Tuesday, March 15, 2011

Ontario Employment Law: Notice Periods and Senior Executive Employees

What notice period is applicable when the employment of a senior executive is terminated after a short period of employment?

In Love v. Acuity Investments Management Inc., a ruling released February 16, 2011, the Ontario Court of Appeal addressed this issue directly.

A senior Vice President (and shareholder in the respondent employer) appealed a trial judge's 2009 decision to award him five months of pay in lieu of notice. He had been employed for two years and seven months at the time of termination.

The Court of Appeal, while recognizing that a trial judge's conclusion is entitled to deference, stated the following:
. . . if the trial judge erred in principle, this court may substitute its own figure, although it should do so sparingly if the trial judge's award is an acceptable range despite the error in principle.
The Court of Appeal identified three such errors in the case at hand. It set aside the five month notice period awarded at trial and substituted a longer period of nine months.

First, appellate Court ruled the trial judge had over-emphasized the appellant's short length of service. While the Court noted that this factor is important in the assessment (with shorter lengths of service tending to reduce the appropriate length of notice), it held that it should not be given disproportionate weight.

The Court was also critical of the trial judge's reliance on two cases involving employees with similar lengths of employment but very dissimilar positions:
The two cases from which the trial judge drew guidance in awarding 5 months were cases in which the length of service was comparable to the appellant's and the notice period was assessed at 4 and 5 months respectively. However these cases can provide very little guidance if one looks at other important factors. They were not cases involving a senior executive reporting to the chief executive officer. In neither case was the employee an owner of the business. In both cases, the employee's average annual compensation was a small fraction of the appellant's. The fact that these employees were awarded 4 and 5 months' notice is of little help in deciding what was appropriate for the appellant.
Second, the Court held that trial judge did not give enough emphasis to the character of the appellant's employment. The fact that the appellant had not supervised others, did not mean he was not a "high level employee" entitled by virtue of that fact alone to a longer notice period.

Third, appeal court noted that the trial judge failed to consider one of the Bardal factors altogether, namely the availability of similar employment.

In this regard, the court noted that both the appellant's substantial average annual compensation and the possibility of equity participation in his employer were important attributes of his employment that should not have been ignored. This Bardal factor militated towards a longer period of notice since finding an employment opportunity with the same or similar features would no doubt be difficult.

If you have been wrongfully dismissed, please consult a lawyer who can advise as to your entitlements both at common law and under the Ontario Employment Standards Act.

- Robert Tanha, Toronto

Visit our Toronto Law Firm website: www.wiselaw.net

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