In the Alberta Court of King's Bench decision of Lischuk v K-Jay Electric Ltd., 2025 ABKB 460, the Court found "exceptional circumstances" that warranted going beyond the usual "cap" of 24 months for common law notice periods in Alberta.
The plaintiff employee, Glenn Lischuk was a lifelong employee of the defendant employer, K-Jay Electric ("K-Jay"), starting at the age of 21 as a helper, until his termination at age 58 where he was working in the position of General Manager. He served the company for 37 years and was terminated without cause in 2013.
At the time of the trial in 2025, the plaintiff was not working, and he did not look for other work after his termination in 2013. Despite this, the Court did not find that the plaintiff had failed to mitigate his damages. The Court emphasized an employer's onus of proof in demonstrating a failure to mitigate.
The plaintiff was also a shareholder in K-Jay, through his holding company (the "Holding Company"). Throughout his employment, the plaintiff received payments from K-Jay associated with these shareholdings. Upon the plaintiff's termination, K-Jay triggered a repurchase of these shares.
There was no written employment contract between K-Jay and the plaintiff.
Main Issues
1. Reasonable Notice Period
Historically, or at least since 1983, Alberta courts have described 24 months as being the "rough upper limit" for notice periods.
However, upon a survey of Alberta, British Columbia, and Ontario case law, Justice Angotti concluded that there is no authority that finds 24 months to be a "hard cap on the level of reasonable notice," though courts should exercise caution when considering exceeding this upper limit.
Exceptional Circumstances
Justice Angotti considered Ontario law "requiring exceptional circumstances...to support awarding a reasonable notice period that breaks through the ceiling of 24 months." These exceptional circumstances 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," so that the employee is significantly limited in obtaining similar employment based on factors specific to their singular employment. Within this, the Court likened the plaintiff's termination to a forced retirement.
The Court applied Milwid v IBM Canada Ltd., 2023 ONSC 490 and determined that K-Jay's decision to terminate the plaintiff created difficulties for a long-time, older employee to find comparable employment.
Evidence was put to the Court that the plaintiff was terminated because K-Jay desired to move away from the plaintiff's "very old school mentality." In conjunction with the fact that an "old school mentality" would be a difficult sell to other employers, the Court concluded that the plaintiff's ability to find similar and comparable employment would be significantly limited after working for K-Jay for over three decades. The Court found that while the plaintiff had some transferrable skills within the electrical industry, these skills are not transferrable to other industries at the management or executive level.
Based on these factors, the Court determined that the plaintiff was entitled to a notice period of 26 months.
2. Failure to Mitigate
In wrongful dismissal cases, the plaintiff has a duty to take all reasonable steps to mitigate their losses by seeking comparable sources of income. However, it is the defendant employer's onus to prove that the employee failed to meet his duty to mitigate.
In this case, the plaintiff took no steps to seek comparable income or employment.
However, the Court highlighted that an employer cannot solely rely on the employee making no efforts to mitigate. The defendant employer must still show that suitable jobs were available, and that the plaintiff employee could have found employment, if they had taken steps to pursue such opportunities.
In this case, K-Jay provided no evidence of available comparable work, and an attestation of a busy market at the time of the termination was termed slim evidence, at best.
The Court found that the plaintiff had not failed to mitigate.
3. Entitlements to Profit Sharing Bonuses and to Increased Value of Shares During the Reasonable Notice Period
The plaintiff held 20.1% ownership in K-Jay through the Holding Company until termination when the shares were repurchased. The plaintiff and other employee shareholders were paid annual bonuses calculated in large part on the percentage of shares held by the employee shareholder or their company.
The Court cited the following two-part test from Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26 to determine whether reasonable notice damages include bonus payments:
- But for the termination, would the employee have been entitled to the bonus during the reasonable notice period?
- 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?
On the first prong of the test, the Court found that the bonuses paid based on shareholdings were part of employment compensation and were paid as employment income, evidenced by their inclusion on tax forms. On this basis, the Court determined that the plaintiff was prima facie entitled to receive damages for lost bonus payments.
Regarding the second prong of the test, the unanimous shareholder agreement governing the shareholdings did not discuss bonus payments, profit sharing, or in any way limit the common law right of the plaintiff. Overall, the Court found that the shareholder bonus payments were inextricably linked to the plaintiff's employment (rather than simply being dividends) and that no contract between the parties clearly restricted plaintiff's entitlement.
The Court reiterated that employees have a right, to acquire and to benefit from the shares, subject to any terms or limitations in any contracts, including a unanimous shareholder agreement, and that this right extends throughout the entire notice period.
The plaintiff was found to be entitled to damages for the annual bonus payments that would have been made in the reasonable notice period.
Even though the plaintiff was entitled to the bonus payments, the plaintiff's shares were held by the Holding Company and any dividends because of the share holdings would be payable to the Holding Company, not the plaintiff employee. Accordingly, the Court declined to pierce the corporate veil and dismissed the plaintiff employee's claim for increased share value.
Key Takeaways
1. Extension of 24 Month "Cap" for Termination in Exceptional Circumstances
The door has been opened in Alberta for an employee to claim more than 24 months of reasonable notice in exceptional circumstances.
2. Employer's Burden to Prove Failure to Mitigate
Employers must remember that they are required to provide evidence to demonstrate an employee's failure to mitigate. Even though the employee is the one with the duty to mitigate, the employer is the one who has the onus of proof to show that the employee failed to meet their duty. An employer cannot solely rely on the plaintiff making no efforts to mitigate.
3. Importance of Termination Provisions in Employment Contracts
The importance of employment contracts with clear and unambiguous termination entitlement provisions cannot be overstated. In this case, there was no written employment contract, thereby no contractual limit on the reasonable notice period, nor any contractual provision that dealt with bonuses.
The foregoing provides only an overview and does not constitute legal advice. Readers are cautioned against making any decisions based on this material alone. Rather, specific legal advice should be obtained.
© McMillan LLP 2025
