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Posts tagged: reasonable notice

Valuing Employee Pensions in Wrongful Dismissal Cases: A Boring but Important Issue

By , November 6, 2018 10:18 am

A long service, older worker is terminated. Under the terms of the individual’s pension plan, the employer is not permitted to continue his participation in the pension plan. So the question arises: when calculating wrongful dismissal damages, how do you calculate damages for pension benefits?

A recent case considered this question.

The Facts

Imperial Oil Ltd. terminated Donald Dussault’s employment after 39 years of service when he was 63 years old. Imperial Oil immediately discontinued Mr. Dussault’s participation in its pension plan and Mr. Dussault decided to start collecting his pension benefits.

A judge concluded that Mr. Dussault was entitled to compensation in lieu of 26 months’ notice of termination. One component of his compensation was his pension.

Commuted Value of Pension

Imperial Oil called an expert witness who concluded that Mr. Dussault’s pension was worth $189,117 more than if Imperial Oil had kept him in its pension plan for the 26-month period after his termination. Mr. Dussault did not call an expert witness of his own on this issue.

Employee Claim for Damages for the Employer’s Contributions to his Pension During Notice Period is Denied

Since Mr. Dussault would have been enrolled in the pension plan if Imperial Oil had provided him with 26 months’ notice of termination, and since Imperial Oil would have made contributions to his pension during this notice period, Mr. Dussault sought damages equal to these contributions. The court concluded that the value of his pension was higher than if Imperial Oil had continued paying into his pension plan until the end of the 26-month notice period. However, the court refused to order the requested damages because Mr. Dussault could not prove any damages.

Employer Claim to Reduce Employee Damage Award by the Value of the Pension Benefits he Received During the Notice Period is Denied

Mr. Dussault collected pension benefits during the 26-month notice period. Imperial Oil asked the judge to deduct this amount from Mr. Dussault’s wrongful dismissal damages. However, the judge refused to do, concluding that pension benefits are a benefit employees have earned for their years of service and are not meant to be an indemnity for the loss of employment.

Lessons to Be Learned

  1. Every employer should require all employees to sign an employment contract with a legally enforceable termination clause. In this case, Imperial Oil could have reduced a 26-month common law reasonable notice period to as little as 8 weeks’  termination pay and 26 weeks’ severance pay. This is another case where a judge concluded that the common law notice period was more than 24 months.
  2. For long-service employees who are entitled to a lengthy common law reasonable notice period, damages for a reduced or an enhanced pension can be significant. I have represented clients who have not taken pension benefits during the notice period and the value of lost pension value (as opposed to an enhanced pension value in this case) has been significant.
  3. When valuating pension benefits, it is important to retain an expert. A slight change in actuarial assumptions can result in significant differences in a pension’s valuation.

For almost 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416-317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Another Example of a Senior Executive Being Awarded More Damages Than Expected

By , August 21, 2018 10:45 am

A recent case decided by the Ontario Court of Appeal demonstrates yet again that relying on informal understandings with an employee about their rights on termination is a very bad idea.

In this case, a 51-year-old President was terminated after a little more than 11 years of service.

Judge Concludes 51-year-old Employee with 11 Years Service is Entitled to 17 Months Notice of Termination

The employee did not sign an employment contract so he was entitled to reasonable notice of termination. A well drafted termination clause would have limited the employer’s exposure to 8 weeks notice of termination. Without it, the trial judge concluded he was entitled to 17 months common law notice of termination.

Court of Appeal Concludes the Employee was Entitled to a Bonus Despite the Employer’s Past Practice

The employee claimed he was entitled to a bonus during the 17-month notice period. The trial judge disagreed. However, the Court of Appeal overturned the trial judge’s decision on this issue. The Appeal Court concluded that even though the employer’s practice was not to pay a terminated employee a bonus, he was nevertheless entitled to a $166,945 bonus. In this regard, the Court restated the law as follows:

  1. Was the bonus an integral part of his compensation package, triggering a common law entitlement to damages in lieu of bonus?; and
  2. If so, is there any language in the bonus plan that would restrict his common law entitlement to damages in lieu of a bonus over the notice period?

Lessons to be Learned:

  1. All employees, but especially high paid executives, should be required to sign an employment agreement with a termination clause. Reasonable notice periods for older employees seem to be going up and often exceed one month per year of service. 
  2. All variable compensation plans should clearly set out an employee’s rights under the plan when his or her employment is terminated. There are several recent Appeal Court decisions which have strictly read contractual language against the employer. These plans should be reviewed by an employment lawyer regularly.

