Widespread confusion on how courts determine the amount of notice of dismissal

As I and others have frequently commented, there is widespread confusion and misunderstanding regarding how our courts determine the amount of notice of dismissal (sometimes referred to as “severance”) an employee is entitled to. The recent decision of the Saskatchewan Court of Queen’s Bench in Coppola v. Capital Pontiac Buick Cadillac GMC Ltd. provides a fairly thorough analysis. The Court began by referring to the “core” factors identified in the seminal case of Bardal v. The Globe & Mail Ltd.:

1. Position/character of employment
2. Length of service
3. Age of employee
4. Availability of similar employment

In recent years, there has been controversy regarding the relevance of the “character of employment”. Historically, there was a view that those with more senior positions were entitled to lengthier notice periods. This was based upon the assumption that there were fewer such jobs available. In Honda Canada Inc. v. Keays, the Supreme Court held that “the particular circumstances of the individual should be the concern of the courts in determining the appropriate period of reasonable notice. Traditional presumptions about the role the managerial level plays in reasonable notice can always be rebutted by evidence.” In other words, while there may be some presumptions regarding the impact of an individual’s position or character of employment, those presumptions can be rebutted by actual evidence regarding the availability of similar employment or other factors relating to the length of time it should take to find a new job.

With respect to length of service, the myth of the “rule of thumb” that employees are entitled to one month of notice for every year of service continues to be pervasive, despite the fact that the courts have explicitly rejected it, and that statistical analysis of judicial awards shows that it is not followed. I often warn our clients that short-term employees tend to receive disproportionately lengthy notice periods. The Court in Coppola referred to this issue, as the employee in that case was one with relatively short service (under two years):

44 In Hall v. Canadian Corporate Management Co., the Ontario Court of Appeal considered an appeal of an award at trial of 12 months notice for a 51-year-old employee who had been enticed by a friend to sell his business in one locale and to join him as vice-president in a new venture in a different city at a substantial salary of $50,000 per year. He was terminated after only 11 months. The trial judge took into account that the employee had expected a fairly lengthy period of employment with the new company and that it took him over a year to find new employment. The Court of Appeal decided that the 12 months notice was too long considering that he had been employed for only 11 months and reduced the notice period to six months.

45 In Issacs v. MHG International Ltd., a 38-year-old employee with a Bachelor of Science degree was hired as a purchasing agent for a company that had been retained to design and build a large petrochemical plant at a salary of $41,000 per year. Less than eight months later, the project was cancelled and the employee’s services were terminated. The trial judge determined that a reasonable notice of termination was nine months, having regard to the nature of the employment and the employee’s age, training and qualifications. The trial judge also considered that the employee had been enticed from a situation of secure employment. The Ontario Court of Appeal upheld the trial judge’s decision to award damages based on nine months notice, but did state that individual members of the court would have been disposed to fix a shorter period of six months.

46 In McNevan v. AmeriCredit Corp, the plaintiff was dismissed without cause from his position as assistant vice-president at one of the defendant’s call centres after 13 months’ service. The trial judge took into account a dearth of similar employment available to the plaintiff in his chosen field. He also found that it would have been reasonable for the plaintiff to assume that his position was secure given the experience that he brought to the position and the success he had achieved during the year he was with the company. The Ontario Court of Appeal found that the trial judge’s award of six months’ notice, while generous, to be within the acceptable range given the difficulties that the plaintiff would encounter finding opportunities to match his skill and experience. The court referred to both Hall and Issacs as examples of cases establishing the range.

47 In Vettraino, this Court had occasion to consider both Hall and Issacs in the context of an action brought by a 56-year-old social worker with extensive experience in mental health counselling and supervision who was dismissed from a $78,000 per year position as Director of Mental Health and Addiction Services for Sun Country Health Region just short of 18 months after assuming the position. He found comparable employment five months after his dismissal. I found that while the plaintiff had not been enticed to leave secure employment, the offer of reimbursement for relocation expenses conditional on two years’ return service at the time of hire created an expectation of secure employment. This Court awarded the plaintiff damages based on five months’ notice.

