The Ontario Court of Appeal Confirms Reasonable Notice ‘Cap’ of 24 Months’, Absent Exceptional Circumstances
August 23, 2019
In a recent decision of the Ontario Court of Appeal, the Court confirmed that 37 years of service in a senior management role does not constitute “exceptional circumstances” to justify a notice period over 24 months.
Michael Dawe (“Dawe”) was employed with the Defendant, The Equitable Life Insurance Company of Canada (“Equitable Life”) for 37 years as a Senior Vice President. Dawe had worked his entire career at Equitable Life since he was 25 years old. He was terminated without cause, following a minor dispute about the purchase and use of promotional sports tickets. At the time of termination, Dawe was 62 years old. His base salary was $249,000, with a bonus for the last fiscal year of $379,585.
Dawe sued for wrongful dismissal. Both parties moved for partial summary judgment on the issue of the appropriate notice period and the employee’s entitlement under the bonus plan.
The motion judge determined Dawe was entitled to 30 months’ notice and that he was entitled to bonus payments during the notice period. In support of this finding, the motion judge appeared to rely on Dawe’s statement that he intended to work until a retirement age of at least 65 and his own perception of broader social factors, such as the abolishment of mandatory retirement, in favour of a long line of appellate cases that have held that only exceptional circumstances will support a base notice period in excess of 24 months.
On appeal, the Court reduced the notice period to 24 months, finding that there were no exceptional circumstances in this case that warranted a longer notice period. While the Court of Appeal recognized Dawe’s lengthy service, his senior position and age at the time of termination, the Court noted its leading decision of Lowndes v. Summit Ford Sales Ltd. (2006) 206 O.A.C. 55 (C.A.), and cases following, which held that the base notice period of 24 months “recognizes” and “rewards” these factors, and constitutes the “high end of the appropriate range of reasonable notice for long-term employees” in Dawe’s position.
In addition, the motion judge’s consideration of the end of mandatory retirement ought not to alter the traditional approach to determining reasonable notice. The Court’s jurisprudence on damages for wrongful dismissal has consistently held that while there is “no absolute upper limit or ‘cap’ on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months”. The Court of Appeal held it was not open to the motion judge to “chart his own course” in light of these authorities.
The Court of Appeal also noted that when a minor conflict erupted between Dawe and Equitable Life, Dawe initiated his own departure process from Equitable Life by requesting an “exit strategy”. This factor, the Court stated, ought to have weighed against a finding there were “exceptional circumstances” in this case justifying a notice period in excess of 24 months. The Court concluded that although Mr. Dawe’s circumstances (including his senior position, career-long years of service at the same company, age at the time of termination, and his difficulty in finding new employment) warranted a substantial notice period, there was no basis to award Mr. Dawe more than 24 months’ notice.
In respect to the bonus entitlement, the Court held that the bonus was an integral part of Dawe’s compensation. While Equitable Life unilaterally imposed changes to the bonus plan attempting to remove Dawe’s common law entitlement to bonus payments at termination, the unfavourable language was not brought to Dawe’s attention at any time before his termination. As a result, the Court of Appeal concluded that the termination provision in the bonus plan was unenforceable.
After this decision, what constitutes “exceptional circumstances” remains a fluid and artful concept to be determined on a case-by-case basis. What is clear, however, is that many years of dedicated service and a senior management/executive level position, is not sufficient, without more, to justify a notice period beyond the typical ‘cap’ of 24 months.
Furthermore, new language in a bonus plan limiting an employee’s rights upon termination to bonus entitlements must be brought to an employee’s attention to be enforceable.
 Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512