For over 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416-317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Employment Law Update: Mid-Year Report

By , June 26, 2018 3:34 pm

In this blog, as we enter the dog days of summer, I will review five current trends and developments in Ontario’s employment laws.

1.  A New Sheriff is in Town: The PC party has replaced the Liberal party as Ontario’s governing party

I anticipate this change in government will result in less government regulation of Ontario’s workplaces. During the election campaign, Doug Ford promised not to increase the minimum wage from $ 14.00 to $ 15.00 on January 1, 2019. I will let you know in a future blog whether he keeps this promise.

In the meantime, two laws the Liberal government introduced are scheduled to take effect on July 1, 2018 and January 1, 2019.

One law changes the way public holiday is calculated. Bill 148 changed the way public holiday pay was calculated, however, effective July 1, 2018, public holiday pay will once again be calculated using the formula that applied prior to the coming into force of Bill 148. In other words, the employee’s public holiday pay for a given public holiday will be equal to the total amount of regular wages earned and vacation pay payable to the employee in the four work weeks before the work week in which the public holiday occurred, divided by 20.

The second law will require an employer to provide salary information to job applicants and prohibit employers from asking job applicants about their salary history. In particular, on April 26, 2018 the  Pay Transparency Act was passed. Unless Doug Ford repeals this law, on January 1, 2019 all employers will be prohibited from either directly/ indirectly asking candidates about past compensation, they will be required to post a compensation rate or range for all publicly advertised job postings, and they will be prohibited from reprising against employees who make inquiries about compensation practices.

Last year, the Liberal government announced it was hiring 175 employees to make sure Ontario employers are complying with the Employment Standards Act. Many of these people have now been hired, and trained and are conducting inspections of Ontario’s workplaces. The government has stated it intends to inspect 1 in 10 Ontario workplaces each year.

For more information on how we help employers comply with the Employment Standards Act, click here

2.Cannabis Use Will Be Legal On October 17, 2018

The federal government has announced that cannabis use will be legal on October 17, 2018. In the meantime, the Ontario government must decide how to regulate the sale of cannabis in Ontario. Employers need to decide whether or not to introduce or amend a drug and alcohol use policy. An employee who is impaired at work can be a health and safety problem particularly if the employee is working in a safety sensitive position. Drug testing to address this issue is, however, an extremely controversial and complex legal issue. In fact, a number of drug testing cases have been appealed to the Supreme Court of Canada.

To assist employers with this issue, we can draft a drug use policy for a fixed fee.

3. It Is Increasingly Difficult To Predict Whether The Courts Will Enforce A Termination Clause

I have been writing about this issue for a number of years. Despite numerous Ontario court cases including several Court of Appeal decisions I still cannot predict with any degree of certainty whether a termination clause will be enforced. In 2017, the Court of Appeal in North v. Metaswitch Networks Corp. basically overturned its 2016 decision in Oudin v. Centre Francophone de Toronto on the same issue. In the 2018 decision in Nemeth v Hatch Ltd, the Court of Appeal  found that the following clause was enforceable:The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation. Most employment lawyers including myself were surprised by this decision.

We will review and draft needed changes to your employment contract including the termination clause for a fixed fee. For more information on our employment contract service, click here

4. Notice Period For Older Senior Managers May Be Trending Upwards

Since 1960, Ontario judges have been applying the Bardal factors when determining the appropriate reasonable notice period in wrongful dismissal cases. The age of an employee and the employee’s position are two factors that are taken into account.

A couple of 2018 decisions suggest that Ontario judges may be increasing the notice period for older, senior, relatively short service employees. In Chambers v. Global Traffic Technologies Canada Inc a 57 year old general manager with 2.5 years service was awarded 9 months pay in lieu of reasonable notice. In Hale v. Innova Medical Ophthalmics Inc. a  59 year old President with 6 years and 8 months of service was awarded 18 months termination pay. To reduce the litigation risk associated it is a good idea to require these kinds of employees to sign an employment contract with a termination clause – if you can figure out how to draft an enforceable termination clause!

5. The Cost Of Health & Safety Violations Is Likely Going Up

The Ministry of Labour investigates most “critical injuries” as that term is defined under Ontario’s Occupational Health & Safety Act (“OHSA”) and the Ministry often charges an employer for a violation of OHSA in connection with such an accident. Fines for relatively minor injuries often exceed $ 50 000. On December 17, 2017,  the maximum fine for a breach of OHSA increased from $ 500 000 to $ 1 500 000. The Ontario Court of Appeal has stated that deterrence and the size of an employer are two factors that trial judges should take into account when determining fines under OHSA. In the future, I therefore expect the Ministry of Labour will be looking for larger fines from large profitable employers when negotiating plea bargains.

