Late last month, the Ontario Superior Court of Justice released its decision in Milwid v. IBM Canada Ltd. Employers should be sure to take note of this decision not only because it includes commentary from the court on the potential impact of the COVID-19 pandemic on the common law reasonable notice period, but also because it provides an example of a case where the court was willing to exceed the customary 24-month cap on reasonable notice damages in wrongful dismissal matters.
At the time of termination, the plaintiff was employed with IBM Canada as a Band 10 Offering Manager in IBM’s Cloud and Cognitive Software Business Unit. By that time, he had been with IBM for much of his working career, having started with IBM South Africa in early 1982 (service which the defendant, IBM Canada, recognized) before continuing with IBM Canada upon immigrating to Canada in 1998.
In May 2020, the plaintiff was terminated without cause in the midst of the COVID-19 pandemic. Although IBM Canada offered the plaintiff a separation package, it was rejected. On May 21, 2020, IBM Canada gave the plaintiff 11 weeks’ working notice. It subsequently provided him with one additional week of pay in lieu of notice, as well as 26 weeks of severance pay and accrued vacation.
The plaintiff then commenced an action against his former employer for wrongful dismissal, and brought a motion for summary judgment. The plaintiff sought damages during the common law reasonable notice period including salary, incentive compensation, pension, group health and other benefits.
At the time of termination, the plaintiff’s compensation package was comprised of the following:
- Annual base salary of $169,695.00,
- Annual contributions by his employer to his pension based on 6% of his salary, and
- A comprehensive group insurance plan.
The plaintiff had also received, in the years preceding his termination, an average annual discretionary bonus of $1,497.00. Furthermore, in November 2018, the plaintiff was granted IBM equity in the form of Restricted Stock Units (or “RSUs”) under the terms of IBM’s Long Term Performance Plan (or “LTPP”). Under the LTPP, the plaintiff received a total of 888 RSUs, half of which were to vest on November 14, 2020, and the remainder of which were to vest on November 14, 2022.
Notably, by the time of the motion hearing, the plaintiff had not found alternate employment. His evidence was that he had applied to 122 positions in a 14-month period, but had yet to even secure an interview.
Finding the case to be an appropriate one for summary judgment, Justice Ramsay first considered what the appropriate common law reasonable notice period was in the circumstances. The plaintiff submitted that a reasonable notice period was 30 months, particularly in light of what he argued were exceptional circumstances warranting a departure from the so-called cap of 24 months for common law reasonable notice. The plaintiff noted that the unprecedented shutdown of the economy that occurred due to COVID-19 could be considered to be such an exceptional circumstance, or alternatively, a factor in justifying a notice period in excess of 24 months. For its part, IBM Canada submitted that a 20 to 22 month notice period was appropriate in the circumstances, subject to a reduction for unreasonable mitigation efforts and a contingency.
Justice Ramsay was not convinced that the case law referenced by the plaintiff in support of his argument stood for the proposition that the COVID-19 pandemic constitutes an exceptional circumstance. Nevertheless, she did acknowledge that a body of jurisprudence has developed where the court has taken judicial notice of the pandemic in the context of wrongful dismissal matters and that in some cases, the court has accordingly extended the reasonable notice period beyond the “non-pandemic” notice period.
Justice Ramsey highlighted several factors militating in support of a lengthy reasonable notice period, including the plaintiff’s age, his length of service, the fact that he had worked for the same employer for a prolonged period of time, the fact that his job was technical but specialized and geared towards the defendant’s company, as well as the significant responsibilities associated with his position. Ultimately, she agreed with the plaintiff that a reasonable notice period on the upper end of the range – being 24 to 28 months – was appropriate. Although there is no absolute cap on what constitutes reasonable notice, Justice Ramsey noted that exceptional circumstances must exist in order to support a notice period greater than 24 months. In her view, however, there were such circumstances in this case. In her reasons, Justice Ramsey explained:
[…] I find that there are exceptional circumstances in this case which warrants a notice period in excess of 24 months. The plaintiff’s age (62), his length of service with the same employer (38 years), the managerial position he held at the time of termination, his compensation and benefit package (which includes the equity awards) in an uncertain economy, the technical/skilled nature of his skills geared towards the defendant’s business, all support an award of 26 months.
As the purpose of the notice period is to afford a terminated employee an opportunity to mitigate damages, having taken judicial notice of the declaration of the pandemic in March 2020, the emergency measures put in place by the provincial government to manage the spread of the virus, including the shutdown, resulting in restrictions on commerce and gatherings, arguably, this would have impacted the plaintiff’s ability to mitigate his damages. However, absent more from the plaintiff, I would increase the notice period by only an additional month, on account of the pandemic and the timing of his termination, for a total notice of 27 months.
Justice Ramsey found that the plaintiff was also entitled to damages for lost pension benefits during the reasonable notice period, as well as the value of the RSUs vesting during the reasonable notice period. He was not, however, entitled to any discretionary bonuses for 2020 or 2021. Justice Ramsey did not make any reductions to her award in respect of mitigation efforts or apply a contingency.
In Our View
Recently, Ontario courts have recently demonstrated what seems to be a greater willingness to exceed the customary 24-month cap on reasonable notice damages in wrongful dismissal matters. In Currie v. Nylene Canada Inc. (March 14, 2022), for example, the Ontario Court of Appeal upheld a decision to award a 26-month reasonable notice period to an employee also based on exceptional circumstances. What is notable about this particular case, however, is that the circumstances cited by Justice Ramsey as being “exceptional” don’t necessarily appear to be all that exceptional. In fact, many are simply the usual factors that are used to determine the appropriate notice period at common law.
We will continue to monitor wrongful dismissal damages awards to see if this becomes more of a trend. Nevertheless, in light of this decision, employers should review their employment agreements and ensure that any provisions attempting to limit an employee’s entitlements on termination are enforceable as a risk mitigation measure.
For more information, please contact Steven Williams at 613-940-2737.