2. The Ontario Court of Appeal recently confirmed in
Dawe v The Equitable Life Insurance Company of
Canada (“Dawe”) that notice periods beyond 24
months will be awarded rarely and only if there are
“exceptional circumstances.” A notice period serves
to cushion employees that have been terminated
without cause by providing them with a period to
help find new employment. While the Court of
Appeal’s decision in Dawe entrenches notice periods
of up to 24 months as the norm, it does not prevent
longer notice periods.
3. In addition, the Court of Appeal held that a bonus
plan that removes entitlements to bonus
payments during a notice period will only be
enforced if the employee was previously made
aware of and agreed to the plan.
4. Background
Michael Dawe was employed as a Senior Vice President
with The Equitable Life Insurance Company of Canada
(“Equitable Life”). He sued Equitable Life for wrongful
termination after he was terminated without cause. The
termination arose after the breakdown of extensive “exit
strategy” discussions with Mr. Dawe, where he sought to
leave the company because of alleged harassment. Mr.
Dawe was 62 years of age at the time of termination, had
37 years of service with Equitable Life and its
predecessor, and was enrolled in the Equitable Life bonus
plan. Both parties sought partial summary judgment on
two issues relating to the calculation of damages: 1) the
common law notice period; and 2) entitlements under the
bonus plan.
5. At trial, the judge held that 30 months was an appropriate notice
period and that Mr. Dawe was entitled to bonus payments over this
period. The trial judge noted that Mr. Dawe could have been entitled
to a notice period of 36 months, had he requested it, given his
approaching retirement. Furthermore, the trial judge explained that
despite recent updates to the bonus plan, that restricted bonus
payments throughout notice periods, Mr. Dawe was entitled to bonus
payments because the provision was ambiguous, had not been brought
to Mr. Dawe’s attention, and the requirement that Mr. Dawe sign a
release contravened the Employment Standards Act.
6. CourtofAppeal’s
DecisioninDawe
The Court of Appeal overturned the trial judge’s decision, finding that the
trial judge erred in determining that 30 months was the proper notice
period when it should have been 24 months. In doing so, the Court of
Appeal reiterated that while there is no upper limit to notice periods, only
“exceptional circumstances” will support common law notice periods
exceeding 24 months. The Court of Appeal criticized the trial judge for
relying on “change in society’s attitude regarding retirement”, with the
abolition of mandatory retirement, as the basis for the 30 months’ notice
period, as opposed to the presence of exceptional circumstances. The
Court of Appeal noted that Mr. Dawe’s request for an “exit strategy” from
Equitable Life was a factor to be weighed against this case having
“exceptional circumstances” justifying a notice period beyond 24 months.
7. Decision, contind.
In addition, the Court of Appeal agreed with the trial
judge that Mr. Dawe was entitled to damages for loss
of bonus payments. The Court of Appeal noted that a
two-part test is used to determine if a wrongfully
dismissed employee is entitled to damages for loss of
bonus entitlements: 1) was the bonus an integral part
of the employee’s compensation package; and 2) was
there any language in the bonus plan that would
remove the employee’s right to the bonus plan?
8. The Court of Appeal found that the bonus plan was an
integral part of Mr. Dawe’s compensation package.
However, the Court of Appeal held that while the
language of the bonus plan precisely addressed what
happens to bonus plan participants upon termination
without cause, this language was not communicated to
Mr. Dawe. The Court of Appeal emphasized that merely
providing the bonus plan to Mr. Dawe was inadequate
and that Equitable Life should have brought the specific
unfavourable terms to Mr. Dawe’s attention. Without
knowledge of the terms, the Court of Appeal found that
Mr. Dawe could not have agreed to them. Therefore, the
Court of Appeal held that the terms restricting bonus
payments over the notice period were unenforceable.
Decision,
contind.
