Courts have repeatedly breached 24-month cap on notice periods, specialized skills might be the factor: Rudner

Stuart Rudner, an employment lawyer, mediator and founder of Rudner Law, is seeing a pattern in recent rulings where reasonable notice periods have exceeded 24 months.

In several recent decisions, courts have awarded workers reasonable notice periods that extend beyond 24 months — which has widely been viewed as an unofficial cap on damages, barring extraordinary circumstances.

In Lynch v. Avaya Canada Corporation, the plaintiff — who had been with the company for nearly four decades — was awarded 30 months’ notice. And in Milwid v. IBM Canada Ltd., an award of 27 months’ notice was upheld on appeal for a worker who had been on the job for 38 years.

Stuart Rudner, an employment lawyer, mediator and founder of Rudner Law, is seeing a pattern in the rulings.

“The Ontario Court of Appeal ‘officially’ confirmed that unofficial cap about seven years ago,” he said. “They didn’t say there was an upper limit. In fact, they specifically said there was no upper limit but that, absent exceptional circumstances, nobody should get more than 24 months.”

That led to an obvious question; what are the “exceptional circumstances” in these cases that justified the higher awards? In Lynch and Milwid, both workers were older and had worked for lengthy periods for a single employer, said Rudner, which was notable but not extraordinary.

“That seemed kind of disingenuous, because age and length of service were already factors you were supposed to take into account,” he said. “So that shouldn’t have been deemed exceptional.”

The common characteristic he is seeing in cases that break through the cap is a worker with a highly specialized skill set that is not easily transferable to other employers or industries.

“Although the court didn’t explicitly put it that way, it seems like that’s the key factor,” said Rudner. “That’s what differentiates these cases from other long-term service employees of an older age.”

Having an older, long-tenured employee with specific expertise — who would therefore be more challenged to find employment — is a “logical way to approach this and understand when you can breach the 24-month cap.”

Mitigating the risk

The easiest way for employers to mitigate the risk of a high notice period is to have a contract in place with an enforceable termination clause, said Rudner.

“Then none of these factors become an issue. Although it’s easiest to put a contract in place when an employee is hired, you can always implement a contract for an existing employee if they agree and you provide consideration,” he said.

If a worker won’t agree to a change in the terms of their employment, there are other tactics to consider — such as training the worker and expanding their skillset to make them more marketable, he said.

Helping them find a new job can also significantly lower the exposure for employers.

“Under common law, mitigation is a factor. If they find new work sooner, then it doesn’t matter if they are theoretically entitled to 10, 24 or even 30 months,” said Rudner. “If they find new work after six months at the same compensation, then the obligation ends.”

Providing a positive letter of reference can help the worker find a new position, and Rudner doesn’t see a good reason not to do it.

“A lot of companies won’t do it as a matter of course, which to me doesn’t make a lot of sense,” he said. “Provide a positive letter, provide outplacement counselling, do whatever you have to do to help them find new work. That’s probably the best way to mitigate your damages or exposure.”

He also discourages employers from offering payment in a lump sum when the notice period is lengthy. Going the salary and benefit continuance route and clawing it back once they find a new job, is a better option.

Risk to providing reference letters?

Companies might be loathe to provide a positive reference should the worker not perform well at their new job over concerns the new employer might sue them.

“That was always the fear, and it is largely U.S.-driven fear. But I’m not aware of a single case,” he said. “The golden rule is that you’ve got to be honest and act in good faith when giving a reference, whether it’s positive or negative. As long as you do, the potential liability is really not there.”

More than just base pay

Another thing to bear in mind is that reasonable notice period doesn’t just cover base pay, he said.

“We’ve seen in the last couple of years that courts are more inclined to provide additional or more variable types of compensation like bonuses or incentive plans payments,” said Rudner.

That has even extended in cases where payments are handed out after the worker leaves, and despite language that states something akin to having to be an “active employee” to qualify.

“The default is that at common law you should get all your compensation as if you were still working,” he said.

The final word

Putting on his mediator cap, and thinking through the impact of these recent rulings, Rudner said counsel for employers should stop saying there is a 24-month cap since it has been confirmed there are circumstances where you can go beyond it.

“But at the same time, employee counsel have got to stop asking for 30 months when there are no exceptional circumstances and, in fact, realistically the person is probably entitled to more like 12 months,” he said.

Rudner, who often discusses winning at mediation, encourages counsel to make strategic offers at mediation rather than indefensible ones, which usually encourage a similarly indefensible counter-offer and simply impedes settlement.

What counts as “exceptional” is still being determined, in his books. There is no concrete definition, but the rulings in Lynch and Milwid are something tangible that “we can grab onto,” he said.

“We’re still figuring it out,” he said.

For more information about Rudner Law’s Alternative Dispute Resolution, visit https://www.rudnerlaw.ca/alternative-dispute-resolution/. Stuart Rudner can be reached at 416-864-8500 (phone or text) or [email protected].

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