What happens if a plaintiff in a wrongful dismissal claims fails to make reasonable efforts to find new work?
How do you calculate damages for wrongful dismissal when the Plaintiff has variable compensation as a significant part of his income?
Is the pandemic a factor to be considered when determining the reasonable notice period?
Do non-competition or non-solicitation clauses lead to additional notice?
In the recent case of Hawes v Dell Canada Inc., the Supreme Court of British Columbia addressed all of these issues and more. The decision provides a useful reminder of some basic principles of law to be applied in wrongful dismissal claims, as well as some guidance with respect to a new issue: the impact of a pandemic.
Isn’t “severance” one month per year of service?
As a lawyer, and as a Mediator, I routinely tell people that there is no set formula or easy calculation to determine reasonable notice. I have heard “one week per year”, “one month per year”, and various other theories; however, the data does not bear any of them out and the jurisprudence clearly indicates that many factors are to be taken into account. As a result, a formula based solely on length of service is bound to be inadequate.
That said, at least in British Columbia, there is jurisprudence supporting the notion that “courts may consider one month per year of service as a guide”, as expressed by the Court in Hawes. That is not wrong, so long as anyone applying it recognizes that all of the other factors must be considered and that they can have a dramatic impact on the notice entitlement (often referred to as “severance”). Take, for example, Dalton v Fraser Valley Fire Protection Ltd., where the Provincial Court of British Columbia awarded three months of severance to someone that only worked for three days. Applying the one month per year theory would result in a notice period of 0.0082 months, so clearly there were significant factors beyond length of service in that case.
Does the pandemic extend notice periods?
I have discussed this issue in various contexts, and so far the case law suggests that if an individual was dismissed during the pandemic, it is likely to result in an extension of the notice period, though some courts suggest that there must be some consideration of the actual impact of the pandemic on the individual’s ability to find new work. That is what happened in Dawes, where the Court found that
 The fact that Dell terminated Mr. Hawes’ employment at the outset of the pandemic in March 2020 is also a relevant consideration. While the pandemic does not automatically lead to longer notice periods (Goetz v. Instow Enterprises et al., 2021 BCSC 709, at para. 68), there is no question that it led to a general and significant economic downturn. In his affidavit, Clayton Corea, Dells’ District Sales Manager of Data Centre Technologies and Mr. Hawes’ manager, deposes that many of Mr. Hawes’ former clients have not made significant purchases since April 2020. This suggests that the sales sector in which Mr. Hawes’ was employed has been adversely affected by the economic downturn caused by the pandemic.
Is the existence of non-competition or non-solicitation covenants a factor to be considered?
Employers love to include restrictive covenants in their contracts, even if they may not be enforceable. But they don’t always consider the possibility that adding such covenants could increase their severance costs. In Dawes, the Court held that
 I also take into account that Mr. Hawes was bound by non-compete and non-solicitation clauses for one year following termination of his employment. This would have adversely affected his ability to find work in the area of his expertise during that year.
How do you treat variable compensation during a notice period?
We often discuss “how many months” someone is entitled to, but the other important discussion is how much a month is worth. Particularly for employees that derive a substantial portion of their income through variable compensation like commissions, bonuses or profit-sharing, that can be critical. It is also why “base salary only” packages are misleading and often legally insufficient; for example, if someone earns half of their income through commissions and a severance package indicates that they will receive 12 months of base salary, then the package is really only worth six months.
In Dawes, the Plaintiff received substantial commissions every year. He asked the Court to take an average of his last three years of employment, but the Defendant argued that doing so would artificially inflate his income since he had unusually high commissions in 2018. As the Court said:
 It is clear from the authorities that, where an employee’s earnings are variable, there is no set formula. The court must award what is fair in the circumstances to approximate what the employee would have earned during the notice period. Sometimes courts have used the average of the past five years of commission earnings: Veach v Diversey Inc.,  B.C.J. No. 2420. Where an employee’s commission earnings have been on an increasing or declining trend in the years prior to dismissal, it may be preferable to use only the last year’s earnings: O’Reilly, at para 43. Where the past is not a reliable indicator, the court has made an estimate based on the whole evidentiary record: TCF Ventures at para 43.
 Mr. Hawes’ annual commission earnings were not inclining or declining. The evidence shows that were usually in the range of $162,000 to $167,000. It is not appropriate to take the average of the last three years of commission earnings because 2018 was an outlier and the evidence shows Mr. Hawes was very unlikely to have comparable sales during the notice period. Further, there is some evidence that the pandemic-driven economic downturn was likely to adversely affect sales to Mr. Hawes’ client list and his sales in 2018 would have increased his quota during the notice period. Considering all of the evidence, I find that the best estimate of what his annual commission would have been during the notice period is $165,000.
Failure to mitigate may not result in less severance
As a Mediator, I often have Defendants allege that the Plaintiff did not make reasonable efforts to find new work and that their severance entitlement should be reduced as a result. First, I explain that the “bar” for establishing reasonable mitigation efforts is generally quite low. Second, I explain that even if the Defendant can demonstrate that the Plaintiff failed to make reasonable efforts, that alone will not justify decreased damages; the employer will also have to prove that if the Plaintiff did make reasonable efforts, they would have found new work. As the Court said in Dawes:
 Turning to mitigation, a defendant bears the onus of proving that a dismissed employee has failed to mitigate their losses. The standard is high. A defendant must prove both that the plaintiff has failed to take reasonable steps to reduce their loss and that those reasonable steps would have been successful: McLeod v. Lifelabs BC LP, 2015 BCSC 1857, at para 57.
That is why, as counsel, we advise our Employer clients to actively monitor job opportunities while negotiating or litigating a former employee’s severance entitlement.
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