The Alberta Court of King's Bench recently released a decision in Lischuk v K‑Jay Electric Ltd, 2025 ABKB 460, that resulted in one of the largest wrongful dismissal awards in recent memory. The Court awarded over $1.52 million to a long-serving employee after finding that he was entitled to an extended notice period and significant bonus payments. The case offers important lessons for employers on reasonable notice, bonus entitlement during the notice period, mitigation obligations, and the limits of shareholder-related claims.
Background
The employee worked for the employer for 34 years, ultimately serving as General Manager. In addition to his employment, he held shares in the company through a holding company. His compensation included salary, benefits, and substantial annual bonuses tied to company performance.
In 2013, the employer terminated the employee's employment without cause and initiated the buy‑back of his shares under a Unanimous Shareholders Agreement (USA). The USA valued the shares as of the termination date, leading to a dispute over whether he was entitled to share value increases during the notice period, as well as ongoing bonus payments.
Reasonable Notice Exceeding the Upper Limit
While Alberta courts often refer to a 24‑month "rough upper limit" for reasonable notice, the Court in Lischuk extended the period to 26 months. This was based on exceptional circumstances:
[20] "Exceptional circumstances" usually arise where an individual begins working for a company as a young adult and is terminated near potential retirement age, after becoming a key or highly specialized employee. The employee, upon termination, is in a situation where their prospects of obtaining similar and comparable employment are significantly limited based on factors specific to their singular employment, such that they have effectively been "forced into retirement".
In this instance, the employee had served the same employer for 34 years and was 58 years old at the time of termination. He held a senior management role with no direct external market equivalent and had limited re-employment opportunities, as his highly specialised skills were developed over decades within the company and not easily transferable to other industries.
Bonus Entitlements During the Notice Period
One of the most significant components of the award was the $948,626 bonus payments throughout the notice period. The Court applied the Supreme Court of Canada's two-part test in Matthews v Ocean Nutrition Canada Ltd., 2020 SCC 26,:
[61] The starting point for a dispute over bonus damages is Matthews v Ocean Nutrition Canada Ltd., 2020 SCC 26. The Supreme Court set out a two part test for determining whether reasonable notice damages include bonus payments: Matthews, at para 55. First, but for the termination, would the employee have been entitled to the bonus during the reasonable notice period? Second, if the answer is in the affirmative, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?
The Court found that the bonus was part of the employee's total compensation, and the employee had a reasonable expectation of receiving the bonus had he remained employed during the notice period. The Court also found that the USA did not deal with bonus payments or profit sharing and did not unambiguously limit or remove the employee's common law rights.
Mitigation of Damages
The employer also argued that damages should be reduced because the employee failed to actively search for alternative work during the notice period. Relying on Red Deer College v Michaels, 1975 CanLII 15 (SCC), the Court rejected this argument, noting that the employer bears the burden of proving that suitable alternative employment was available. The employer failed to prove that;
- the employee failed to take reasonable steps to mitigate; and
- that comparable employment opportunities were available and would have been secured through reasonable effort.
In this case, the employer failed to present evidence of comparable positions, and therefore no reduction in damages was warranted.
Share Value Increase Claim Dismissed
The employee sought compensation for share value growth during the notice period, but the Court rejected this because the shares were owned by a separate corporate entity.
In total, the employee received $1,522,841.33 plus interest for salary, benefits, Christmas bonuses, annual bonus entitlements during the notice period, and unused vacation pay.
Key Takeaways for Employers
- Extended notice is possible: The decision confirms that the 24-month guideline is not a strict limit. Courts may award notice beyond 24 months where the exceptional circumstances warrant it.
- Bonuses are not automatically excluded: This case serves as a strong reminder to employers that if bonuses are meant to be excluded following termination, the language in the contract or bonus plan must be clear, express, and enforceable. Unless an employment contract unambiguously excludes them, bonuses that would have been earned during the notice period are compensable.
- Mitigation burden rests with employers: Without evidence of available comparable positions, employers will have difficulty reducing damages on mitigation grounds.
This decision highlights the substantial financial risks employers may encounter when terminating senior, long-tenured employees without cause. To manage this exposure effectively, it is essential to employ precise contractual language, implement proactive mitigation strategies, and seek timely legal counsel.
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.
