Anyone involved in the human
resources side of management will be familiar with the concept of
notice periods for terminated employees, and how they are
calculated. In most cases, the primary factor involved in
determining the appropriate length of a reasonable notice period is
the employee's length of service. However, this is not
always the case. In cases dealing with particularly senior
and specialized employees, significant notice periods may be
awarded even for employees with short service. In such cases,
employment contracts with termination clauses can take on even
greater importance for employers attempting to maximize their
flexibility and limit their liability.
In Rodgers v CEVA, the plaintiff had been hired
as the most senior employee in the Canadian division of the
defendant, which handled trucking and logistics. The
plaintiff was responsible for 500 employees and sales in excess of
$140 million annually.
At the time of his hiring, the
plaintiff was also required to make a significant investment in
shares of the defendant's Equity Plan prior to the commencement
The plaintiff's employment was
terminated after slightly less than three years on the job.
At trial, the defendant did not allege cause.
The plaintiff was ultimately
awarded a 14 month notice period.
The Court noted several factors
which it found justified such a significant notice period.
First, it found that the plaintiff's ability to mitigate was
somewhat limited. The plaintiff's experience was limited
to one industry, and although capable and experienced, he had only
a high school education. As a consequence, his job search was
hampered by the reality that there were simply not many companies
carrying on a similar business in Canada.
Although not explicitly stated by
the Court, the plaintiff earned a substantial salary, one which it
appears likely he may only have been able to obtain working in the
single, specialized sector of the economy.
Finally, the Court found that the
requirement that the plaintiff invest substantially into the Equity
Plan prior to beginning employment was intended and did create the
impression that by taking the job the plaintiff would have a higher
degree of job security than might otherwise be anticipated.
What Employers Should Know
Although the plaintiff's
damages were reduced due to his commencement of other employment,
the defendant was still required to pay a significant amount in pay
in lieu of notice.
The high notice period awarded in
this case goes to underscore the importance of implementing
employment contracts that may limit such recovery through
termination clauses. The maxim of "hope for the best,
plan for the worst" is particularly true when entering into an
employment relationship. This is particularly so when dealing
with upper level employees, who are likely to command significant
notice periods regardless of their years of service.
It is important to note that a
termination clause does not necessarily need to limit an
employee's entitlements to the minimum set out in the
Employment Standards Act. Indeed, many senior executives may
be unwilling to agree to such a restrictive term. However, by
including an agreeable notice clause that creates a formula for
determining notice upon dismissal, the parties will have certainty
in their relationship, and can avoid not only the costs associated
with wrongful dismissal litigation, but also the jeopardy posed by
judicial discretion in notice periods.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Labour and employment law had some interesting developments in 2016. What follows are a few highlights from the last year and an introduction to an issue that may attract significant attention in 2017.
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