HUMAN Capital - Summer 2015 - (Page 33)
Severance Pay Amounts
BY STUART RUDNER
Although Canadian courts have steadfastly insisted there are many
different factors that can be considered when assessing the amount
of notice of dismissal to which an employee is entitled, those of us
who deal with dismissals on a regular basis focus on the "core" factors
originally set out in the 1960 ruling of Bardal v. Globe and Mail Ltd.:
- character of the employment
- length of service of the servant
- age of the servant
- availability of similar employment, having regard to the experience,
training and qualifications of the servant.
We know better than to rely upon the mythical rule of thumb of "one
month per year of service," because the courts will consider more
than just the individual's tenure with the company. And, of course,
we don't refer to employees as "servants" anymore. And we are also
mindful that if the employee was induced to leave prior employment,
that can add significantly to the amount of notice.
In recent times, however, questions regarding the application of two
of the core factors have arisen. Historically, the underlying theory
was individuals in "lower level" positions should have an easier time
finding new employment as there would be more positions available,
but this has been questioned. In Di Tomaso v. Crown Metal Packaging
Canada LP, the employee had worked for the Crown Metal for more
than 33 years in an unskilled/labourer position. He was provided
with working notice and 26 weeks of severance pay pursuant to the
Employment Standards Act. The company took the position he was
entitled, at most, to 12 months' notice because he was an unskilled
and low-level worker. However, the court disagreed and awarded
22 months' pay in lieu of notice. The company appealed to the Court
of Appeal, which upheld the original decision, noting that "there is
recent jurisprudence suggesting that, if anything, (position/character
of employment) is today a factor of declining relative importance.»
In addition, the age factor has become somewhat of a wildcard in
light of the aging workforce and the abolition of mandatory retirement. Previously, employees approaching retirement age tended
to receive shorter notice periods, since the underlying assumption
was they would not be working much longer anyway. However,
people are working later in life than they used to, and the reality is it
is difficult for a 60 or 70 year old to find a new job. As a result, there
have been several recent cases where older workers have received
lengthy notice periods.
Recently in Ontario, we saw a wrongful dismissal case involving two
plaintiffs in their 80s, and the court made the following comments:
* "... the fact of the matter is courts will have to increasingly grapple
with adjusting what a reasonable notice period is in this new
* "I do not think there is a place in this social reality for an automatic
presumption that persons should or would naturally retire on
reaching senior age."
In another case (Kotecha v. Affinia), a 70-year-old labourer with 20
years of service received 22 months of pay in lieu of notice. This case
involved both factors discussed above-an older worker and a lowerlevel position. Despite those two factors, the plaintiff received a substantial notice period, close to the "unofficial cap" on notice periods
of two years, which seems likely to become less relevant as well.
The trend definitely appears to be toward lengthier notice periods,
particularly for non-managerial or executive employees that previously were often limited to 12 months or less. Older workers are
also being awarded substantial notice periods, creating a difficult
situation for employers that could, in the past, wait for an employee
with declining performance to hit age 65 and retire with dignity.
Now, employers may not only have to dismiss them, but provide a
substantial severance package.
Of course, the unpredictability of common law "reasonable notice"
can be avoided altogether if the parties use an employment agreement to clarify exactly what their rights and obligations will be in the
event of dismissal. I often work with clients to do so.
Stuart Rudner is a leading Canadian
Employment Lawyer and founding partner
of Rudner MacDonald LL P. He is the author
of You're Fired! Just Cause for Dismissal in
Canada, founder of the Canadian HR Law
Group on LinkedIn, and author of the Canadian
HR Law Blog. Contact him at srudner@
employment law tweets @CanadianHRLaw.
HUMAN CAPITAL | SUMMER 2015 | 33
Table of Contents for the Digital Edition of HUMAN Capital - Summer 2015
Seven Best Practices to Improve Candidate Care Through the Recruitment Process
Diversity and Inclusiveness in Today’s Workplace
Navigating the Current Job Market: Students, Professionals and Employers
The Meaning of Turnover
Changes in the TFW and LMIA Process
The Changing Face of Training and Development
Index of Advertisers/ Advertisers.com
HUMAN Capital - Summer 2015