Ontario Court awards 27-month notice period paid by salary continuance
Author: Chris Forguson
For many years, Canadian Courts have been guided by a "rough upper limit" of 24 months for notice periods for common law wrongful dismissal damage awards. This 24-month "limit" has never been an express cap and there are a handful of cases where the 24-month "ceiling" has been exceeded.
These cases are generally quite rare. The effect of this is that the 24 month "limit" has generally been reserved for those dismissed employees that (a) have very long service (25 years plus) and (b) are at least in their mid to late 50's, and (c) occupied senior management positions or very specialized positions.
If a dismissed employee did not have all of these factors, the Courts would generally back the notice period off from 24 months to allow "room" for those employees that satisfied all of these criteria.
A recent decision of the Ontario Supreme Court: Markoulakis v. SNC-Lavalin Inc., 2015 CanLII 1081 (ONSC), does not really break new ground in this area but stands as another rare example of a situation where a Court is willing to go beyond the 24 month "limit".
The plaintiff in the Markoulakis decision was a senior Civil Engineer, age 65. He had worked for the defendant for over 40 years. The defendant had been his only employer.
The plaintiff sought a 30-month notice period. The Court found that the plaintiff's circumstances were exceptional and justified a notice period of 27 months.
Of equal interest to the long notice period is the fact that the Court ordered the defendant to continue paying the plaintiff monthly for the duration of the notice period by way of salary continuance. The defendant had continued paying the plaintiff up to the date of the trial - some 34 weeks after the date of dismissal. The defendant took the position that this was enough notice.
The Court was faced with the issue of what to do about the contingency of mitigation in the approximately 18 months of notice period following the trial. Neither party advocated a deduction from the notice period to take account of the possibility of mitigation.
The trial judge considered three options: (1) A lump sum award with a reduction for the contingency of future mitigation, (2) a partial award at trial (it was a summary trial) with the parties returning at the end of the notice period for a further quantification and review of mitigation efforts and earnings and (3) A trust approach where the plaintiff is ordered to account for any earnings during the notice period.
The trial judge elected option 3 and ordered salary continuance for the balance of the notice period subject to the parties returning to that judge in the event there was a dispute about continuing mitigation.
This result is at odds with the British Columbia decision in Tull v. Norske Skog Ltd., 2004 CanLII 1098 (BCSC) where Mr. Justice Pitfield canvassed the caselaw in British Columbia and came to the following conclusion:
"This overview of decided cases compels me to concluded that employers, employees and those advising them would be well-served if the Court of Appeal were to consider the place, if any, of salary continuance arrangements in wrongful dismissal actions.
In my opinion, the principle that damages must be assessed on a once and for all, one-time basis, the requirement that the court resort to a kind of mandatory injunction or adjourn judgment to a point following expiry of the notice period if the effectiveness of a salary continuance arrangement is to be assured, and the fact that a salary continuance arrangement to which the employee does not agree reflects the employer's attempt to unilaterally amend the employment contract, suggests that such arrangements should not be endorsed as a means of compensating an employee for damages in a wrongful dismissal action."
The judge in Markoulakis did not consider the Tull decision.
Of interest is the fact that the judge in Markoulakis held that he did not have sufficient evidence on which to consider the lump sum with contingency reduction option. However, the evidence before him included the fact that the plaintiff had applied for over 30 jobs. One would think that such evidence would be more than enough to make a reasoned contingency deduction.