We help employers comply with OHSA. For more information on our fixed fee service, click here

For 30 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at [email protected]

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Employer Alert: Termination Clause UPHELD by Ontario’s Court of Appeal in Nemeth v. Hatch Ltd

By , January 12, 2018 2:20 pm

On Monday, Ontario’s Court of Appeal concluded in Nemeth v. Hatch Ltd., 2018 ONCA 7 that the following termination clause was legally enforceable and that the terminated employee who had been employed for 19 years was entitled to 19 weeks termination pay:

The Termination Clause

The Company’s policy with respect to termination is that employment may be terminated by either party with notice in writing. The notice period shall amount to one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.

My guess is that most employment lawyers who have read this decision are scratching their collective heads, and asking, “What?”

This decision will result in many plaintiff side lawyers taking pause and re-evaluating their cases.

Until this case was released many trial judges were bending over backwards to find uncertainty and ambiguity in termination clauses and striking them down which benefited employees. For a summary of some of these cases click here

The decision in Nemeth v. Hatch Ltd. is a good case in point. An enforceable termination clause meant the employee was entitled to 19 weeks termination pay. If the clause had been found to be unenforceable however then the employee would have been entitled to closer to 19 months notice.

Lesson To Be Learned

At the moment, it is extremely difficult if not impossible to guess whether or not an Ontario trial judge will enforce a termination clause in an employment contract. The Court of Appeal has found a number of such clauses to be enforceable however for the last few years trial judges have been finding ways to get around these cases or as, lawyers say, have concluded these decisions are distinguishable.

In Nemeth v. Hatch Ltd. the Court of Appeal may have been trying to bring more certainty to the law as it relates to the enforceability of termination clauses. In the short term, however, I predict that this decision will create more uncertainty in this area of the law.

An update on mitigation: What happens when a wrongful dismissal case gets to court while the employee is still unemployed?

By , April 3, 2017 8:42 am

The Basics

A wrongful dismissal occurs when an employer does not provide enough notice of termination. An employee can claim damages equal to the remuneration the employee would have earned during the applicable notice period. During the notice period, an employee is subject to the “duty to mitigate,” which means they must look for alternative employment. Notice periods can be as long as 24 months, and even longer in exceptional circumstances. Increasingly, wrongful dismissal cases are getting to court before the reasonable notice period has expired. In these cases, the employee is still subject to the duty to mitigate for the balance of the notice period. In a recent case, the Superior Court of Justice had to answer the question of how the issue of future mitigation should be recognised in the calculation of damages given the fact that the period of reasonable notice had not yet expired.

Patterson v IBM Canada Ltd, 2017 ONSC 1264

In Patterson v IBM Canada Ltd., the hearing took place in February 2017, just over eight months after the Mr. Patterson’s employment was terminated. The judge found that the reasonable notice period in Mr. Patterson’s case was 18 months.

Mr. Patterson claimed that, given his job search history thus far, his prospects of finding alternative employment were low, and he should therefore receive the full 18 months’ pay. IBM suggested the court should discount any award of damages by 10% to reflect the possibility of future mitigation, i.e. that Mr. Patterson may obtain employment during the remainder of the notice period.

The judge noted that the courts have used several approaches in these cases, the two main ones being the “trust and accounting” approach (where the plaintiff is required to account to the defendant for future income if any is earned during the notice period) and the contingency approach (which is the approach IBM was suggesting).

In this case, the judge preferred the contingency approach, and reduced Mr. Patterson’s damages accordingly. The judge found that if the trust and accounting approach were to be applied, Mr. Patterson would have no incentive to continue in his job search. Furthermore, the contingency approach avoids the possibility of future legal entanglements between the parties.

Lessons to be Learned

There is no consensus on which approach an Ontario judge will follow when a wrongful dismissal case is decided before the end of the reasonable notice period. If you are planning on dismissing a long-term employee, it is important to consult with a lawyer to discuss whether a severance package with a built-in contingency approach can be offered, rather than leaving that decision to a judge after spending significant legal costs. The lawyer can also explain the extent of the employee’s obligation to mitigate (look for work) throughout the litigation process.

“The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.”

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