June 26, 2019

In 2015, Michael Dawe’s employment was terminated without cause by his employer, The Equitable Life Insurance Company of Canada.

Mr. Dawe sued his employer for wrongful dismissal, with both he and his employer moving for partial summary judgment on two issues regarding the determination of Mr. Dawe’s damages: (1) the proper notice period; and (2) Mr. Dawe’s entitlement to his bonus.

As a 62-year old Senior Vice-President with 37 years of service, the motion judge held that when there is no comparable employment available, termination without cause “is tantamount to a forced retirement”, with the motion judge believing that Mr. Dawe planned on working until at least age 65.

The motion judge further held that 30 months’ notice was appropriate and that Mr. Dawe was entitled to his bonus over the notice period.  This outcome was significant within the legal landscape, as it surpassed the typical 24-month cap on notice period awards in cases where there are arguably no “exceptional circumstances”.

Somewhat unsurprisingly, in the decision of Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512, Mr. Dawe’s employer appealed the motion judge’s decision.  The employer submitted that the motion judge’s determination of reasonable notice was excessive and that he failed in finding Mr. Dawe was entitled to his bonus, contrary to the employer’s bonus plan termination provision which stated as follows:

Termination without Cause: An Eligible Participant terminated without cause will be entitled to receive only Terminal Awards calculated in sub-paragraph (a)(iv) (below), pro-rated to the last day of active employment, regardless of whether notice of termination is given or not given and regardless of whether the termination is lawful or unlawful, and only if the Eligible Participant provides the Corporation with a Full and Final Release in the manner required in the Eligible Participant’s termination letter.

For greater certainty, term IX.D, titled “Restrictions”, provides:

  1. a)   Awards earned and awards actually paid shall not be considered in determining any entitlement to termination, severance or common law notice or payments in lieu of notice. Upon termination without cause and with or without notice, the Eligible Participant’s only entitlements under this Plan shall be the Terminal Awards set out in section IX C.(a)(iv) (above).

While the Court of Appeal ultimately found the above language to effectively limit Mr. Dawe’s bonus entitlement, it refused to reverse the motion judge’s decision on the basis that the aforementioned clause was never properly communicated to Mr. Dawe.  Essentially, the Court found that there was insufficient proof indicating that Mr. Dawe fully appreciated the impact of the clause on his bonus entitlement.

That said, with regard to the motion judge’s determination on the appropriate notice period, the Court of Appeal reduced the award from 30 months to 24 months, in line with the historical cap on notice period awards absent “exceptional circumstances”.  In coming to its decision, the Court noted that the motion judge relied on “his own perceptions of the “change in society’s attitude regarding retirement”.  The Court further found that it was Mr. Dawe who initiated his departure from his employer, requesting an “exit strategy”.

Whether and to what extent this decision will affect the historical 24-month limit cap on notice period awards remains to be seen.  What is certain, however, is that if an employee stands a chance at being awarded more than this upper limit, their circumstances better be very “exceptional”.