Question: Our company is considering terminating a longterm,
senior executive. What is our maximum financial exposure?
Answer: Twenty four months has generally been considered to be
the upper limit for reasonable notice of termination without just
cause. However, in a recent Ontario case the Court awarded a
relatively short-term employee damages in an amount equivalent to
30 months salary and benefits.
The Plaintiff in this case was Mr. Kilpatrick who had previously
been employed as the President at the Moncton Hospital. He had
worked for that organization for about 29 years and was secure in
his position. The Peterborough Civic Hospital actively recruited
Mr. Kilpatrick and eventually persuaded him to relocate and accept
the position as Chief Executive Officer with their
About six years later the Peterborough Civic Hospital terminated
Mr. Kilpatrick's employment and he sued for wrongful dismissal.
While Mr. Kilpatrick's employment of six years was not overly
lengthy, the Court put great emphasis on the fact that Mr.
Kilpatrick was induced away from a long-term secure position with
his former employer. The Court concluded that
during the recruitment process the Peterborough Civic Hospital
led Mr. Kilpatrick to believe that his employment with them would
be long-term. The Court also noted that Mr. Kilpatrick's
chances of obtaining a similar position elsewhere were slim given
the restructuring and downsizing that was taking place in the
Ontario health care sector. As a result of all of these factors the
Court ordered the Hospital to pay Mr. Kilpatrick 30 months salary
and benefits even though he had been employed for only six
There are two important lessons for employers from this case.
Firstly, employers are reminded that improper terminations carry
with them the risk of huge financial losses. As a result, employers
must carefully plan terminations and obtain appropriate advice.
Secondly, an employer's financial exposure from a termination
is much larger where an employer utilized a "headhunting"
approach and convinced an employee to leave their current secure,
The easiest and most practical method by which employers can
manage the financial risk of termination is by utilizing written
employment contracts with their employees. "Reasonable
notice" of termination is generally only required where there
is no employment contract which specifies the amount of notice or
severance pay upon termination. Peterborough Civic Hospital would
have avoided the damage award of 30 months salary and benefits if
it had agreed with Mr. Kilpatrick prior to his employment on the
amount of severance to be paid in the event of termination. It is
always advisable for employers to utilize written employment
contracts especially for senior staff. However, an employment
contract is even more useful in managing risk when employers are
actively trying to convince an individual to leave their current
employment to join them. In these circumstances, if both the
individual and the company agree on the amount of severance which
will be paid in the event of termination then the company will
avoid the types of claims which were advanced by Mr.
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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Unfortunately, reasonable accommodation for employees in the workplace continues to be the source of significant litigation and even today we continue to see outrageous examples of employers behaving badly.
We are now beginning to see reported cases involving charges and subsequent fines laid against employers for failing to provide information, instruction and supervision to protect a worker from workplace violence.
On October 13, 2016, the Supreme Court of Canada denied leave to appeal an Ontario Court of Appeal decision which ordered an employer to pay a former employee 37 months of salary and benefits following termination.
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