The Ontario Court of Appeal decisions in IBM Canada Ltd. (2023 ONCA 702) <https://canlii.ca/t/k0qrg> and Avaya Canada Corporation (2023 ONCA 696) <https://canlii.ca/t/k0qrd>provide critical insights into when extended notice periods of over 24 months are warranted in wrongful dismissal cases. This blog post examines both cases, focusing on the unique factors that led to the awarding of extended notice periods.
IBM Canada Ltd. – Background on Case
The Plaintiff’ wrongful dismissal claim against IBM Canada Inc. was a landmark case in the employment law landscape. Justice Audrey P. Ramsay of the Superior Court initially heard the case, with IBM Canada Inc. later appealing the decision.
Key Legal Issues: IBM Canada Inc. challenged the motion judge’s finding of exceptional circumstances that justified a reasonable notice period of more than 24 months. They also disputed the damages awarded for Restricted Stock Units (RSUs) that would have vested within the notice period.
Court’s Decision: The Court of Appeal, after hearing IBM’s submissions, dismissed the appeal, affirming the motion judge’s decision.
Extended Notice Period Justification: The motion judge found that the Plaintiff was entitled to a 26-month notice period, considering his age, long service, exclusivity of employment, character of his employment, and the specialized nature of his work. These were seen as exceptional circumstances, justifying an award over 24 months.
Significant Factors: The court recognized that the Plaintiff’s skills, almost exclusively related to IBM’s products, were not transferrable, making this an exceptional circumstance not covered by the standard Bardal factors. Thus, a notice period exceeding 24 months was deemed reasonable.
Pandemic Considerations: An additional month of notice (totaling 27 months) was awarded to reflect the exceptional circumstances of the COVID-19 pandemic, as the Plaintiff lost his position at the onset of the global economic shutdown.
Equity Awards and Termination: The court also found ambiguity in the termination clause of the Plaintiff’s Equity Award Agreement. This ambiguity led to the conclusion that the Plaintiff’s RSU eligibility extended to the end of the common law notice period.
Avaya Canada Corporation – Background on Case
Background: The Plaintiff’s wrongful dismissal case against Avaya Canada Corporation was heard by Justice Nathalie Champagne of the Superior Court.
Legal Issues and Appeal: Avaya Canada Corporation terminated the Plaintiff, a professional engineer, due to company restructuring. The Plaintiff had worked for Avaya and its predecessor since May 1982. The motion judge granted a 30-month notice period, which Avaya appealed on several grounds, including the excessiveness of the notice period and alleged failure of the Plaintiff to mitigate damages.
Court’s Ruling on Notice Period: The Court of Appeal upheld the motion judge’s decision, rejecting Avaya’s argument that awarding a notice period in excess of the Plaintiff’s claim in the Statement of Claim was erroneous. The court recognized that the circumstances of the Plaintiff’s case justified a notice period in excess of 24 months, considering factors such as his specialized role and long tenure.
Exceptional Circumstances Identification: The court emphasized the need for judges to specifically identify factors demonstrating exceptional circumstances when awarding notice periods over 24 months. In the Plaintiff’s case, these factors included his specialized skills and significant contributions to Avaya over a long career.
Mitigation of Damages: The court also addressed Avaya’s claim regarding the Plaintiff ‘s failure to mitigate damages. It upheld the motion judge’s findings, which accepted the Plaintiff ‘s efforts to find employment and reasons for not expanding his search. The court noted that these factual findings deserve deference and did not find any errors in the motion judge’s treatment of the mitigation issue.
Conclusion: The appeal was dismissed, and the Plaintiff was awarded costs of $20,000
IBM Canada Ltd. (2023 ONCA 702) and Avaya Canada Corporation (2023 ONCA 696) are pivotal cases from the Ontario Court of Appeal that significantly contribute to the understanding of extended notice periods in wrongful dismissal cases. This expanded analysis examines these cases jointly, extracting overarching conclusions and implications for both employers and employees in similar circumstances.
Conclusions from a Joint Reading of IBM Canada Ltd. and Avaya Canada Corporation
(1) Recognition of Exceptional Circumstances: Both cases reinforce that while the 24-month cap on notice periods is a general guideline, courts are willing to consider exceptional circumstances that justify extending this period. Factors like age, length of service, role specialization, and economic conditions play a crucial role in this determination.
(2) Specialized Skills and Market Demand: In both cases, the courts noted the specialized nature of the plaintiffs’ skills and the limited market demand for such skills. This highlights the importance of considering the transferability of an employee’s skills and their relevance to current job markets when determining notice periods.
(3) Impact of Age and Length of Service: The advanced age and lengthy service of the plaintiffs in both cases were significant factors in awarding extended notice periods. This emphasizes the challenges older, long-term employees might face in finding comparable employment after dismissal.
(4) Economic Conditions and External Factors: The impact of external factors like the COVID-19 pandemic was acknowledged in the IBM case, where the global economic shutdown was considered an exceptional circumstance, warranting an additional month of notice. This illustrates the court’s willingness to consider broader economic and societal conditions in their decisions.
(5) Clarity in Employer-Employee Agreements: The IBM case also underscores the need for clarity in employer-employee agreements, particularly regarding termination and benefits. Ambiguities in these agreements are likely to be interpreted in favor of the employee, as seen with the RSUs in the IBM case.
(6) Mitigation of Damages and Employer’s Onus: In the Avaya case, the court upheld the motion judge’s findings on the Plaintiff’s efforts to mitigate damages, emphasizing that the onus is on the employer to prove that an employee did not take reasonable steps to mitigate their losses.
(7) Judicial Discretion and Contextual Analysis: Both cases demonstrate the courts’ discretion and the importance of a contextual analysis when determining reasonable notice periods. Factors leading to a finding of exceptional circumstances must be clearly identified and supported by evidence.
(8) Implications for Future Wrongful Dismissal Cases: These decisions will likely influence future wrongful dismissal cases, particularly for long-term, specialized employees in senior or managerial positions facing termination. Employers should be prepared for the possibility of extended notice periods in such cases.
Conclusion
IBM Canada Ltd. and Avaya Canada Corporation collectively provide critical guidance on the assessment of reasonable notice periods in wrongful dismissal cases. They emphasize the need for a holistic evaluation of each case, considering a multitude of factors that might justify extending notice periods beyond the standard 24 months. These cases serve as a reminder of the evolving nature of employment law and the courts’ commitment to fairness and equity in employment relationships.
Monkhouse Law is an employment law firm located in Toronto focusing on employees’ issues. Please contact us at 416-907-9249 or fill out this quick form for a free 30-minute phone consultation.
