NOTICE PERIODS
TOO MUCHTOO LITTLE JUST RIGHT
by Scott Sterns
Jamieson Sterns
5475 Spring Garden Road, Suite 503
Halifax, NS B3J 3T2
INTRODUCTION
It is a constant source of amazement for Employment Law practitioners how something as straight
forward as calculation of a reasonable period of notice, can be the subject of such dispute.
Regardless of decades of judicial reasoning, general rules applicable to the calculation of a
reasonable notice period, and clear guidelines from the courts, reasonable notice often remains
elusive.
This paper, and the corresponding discussion, will review three key trends in the area of reasonable
notice.
I.
When reviewing the potential for "too much" notice, we will examine lower court decisions
in which the principals of Wallace v. United Grain Growers Ltd. are reviewed.
2.
When reviewing the potential for "too little"notice, we will examine the Ontario Court of
Appeal decision in Felker v. Cunningham, and the related facts, but drastically different
result, in the Supreme Court of Canada's reasoning in McKinley v. BC Tel.
3.
Finally, we will attempt to resolve the dispute with a table which reviews 1,600 wrongful
dismissal cases.
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REASONABLE NOTICE
Prior to examining too much, too little and just right, it is helpful to review the standard definition
of reasonable notice.
The most quoted comment of what constitutes reasonable notice ofterrnination of employment was
articulated by McRuer C.J.H.C. in Bardal v. Globe and Mail Limited (1960),24 D.L.R. (2d) 140
(Ontario H.C.):
"There can be no catalogue laid down as to what is reasonable notice in particular
classes of cases. The reasonableness of the notice must be decided with reference to
each particular case, having regard to the character of the employment, the length of
service of the servant, the age of the servant and the availability of similar
employment, having regard to the experience, training and qualifications of the
servant."
That list of factors is not exhaustive. It is now reasonably settled law that promise of job security
or inducement to change jobs will be part of the calculation of reasonable notice. Since 1997, it can
now also be said that bad faith dealings of the employer will be extremely relevant.
Armed with these factors, the calculation of reasonable notice should be simple.
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'TOO MUCH"
Complicating the calculation, is the Supreme Court of Canada's decision in Wallace v. United Grain
Growers Ltd. [1997] 3 S.C.R. 701. At the age of 45, in 1972, Mr. Wallace was recruited from
employment in which he had worked for approximately 25 years. For the next 14 years, he was the
leading salesman for the United Grain Growers. He was summarily discharged in 1986 without
explanation. Mr. Wallace sued. The employer maintained just cause for dismissal up to and
including trial. Mr. Wallace suffered significantly as a result ofthe termination, including significant
emotional difficulties, being forced to seek psychiatric help, and filing for personal bankruptcy.
There was no just cause for dismissal. The principal issue at trial was the period of reasonable
notice. The trial judge awarded 24 months' notice after considering the Bardal factors, as well as
the conduct ofthe employer in terminating Mr. Wallace. The Manitoba Court of Appeal disagreed
and reduced the reasonable notice period to 15 months.
The Supreme Court of Canada reinstated the reasonable notice period of24 months and held:
". . . For most people, work is one of the defining features of their lives.
Accordingly, any change in the person's employment status is bound to have farreaching repercussions.
The point at which the employment relationship ruptures is the time when the
employee is most vulnerable and, hence, most in need of protection. In recognition
of this need, the law ought to encourage conduct that minimizes the damage and
dislocation (both economic and personal) that result from dismissal.
... When termination is accompanied by acts of bad faith in the manner of discharge,
the result can be especially devastating. In my opinion, to ensure that employees
receive adequate protection, employers ought to be held to an obligation of good faith
and fair dealing in the manner of dismissal, the breach of which will be compensated
for by adding to the length of the notice period.
The obligation of good faith and fair dealing is incapable of precise definition.
However, at a minimum I believe that in the course of dismissal employers ought to
be candid, reasonable, honest and forthright with their employees and should refrain
- 5from engaging in conduct that is unfair or is in bad faith by being, for example,
untruthful, misleading, or unduly insensitive.
The court then cited examples of bad faith dealing.
Maintaining a wrongful accusation of theft.
Refusal to provide a letter of reference.
Reassuring an employee that a position will be found while planning for his termination.
Termination while on disability leave.