The Court then set out its analysis of the relevant factors:

48 Having regard to the factors mentioned in Bardal and the other factors referred to in subsequent jurisprudence as noted above, I find Mr. Coppola’s situation to be as follows:

• The character of employment is evidenced in the title which Mr. Coppola was given upon being hired by Capital Pontiac, being Fleet Account Manager. His proficiency in retail sales was recognized in a new remuneration plan. A few months later, Mr. Coppola took charge of the AmeriCredit financing portfolio and as a result of his success he was promoted to the position of Finance Manager in addition to retaining his position as Fleet Account Manager. While it may be the case that Mr. Coppola did not necessarily supervise other employees, he was instrumental in assisting others in closing their deals. When he started with Capital Pontiac in 2000 he earned an average salary of approximately $3,450 per month. At the time of his dismissal in June of 2002, his average salary was almost $12,900 per month. Since much of his salary was based on commissions, there is no question that he was generating significant sales for his employer, Capital Pontiac.
• The length of service in this case was just shy of 23 months. Given the phenomenal success that Mr. Coppola had exhibited in managing the fleet sales, conducting retail sales, his handling of the AmeriCredit portfolio and being promoted to one of the Finance Manager positions, it would appear that Mr. Coppola had every reason to feel secure in his employment at Capital Pontiac. While the employment principles referred to above clearly establish that an employee may be dismissed without cause and without the need for the employer to give any reason, when an employer does proffer a reason, it should be honest and forthright. The reason given by Mr. Axelson to Mr. Coppola, that he was being dismissed because he had decided to reduce the number of Finance Managers from three to two, does not ring true. While it makes no difference given the employers’ right to terminate without cause it would seem in this case that Mr. Coppola’s refusal of a transfer to a different dealership was more likely the reason for his dismissal, though this was not communicated to Mr. Coppola at the time. It may also be the case that Mr. Axelson realized that he had been outwitted in compensation negotiations with Mr. Coppola who was now earning almost four times his initial salary.
• Mr. Coppola was 36 years of age at the time of his hiring. He brought with him nine years of experience in automotive sales and management, and he had had some success as a self-employed businessman. Given his success as a salesman at Capital Pontiac, he could have anticipated remaining with the company for a number of years. He was not close to retirement age. He was young enough to establish a new career away from automotive sales and financing, which is what he eventually did.
• Availability of similar employment was a problem for Mr. Coppola. While he did find employment two months after his dismissal, that job lasted less than a month. Mr. Coppola did not lose that position because of anything he did or did not do. In considering whether “similar employment” was available to Mr. Coppola in the City of Regina or its environs, I also take into account that it was highly improbable that anyone would have hired him at the same salary that he was earning at Capital Pontiac at the time of his dismissal.
• Given Mr. Coppola’s experience and qualifications in automotive sales and financing and his ability to quickly translate his personal attributes into a successful sales career at Capital Pontiac within a short period of time—as evidenced by the substantial salary and commissions he was earning at the time of his dismissal—I am inclined to place Mr. Coppola into the category of a senior or higher-ranking employee deserving of a longer period of notice of dismissal despite his relatively short period of employment at Capital Pontiac.

As a result of the above, the Court held that Mr. Coppola was entitled to six months of notice of dismissal.

This is but one decision regarding notice of dismissal. However, it is a particularly detailed analysis, and provides some insight into how the courts will, either implicitly or explicitly, assess the applicable notice period in a particular case.

Of course, I always advise my clients and audiences that employers can avoid all of the uncertainty surrounding the common law requirement of reasonable notice by using enforceable agreements with clauses that specify the amount of notice that an employee will be entitled to in the event of dismissal without cause.

Stuart Rudner
Miller Thomson LLP