In its recent decision in Allstate du Canada c. Daunais, the
Court of Appeal of Québec overturned a judgment of the
Superior Court of Québec and confirmed the exceptional
nature of awarding 24 months' notice of termination and the
obligation of employees to mitigate damages resulting from
termination of employment.
In this case, the employee, who was 52 years old at the time of
termination, had progressed through the company's ranks to
become the director of an insurance agency. In 2012, after 32 years
of service, the employer decided to terminate her employment
PERIOD OF REASONABLE NOTICE
The employer offered to pay the employee the equivalent of 18
months' salary and commissions in lieu of notice and to
maintain most of her employee benefits during such period.
The Superior Court found that a notice period equal to 24 months
was required. Moreover, the lower court awarded the employee moral
damages of C$20,000 for loss of enjoyment of life related to the
manner of termination of her employment, which the court found was
"casual and inconsiderate."
The Court of Appeal found the 24-month notice period granted by
the Superior Court to be excessive and reduced the notice period to
18 months. The Court of Appeal noted that 24 months' notice of
termination should only be awarded in exceptional cases. In this
case, there were no exceptional circumstances justifying such a
long notice period.
The Court of Appeal reiterated the right of employers to
terminate indefinite term employment relationships provided they
abide by the legal and contractual obligations owed to their
employees. In this instance, the Court of Appeal found that 18
months' pay in lieu of notice was reasonable, given the
employee's age and years of service as well as the type of
position she held.
EMPLOYEE'S OBLIGATION TO MITIGATE DAMAGES
The Court of Appeal also found that the trial judge committed an
error of law in awarding the employee six additional months of
notice. The court stated that the purpose of the pay in lieu of
notice is strictly compensatory and is offered by employers to
replace income loss that results from an employee's job loss.
Moreover, employees have an obligation to mitigate the damages
resulting from their loss of employment.
In this case, the Court of Appeal held that the additional
months of notice awarded by the trial judge were essentially months
during which the employee had already begun working for a new
employer. The Court of Appeal was of the opinion that the employer
was not required to compensate the employee for that period since
she did not suffer any damages.
ABSENCE OF REASONS TO JUSTIFY AWARDING MORAL DAMAGES
Lastly, the Court of Appeal stated that there was no evidence
that the employer's manner of termination was such that
awarding moral damages was justified. Accordingly, the court set
aside the trial judge's order requiring the employer to pay the
employee moral damages of C$20,000.
In so doing, the Court of Appeal confirmed that an employer is
entitled to terminate indefinite term employment and that there are
no grounds for awarding moral damages to the employee in the
absence of reprehensible conduct on the part of the employer since
the disadvantages resulting from the loss of employment are already
offset by the notice of termination or the payment in lieu of such
Although the judgment of the Court of Appeal in Allstate du
Canada c. Daunais is rather short, it nevertheless highlights
some well-established principles of law: first, notices of
termination must be reasonable and, second, employees have an
obligation to mitigate their damages in the event of a job
When determining the notice required to terminate employment
without cause, employers must consider the type of position the
employee held, the circumstances in which the employment was
carried on, as well as the employee's age and years of service.
Moreover, in Quebec a 24-month notice period reserved for is
exceptional cases, such as those involving senior executives with
many years of service with their employer.
The obligation to mitigate damages means that an employee must
make diligent efforts to find new employment during the notice
period and must not refuse reasonable offers of employment. It
should be noted that this obligation relates only to efforts that
an employee must expend following his or her termination and does
not create an obligation to successfully secure an offer of
employment during his or her notice period. Nonetheless, an
employer should remain mindful of employees' obligation to
mitigate damages in the event that it faces a dispute with an
employee regarding termination pay.
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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