The Supreme Court of Canada held that all of these terminations are in bad faith and are indicative
of the type of conduct that ought to merit compensation by way of a greater period of notice.
Wallace is regularly cited as counsel argue over reasonable notice periods. The key to utilizing the
reasoning in Wallace is to determine whether the facts of a particular case, will enable the Wallace
reasoning to increase the notice period.
In Musgrave v. Levesque Securities Inc., the Nova Scotia Supreme Court doubled the notice period
because of extreme bad faith. The plaintiff, Mr. Musgrave, worked as an investment dealer at
Levesque for four years. He was dismissed without notice after an allegation of just cause. The
court found that there was no cause.
The court found extreme bad faith, including defamation to former clients and a potential employer,
as well as maintaining just cause in the face of very little evidence. The court determined that the
appropriate notice period for this four-year employee was eight months. That amount was doubled
based on the breach of the duty of good faith set out in Wallace.
- 6In doubling the notice period, the court held that in its duty to act in good faith, the:
"Assessment ofthe employer's conduct is not confined to the moment of dismissal,
but includes conduct subsequent to, but referable to, the dismissal."
In applying Wallace, the court noted that additional notice is warranted because of the bad faith
conduct of the employer, that included:
attempting to mislead the employee;
misleading others as to the reason for dismissal;
removing him insensitively from the office;
being forced to immediately clear out his office under guard;
having personal property taken from him;
suffering general slander and defamation; and
slandering the former employee to a potential employer.
For the Employment Law practitioner, the harsh reality of the termination, and its surrounding and
subsequent facts, must now be considered when calculating notice.
Lest we believe that there will always be significant additions to notice periods, Wallace is restricted
in its application. There must be significant evidence of bad faith conduct by the employer. Some
of the facts found in Wallace must be evident. Such was not the case in Daniel v. Survival Systems
[2000] N.SJ. No. 349.
In that decision, Chief Justice Kennedy dealt with the termination of a chartered accountant
employed for less than two years. Throughout the matter, the employer claimed that the employee
was terminated for just cause.
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There was some dispute of the facts in this case. One of the key reasons for dismissal was the
employer's demand that the employee report for work at the company at 8 :00 a.m. or earlier. After
the employer monitored the arrival times and noted tardiness of one minute, three minutes, four
minutes and eight minutes, the chartered accountant employee was terminated.
The court determined that there was no just cause for termination. However, when Chief Justice
Kennedy dealt with the principals in Wallace and the potential to increase damages, he rejected the
employee's submission that the employer had "played hard ball" through the litigation and made
unfounded allegations of cause. The court held that while there was no just cause, the employer's
actions did not amount to bad faith. The court determined that the employer:
"Presented to this court as a hard-driving, manifestly accomplished business man; a
man who has taken an idea and transformed it into a successful international
company. He expects his employees to share his spirit and enthusiasm for the
company and its endeavors .
. . . The manner of termination was not justified on the facts and so can be addressed
by damages, however, the company's actions were not for the egregious nature that
attract Wallace-type damages."
The plaintiff was awarded three months' notice.
Equally reluctant to award Wallace damages was the Nova Scotia Court of Appeal in Bureau v.
KPMG Quality Registrar Inc. In Bureau, the employee was terminated after 15 months' notice. The
trial judge awarded a five-month notice period. On appeal, the Court of Appeal upheld the decision
of the trial judge noting that a five-month period of reasonable notice was appropriate and the facts
were unlike the facts in Wallace.
Of note, in Bureau, the Nova Scotia Court of Appeal, after fully reviewing the facts and
circumstances of Wallace, held that there was no evidence of bad faith dealing and what evidence
there was of recruitment and subsequent termination, absent other blame-worthy conduct, does not
entitled an employee to an enhanced notice period.
-8The court specifically held:
"It is not every inducement that results in augmented damages on dismissal. As
stated above, while accepting that KPMG courted Ms. Bureau, Justice Richard was
not satisfied that Mr. Travers gave Ms. Bureau assurances oftenure."
The Nova Scotia Court of Appeal notes that despite escorting Ms. Bureau from the building and
implementing the termination that was very swift and somewhat peremptory, it did not entitle the
employee to a longer notice period. The court held:
"The loss of one's job is always a dramatic event. It is not humiliation,
embarrassment and damage to one's sense of self-worth and self-esteem alone which
entitles the employee to augmented damages. There must be an accompanying act
of bad faith or unfair dealings on the part of the employer."
