When a person employed is wrongfully terminated, whether through constructive dismissal or outright termination, they are entitled to compensation for the harm suffered due to the wrongful dismissal. If the parties have a valid employment contract that dictates compensation for unjust termination, then the parties follow that guidance in determining damages. However, if no such contract exists, it does not address compensation in the event of unjust termination, or the contract itself is determined to be void and inapplicable. The parties often turn to the courts for guidance in assessing damages.
When employed, the damages awarded for wrongful termination are known as reasonable notice damages. These damages are intended to compensate the wrongfully terminated employee during the period of reasonable notice to which they would have been entitled had their termination been executed properly and legally. Reasonable notice damages are defined by the number of months of compensation to which the wrongfully terminated employee is entitled.
In this blog, we explore the calculation of reasonable notice damages following wrongful termination of employment, including what criteria the court will consider in undertaking such an assessment, how the criteria are weighted in the final analysis, and the limitations that may be applicable in terms of a ceiling on damages.
Employer Dismisses Employee After Only 10 Months’ Employment
The recent case of Shelp v GoSecure Inc. provides an excellent illustration of how the courts of Ontario evaluate claims for reasonable notice damages in wrongful determination lawsuits. The case involved an employee dismissed without cause as Vice president of Sales for Ontario and Western Canada by the employer after only 10 months of employment. The employee was 51 years old when he terminated his employment and earned an annual base salary of $190,000 plus commissions of up to a further $190,000.
The employee’s termination was part of a larger scheme to accommodate a downturn in the employer’s business. At the time the employee, in this case, was terminated, some 60 employees were simultaneously terminated.
The employee undertook significant efforts to obtain gainful employment and, approximately 11 months after his termination from the employer, successfully secured a sales management position with another company at a similar compensation rate to that which he enjoyed with the employer who dismissed him.
Employee Seeks Compensation for Wrongful Termination
After his dismissal, the employer offered the employee one week’s salary as compensation for his without-cause termination. The employee accurately calculated that this offer was insufficient to satisfy applicable legislation and thus commenced this action in which he sought damages for wrongful termination.
Calculation of Reasonable Notice Damages for Wrongful Termination
The court was satisfied that the employee in this case was entitled to reasonable notice of damages, as he had been dismissed from his employment without cause or payment of appropriate compensation by the Employment Standards Act, 2000.
Calculating reasonable notice damages involves considering the Bardal factors, as the criteria are derived from a case involving a plaintiff of that name. The criteria to be assessed by the court in evaluating appropriate reasonable notice damages include:
- The character of the employment (i.e., stature and nature of position held by the employee)
- The length of the employee’s service to the employer
- The age of the employee at the time of termination
- The availability of similar employment in consideration of the experience, qualifications and training of the employee in question
Weighing of Factors in Calculation of Reasonable Notice
In assessing the criteria delineated above, the court generally accepts that the more specialized and niche the employee occupies, the more compensation to which the employee is entitled. This is because the court acknowledges that it is more challenging to locate and successfully obtain similar positions, given their rarity.
Similarly, longer service to an employer generally engenders higher damages than shorter service, and the older the employee, the more compensation to which they are entitled. The courts recognize that it is generally significantly more difficult for older employees to secure gainful employment, as employers typically seek to hire younger employees who will offer longevity to their company.
If the wrongfully dismissed employee occupies a position to which a plethora of similar opportunities are available following wrongful termination, this factor will reduce the amount of damages to which the employee is entitled. Conversely, if the employee’s position was so specialized or niche that similar employment is difficult to identify and secure, this factor will weigh in favour of an extended period of reasonable notice damages.
Word About the One-Month per Year of Service ‘Rule’
Although many Ontarians misunderstand that the courts establish reasonable notice damages following the rule that each year of service to an employer equates to one month of reasonable notice damages, such a rule does not exist, and no such guidance is codified into law.
Rather, as noted by the court in this case, each case must be assessed on its own merits, which means that courts make various decisions and awards in cases of wrongful termination.
Furthermore, although courts tend to limit reasonable notice damages to no more than 24 months, regardless of the length of service of the wrongfully terminated employee, there are instances wherein courts have exceeded the 24-month ceiling in appropriate circumstances, such that no such ceiling can truly be said to exist.
Court Awards 6 Months’ Damages to Employee of 10 Months’ Duration
In this case, the court considered that the employee was at the higher end of the age spectrum in terms of seeking employment, which weighed in favour of a finding of a lengthy reasonable notice period. However, it also noted that the employee’s skills in sales were neither unique nor highly specialized, as a result of which this factor weighed in favour of a shorter reasonable notice period.
The court also noted that, although the employee occupied a position of some significance with the employer as a Vice President of Sales, his position did not include broad executive authority as he oversaw only three employees. On the other hand, the court could not ignore that the employee had given up employment at a company with which he enjoyed significant seniority to accept the position with the employer in this case, only to be terminated less than a year after receiving the role. As such, the short duration of the employee’s tenure with the employer weighed in favour of a longer, rather than a shorter, reasonable notice period. It took the employee nearly one year to secure comparable employment at comparable compensation.
In these circumstances, the court was satisfied that 6 months’ reasonable notice of damages constituted appropriate reasonable notice for the employee’s wrongful termination.
Toronto Employment Lawyer Representing Employees In Wrongful Dismissal Matters
If you believe you have been wrongfully terminated from your employment, whether through constructive or wrongful dismissal, you need experienced and insightful legal guidance to navigate your next steps. At Haynes Law Firm in Toronto, we provide experienced legal assistance to employees and employers across Southwestern Ontario. Contact us online or at (416) 593-2731 to schedule a confidential consultation to discuss your situation and how we can help you find a resolution.