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Beware of using one month notice per year of service ‘rule of thumb’

One of the questions at the forefront of many employers’ minds when they are considering terminating an employee without cause is how much it is going to cost.  Unless there is a written employment contract with an express termination clause, an employer’s obligation is to provide reasonable notice of termination. Since there is no set formula for determining the appropriate length of the reasonable notice period, employers (or their legal counsel) must estimate what they think the notice period could be, having regard to the employee’s age, length of service, character of employment, the availability of similar employment, and the employee’s skills and training. Often, employers and their legal counsel will use a rough rule of thumb of one month notice per year of service (although the courts have denied that such a rule of thumb exists).

Every so often a case comes along that reminds employers and their legal counsel that while the “one month notice per year of service rule of thumb” may be helpful in some circumstances, it certainly is not applicable in every case. The Ontario Superior Court’s decision in  Dimmer v. MMV Financial Inc., 2012 ONSC 7257 is a good reminder that the determination of an appropriate notice period is very contextual and, depending on the facts of a case, an employee could be awarded significantly more than one month notice per year of service.

Dimmer was the Senior Vice President of a financial services company for four years. He was dismissed without cause when the Company decided to significantly curtail its operations. His former employer agreed that he was entitled to damages for pay in lieu of notice, but the parties disagreed on the length of the appropriate notice period.

The Court found that although Dimmer only had 4 years of service, he was entitled to a 12 month notice period for the following reasons:

  • Dimmer was dismissed in June, 2011 amidst unfavourable market conditions;
  • Dimmer was a senior executive in the company and case law has recognized that senior managers are entitled to a longer notice period due to the nature of their employment;
  • Dimmer was bound by a non-competition agreement in his employment contract which effectively eliminated any opportunity to obtain similar employment for 12 months;
  • While the company did not target Dimmer for hire, it did use a corporate search agency to locate him and it offered him employment knowing that he was working for another company; and
  • Dimmer was 50 years of age at the time of dismissal.

This case serves as a good reminder to employers that the appropriate notice period turns on the facts of each case and that adherence to the “one month per year of service rule of thumb” will not always satisfy their obligations when terminating an employee without cause. Employers would be well advised to seek legal advice on the appropriate notice period because the circumstances (and analogous cases) may indicate that the employee is entitled to significantly more notice period than the employer may have initially thought.

Alison Bird, Lawyer
Cox & Palmer

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Alison J. Bird

Employment Lawyer at Cox & Palmer
Alison Bird is a lawyer practicing in Halifax with the Atlantic regional law firm, Cox & Palmer. Alison is growing her practice in the areas of labour & employment law and litigation. Alison is a frequent presenter on employment law topics and recently presented on the challenges being faced by employers dealing with changing demographics in the workplace. Read more
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2 thoughts on “Beware of using one month notice per year of service ‘rule of thumb’
  • I agree with your thoughts Justin. I would also ask if termination is the best option, would it be possible to offer to keep this person on as a consultant and tap into the knowledge & experience that that is available. Termination without cause often leave employees feeling betrayed and without an explanation for why they are being let go. If it is performance related there are ways to address that and if it is financial then that can be proven.

  • I find the idea of the idea of a non-compete clause impacting the length of a reasonable notice period very interesting. It clearly adversely impacts the potential for the terminated employee to find gainful employment. I wonder, faced with similar facts, if employers should consider offering relief of such clauses as part of a ‘compensation’ in lieu of notice package. From a policy perspective such a consideration would have a positive impact on non-compete clauses as well.