Nine Months Notice for Employee with Less Than Three Years of Service?
The answer is yes according to the Ontario Court of Appeal. In a recent decision, Paul Love v. Acuity Investment Management Inc. and Ian Ihnatowycz the Court of Appeal set aside the trial judge’s finding that an appropriate notice period was five months and substituted a notice period of nine months for a senior executive with less than three years of service.
The decision serves as a useful reminder that there really is no “rule of thumb” based on years of service when it comes to calculating notice periods for senior level employees.
Mr. Love was dismissed without cause on May 3, 2005. At that time, he was 50 years of age and had 2.53 years of service with the defendant. Mr. Love, a Chartered Accountant, was one of two senior vice-presidents in a company of 90 employees, and reported directly to the founder and chief executive officer.
At the time of termination, Mr. Love’s total compensation, including salary, commission, profit distribution and the value of his shares was $633,548.00 on average per year. Mr. Love owned 2% of the company and was one of nine shareholders.
The trial judge concluded that “relatively speaking, Mr. Love is a short service employee”, and found that that Mr. Love held a senior level sales position and did not manage or supervise other people. Accordingly, the trial judge concluded that the reasonable notice period was five months.
The employee appealed, and the Court of Appeal found that the trial judge’s determination of the appropriate period of notice reflected an error in principle in three respects.
First, the trial judge over-emphasized the plaintiff’s short service. The Court of Appeal found that the trial judge was guided by other cases where employees had similar lengths of service, but did not hold similar positions. For example, the employees were not senior executives, or owners of the business, or did not have substantially similar compensation.
The second error was that the trial judge under-emphasized the character of the plaintiff’s employment. The Court of Appeal found that it was relevant that he was one of only two senior vice-presidents and reported directly to the chief executive officer. In addition, they considered that he was responsible for an important part of the employer’s business, received significant average annual compensation and was one of nine owners.
Finally, the Court of Appeal found that the trial judge did not consider the availability of similar employment. The employee’s substantial average annual compensation and the possibility of equity participation in his employer were relevant in assessing similar employment opportunities. The Court of Appeal found that these considerations would suggest that obtaining similar employment would not be easy.
The Court of Appeal concluded that the character of the plaintiff’s employment and the challenge of finding similar employment required a substantially higher period of notice. Accordingly, it set aside the award of the trial judge of five months and substituted a period of nine months.
While not groundbreaking, the decision serves as a useful reminder to be cautious about focussing on an employee’s short period of service when determining a reasonable notice period for employees who occupy senior positions. The character of the employee’s employment must be a factor taken into consideration. The determination of the appropriate notice period is largely fact driven and will depend on the particular facts in each case.
Interestingly, the employer in this case had made a number of offers to settle before trial that exceeded the plaintiff’s recovery at trial and even exceeded the increased notice period awarded by the Court of Appeal. Mr. Love’s claims for damages totalled over $15.5 million, and he recovered just over $500,000 at trial. The trial lasted 19 days and involved allegations of misrepresentation and personal impropriety leveled against the CEO personally. Those claims were not successful. The employee was ordered to pay to the defendants $200,000 for legal fees plus $78,365.66 for taxable disbursements.