Historically, Alberta courts (like most Canadian courts) have refrained from awarding common law reasonable notice periods in excess of 24 months and allowed the maximum only for "C-suite" executives.
However, in a recent decision, Lischuk v K-Jay Electric Ltd, the Alberta Court of King's Bench set a new precedent, awarding a long-term employee a common law reasonable notice period of 26 months.
Facts
The Plaintiff, Glen Lischuk, began working for the Defendant, K-Jay Electric Ltd., in 1978 as a helper, making his way up through the company until he became the General Manager in 2008. In 2002, Mr. Lischuk became a shareholder through his personal company. Mr. Lischuk's employment was terminated without cause on November 21, 2013, after a company decision to change direction. At the time of his termination, Mr. Lischuk was earning $254,000 in base salary, a Christmas bonus, and $137 per month in benefits. Mr. Lischuk did not have a written employment agreement.
There were several issues to be decided at trial, but the findings related to Mr. Lischuk's common law reasonable notice entitlement were a deviation from existing Alberta case authority.
Common Law Reasonable Notice Period
The determination of an employee's common law reasonable notice period begins with the analysis from Bardal v Globe & Mail Ltd. ("Bardal"), with the four main factors to this case: (a) the character of employment, (b) the employee's length of service, (c) the employee's age, and (d) the availability of comparable employment in the market.
K-Jay acknowledged that Mr. Lischuk was entitled to 24 months common law reasonable notice based on theBardalfactors and argued that it is the maximum limit for reasonable notice any employee may receive in Alberta. The Supreme Court of Canada has confirmed that the assessment of reasonable notice depends on the circumstances of the individual plaintiff and that 24 months is "at the high end of the scale." In Alberta, courts have described 24 months as a "rough upper limit," and the Court in this case was unaware of any Alberta authorities that have awarded a common law reasonable notice period beyond 24 months. Not noted in the decision were either of the decisions of Molloy v EPCOR Utilities Inc ("Molloy") and Novakowski v Canadian Linen & Uniform Service Co, which noted the rough upper limit of 24 months' common law reasonable notice in Alberta and confirmed that this upper limit is typically reserved for senior or management employees with significant responsibilities.
Similarly, in the British Columbia case of Ansari v British Columbia Hydro & Power Authority ("Ansari"), the employee's advanced age combined with significant years of service was important, as prospects for other similar employment could be limited for older employees, such as professionals. The Court set out in Ansari that "subject, therefore, to exceptional cases such as Suttie and Sorel, where the degree of responsibility, age, and years of service were very extensive it seems to me that 18 to 24 months is the rough upper limit..."
In this new Alberta case, the Alberta Court highlighted the importance of considering the Bardal factors as a whole and assessing their impact in combination. In weighing whether a common law reasonable notice period above the "rough upper limit" is appropriate, the Court considered that the purpose of the reasonable notice period is to afford an employee a reasonable period of time to search for and secure similar employment. The Court found that none of the cases before it stated that 24 months was a hard cap. Further, it found that "exceptional circumstances" usually arise where an individual begins to work for a company as a young adult and is terminated near potential retirement age after becoming a key employee. Therefore, upon termination, such employees are in a situation where the prospects of obtaining similar comparable employment are significantly limited and they have effectively been "forced into retirement."
At the time of termination, Mr. Lischuk was 58 years old and had worked for K-Jay for 38 years. His only other employment was as a labourer in his early twenties. Mr. Lischuk took on greater roles and was promoted throughout his time at K-Jay. Mr. Lischuk had a 20% equity interest in K-Jay and a compensation level substantially higher than others in similar management positions within the electrical industry. While his skill set was transferable within the electrical industry, it would not have been in other industries. Despite his transferable skills, there were only two other companies comparable to K-Jay in electrical contracting businesses near him. His ability to find similar and comparable employment would therefore be significantly limited as a result of working solely for K-Jay over three decades. The Court also focused on the fact that K-Jay's evidence was that Mr. Lischuk was being terminated because he held an "old school mentality" which would not be attractive to potential future employers.
The Court thus found that the Bardal factors in Mr. Lischuk's situation gave rise to exceptional circumstances that made it necessary to award a reasonable notice period beyond the rough upper limit of 24 months. The proper common law reasonable notice period was found to be 26 months.
Mitigation of Damages
There was no dispute that Mr. Lischuk did not take any steps to seek comparable employment. While K-Jay asserted that Mr. Lischuk could have found a job relatively easily in the market, it did not present any evidence of available jobs, let alone jobs equivalent to Mr. Lischuk's position with K-Jay. The Court held that the onus is on the defendant to provide enough evidence of a labour market or specific job opportunities that would have sufficient potential to give rise to comparable employment for the plaintiff.
There was no evidence that Mr. Lischuk could find work in other industries outside of electrical contracting. Given his ownership stake, extremely high compensation level, his advanced age, employment within one industry, employment with a single employer who had determined his "old school mentality" resulted in the need for a culture shift, and the limited number of companies equivalent to K-Jay, it was held that it would be highly unlikely that Mr. Lischuk would obtain work in the electrical industry. K-Jay did not meet its onus to establish that Mr. Lischuk failed to mitigate his damages, and thus the claim for lack of mitigation was dismissed.
Conclusion
The Court found that Mr. Lischuk suffered damages for the reasonable notice period of 26 months, totalling $1,522,841.33. There was no reduction in damages for failure to mitigate.
Takeaways
This case is certainly an outlier and the Court's conclusion that there were exceptional circumstances is challenging. For instance, the Court found, without reference to the evidence, that it was exceptional for an individual to begin working for a company as a young adult and be terminated near potential retirement age after becoming a key employee so that the prospects of obtaining similar comparable employment were significantly limited. This finding is hard to reconcile with Molloy and other cases. In addition, it is questionable whether 58 is close to retirement – a reasonable person aged 58 could work another 15 to 20 years (and their experience could be quite marketable). Further, the historic way that the Bardal factors have been applied is not to consider how long the plaintiff is expected to take to find replacement employment, but how long a person possessing the plaintiff's Bardal factors is expected to take. Finally, Mr. Lischuk's possession of an "old school mentality" is not a Bardal factor and arguably should not have entered into the Court's consideration in determining the length of the applicable notice period.
In contrast, the Court's conclusions regarding mitigation can be supported by the case law. However, it is unfortunate for employers that an employee can fail to even try to find new employment for an entire 26 month notice period and that is not enough for a Court to find that the employee failed to mitigate at all.
We question the correctness and applicability of this case. A common law reasonable notice period of 24 months is already extensive. Exceeding that amount tends to turn employers into insurers against unemployment. We will see if the employer in this case files an appeal.
Although this case does show that a common law reasonable notice period in excess of 24 months can be awarded in Alberta, and no doubt we will now see greater damages being claimed by long-service employees, this case should not be taken as an indication that there is a new upper limit for common law notice periods in Alberta. This decision is very much fact specific and, for the reasons stated above, could be argued to have been based on assumptions and considerations that would not be as persuasive if argued again.
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.