Where does that leave employment lawyers? Notice is increased on bad faith conduct but that will
regularly be hard to define.
-9'TOO LITTLE"
The ability to properly predict reasonable notice has not been made easier by the Ontario Court of
Appeal's decision in Felker v. Cunningham [2000] OJ. No. 3177.
In Felker, the Ontario Court of Appeal dealt with the alleged wrongful dismissal of $ 100,000 a year
key employee in the electronics industry. Mr. Felker was dismissed for an alleged breach of his
fiduciary duties. While employed, he sought employment with a competitor. The employer learned
of the actions of Mr. Felker, and terminated him without notice or payment in lieu for the breach of
his fiduciary duties.
While many practitioners may have advised Mr. Felker that looking for potential employment was
not a fundamental breach of his employment contract, and that he was entitled to a period of
reasonable notice, the Ontario Court of Appeal disagreed. The court held:
"Since Canadian Aero it has been established law in Canada that high echelon
managers and directors of an organization owe their employer a fiduciary obligation
that transcends their implied duty of fidelity as a regular employee. Thus, an
employee who stands in a fiduciary relationship to his or her employer has an
equitable obligation ofloyalty, good faith and honesty and avoidance of conflict of
duty and self-interest. The employee must act honestly, in good faith and with a view
of advancing the employer's best interest."
The court held that applying for a job at a competitor, Mr. Felker breached that duty and that action
was just cause for termination without reasonable notice. The court held:
"The duty to avoid conflict of interest and self-interest required Felker to avoid
putting himself in a position where his own interests, or other commercial interests
with which he was aligned, would be paramount to [the employer's] interests or
would detract from his ability to work fully and completely for the benefit of [his
employer].
In this regard, Felker was required to make full disclosure to [his employer] that he
was engaged in preparing a presentation to [the competitor].
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When he failed to make full disclosure, he was in breach of his fiduciary duty and
that was just cause for termination."
Mr. Felker appealed to the Supreme Court of Canada. The application for leave was dismissed.
While Mr. Felker's application for employment with a competitor was just cause for termination,
in the case of McKinley v.
Be Tel, in January of2001, the Supreme Court of Canada ruled that lying
about a medical condition, or related dishonesty, is not necessarily just cause for termination. The
court determined that whether an employer is justified in dismissing an employee on the grounds of
dishonesty, is a question that requires an assessment ofthe context of the alleged misconduct. By
implication, the courts seem to state, if you tell a small lie, it is not just cause. The court asks,
whether the employee's dishonesty gives rise to a breakdown in the employment relationship.
Unlike Felker, where an application for employment vacated his right to reasonable notice,
Mr. McKinley's dishonesty regarding his medical condition, because it was determined to not be
central to his employment relationship, allowed him to continue to claim reasonable notice.
As counsel for employers and employees, we are left with increasing the period of reasonable notice
under Wallace, decreasing it under Felker, maintaining it under McKinley, or coming up with just
about any other calculation under any of the huge number of wrongful dismissal cases.
- 11 "JUST RIGHT"
When all else fails, a poll of 1,600 cases seems to be the best approach.
In Employment Law in Canada, Third Edition, England, Christie and Christie, page 14.69.3 notes
that the general rule of one month for every year of service is probably no longer accurate. The text
notes:
"According to Fisher's analysis of approximately 1,600 wrongful dismissal cases,
from all of the common law provinces, judges in fact do not award one month's
notice for every year of service."
There seems to be a revised general rule more accurately reflected as follows:
Employees with prior service of up to 2.5 years received 2.5 months of notice per year of
service.
Employees with prior service of between 2.5 and 5 years received 1.5 months of notice per
year of service.
Employees with prior service of between 6 and 15 years received 1 month of notice per year
of service.
Employees with 16 years or more prior service received 3 weeks' notice per year of service,
which reduces to 2 weeks per year of service after 25 years of prior service.
As practitioners, we are left with a confinning array of cases. The general rule of one month per year
of service seems under attack. It now seems safer to say that the individual calculation contemplated
by Bandal v. Globe and Mail is more relevant then ever. While that may not make the calculation
any easier, it will certainly encourage debate among employment lawyers.