018.
Length of Service
Unsurprisingly, the data slopes upward to the right, with higher notice awards for longer-serving employees.
One common rule of thumb is to estimate reasonable notice as one month per year of service (y = x). In principle, judges shouldn’t use this rule of thumb (and don’t). In 2018, most employees did better than this rule of thumb. The median months-of-notice-per-year-of-service for employees with less than 15 years of service was 1.397.
The awards also get “sticky” around 24 months’ notice. This reflects the case law which says that, while there is no absolute cap on what constitutes reasonable notice, “only exceptional circumstances” will support an award of more than 24 months. Still, in 2018, five employees were awarded more than 24 months.
[Edit: On June 19, 2019, the Court of Appeal reduced the length-of-notice award in Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512. In that most extreme outlier case, the lower-court judge felt the case “warranted” 36 months’ notice because the termination was “tantamount to a forced retirement.” (He ultimately awarded the maximum sought by the plaintiff, 30 months.) The Court of Appeal reduced this award to 24 months on the basis that there were no exceptional circumstances in the case. The lower-court judge had erred by “relying on his own perceptions of the ‘change in society’s attitude regarding retirement.’”]
The youngest employee represented in the data is 33 years old. The oldest is 72. The median age is 57. The average age is 54.8 (excluding the six cases where employee age was not listed).
Character of Employment
There were 26 cases involving managers or high-level employees. There were 15 cases involving all other employees.
Character of employment is said to be “a factor of declining relative importance,” but it still seems to have meaningfully influenced reasonable notice awards in 2018.
Looking at employees with less than 15 years of service, those described as “managers” or “high-level” received an average of 1.659 months of notice per year of service, while the others received an average of 1.1137. By this measure, managers and high-level employees thus did about 1.5 times better than other employees.
On average, all employees with less than 15 years of service received awards equivalent to 1.4334 months of notice per year of service.
Employment Standards Act Minimums
“Common law reasonable notice” awards are invariably greater than the minimum payments required by the Employment Standards Act, 2000 (the “ESA”). The ESA provides two entitlements: 1) termination pay; and 2) severance pay.
ESA termination pay reaches a maximum of 8 weeks of pay (1.85 months) after 8 years of service. ESA severance pay is only paid in certain situations and only if the employee has worked at least 5 years. If it’s owed, ESA severance pay represents an additional week per year of service to a maximum of 26 weeks (6 months). Together, termination pay and severance pay reach a maximum of 34 weeks of pay (7.85 months) after 26 years of service.
Without exception, the statutory ESA amounts must be paid to those entitled to them. By contrast, an employee’s entitlement to pay-in-lieu of common law reasonable notice can be reduced by operation of the doctrine of “mitigation.”
If an employee finds a new job (or otherwise earns new income) before the expiry of the reasonable notice period, the employee is said to have partially or fully mitigated their losses. The former employer’s obligation to pay will be reduced dollar-for-dollar by any new income earned outside the statutory ESA period but still within the “common law reasonable notice period.”