Dec 13

Reasonable Notice and Bonuses – The Court Chimes in Again

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In Dawe v The Equitable Life Insurance Company of Canada, 2019 ONCA 512, the Ontario Court of Appeal provided clarity on two important issues pertaining to employees and employers alike: reasonable notice periods and bonus entitlements post-termination.

Facts and Trial Outcome

In Dawe v The Equitable Life Insurance Company of Canada, 2019 ONCA 512, the plaintiff, Michael Dawe (“Dawe”), was terminated without cause from The Equitable Life Insurance Company of Canada (“Equitable Life”) after 37 years.  Dawe was 62 years old at the time of termination and was a Senior Vice President.

Dawe sued Equitable Life for wrongful dismissal and both parties moved for partial summary judgment on two issues respecting calculation of damages: the appropriate notice period at common law and Dawe’s entitlement to bonuses during his notice period.

Dawe was successful in the summary judgment motion.  The motion judge held that the appropriate notice period was 30 months and that Dawe was also entitled to receive bonus payments over the notice period.  Equitable Life appealed.

Court of Appeal

The Ontario Court of Appeal allowed Equitable Life’s appeal on the issue of notice.  The Court of Appeal rejected the motion judge’s reasoning that Dawe’s circumstances justified a 30-month notice period, and in light of Dawe’s age, senior-level position, 37-year tenure and the difficulty in finding new employment, found that a 24-month notice period was appropriate.  In doing so, the Court of Appeal confirmed that, absent any exceptional circumstances, 24 months remains an upper limit on an employee’s common law notice entitlements in Ontario.

The Court of Appeal also considered the motion judge’s decision that Dawe was entitled to bonus payments during the reasonable notice period.  Despite finding that the language of the bonus plans went well beyond stipulating “active employment” as a precondition for the bonus entitlement and anticipating the very event that occurred (Dawe’s termination without cause), the Court of Appeal did not overturn the motion judge’s decision that Dawe was entitled to the bonus payments, mainly due to Equitable Life’s failure to make him aware of (and to therefore accept) the unfavourable terms in the relevant bonus plans.

Key Takeaways for Employers

•  Absent exceptional circumstances, a 24-month notice period will be the upper limit on reasonable notice periods for long-terms employees;

•  Employment contracts with enforceable termination provisions may help an employer avoid the uncertainty of a court determining the appropriate notice period at common law for a long-service employee; and

•  Always bring unfavourable terms of bonus plans to an employee’s attention, and record their acknowledgement and understanding of the same.

Key Takeaways for Employees

•  Prior to accepting new employment, always review your employment contract and any relevant policies and procedures.  When unclear about any of the terms, always consult with an employment lawyer.

•  Terminated employees should always consult with an employment lawyer to assess what their entitlements might be on termination before signing any Release documents presented to them by their employer.

If you have questions regarding this blog post or any employment law question, contact Monkhouse Law today to arrange a free, confidential 30-minute phone consultation.

About the Author: Miguel Mangalindan is a Senior Associate Lawyer at Monkhouse Law where he practices Employment, Human Rights and Disability Insurance Law.

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