Uncertainty regarding employer liability for terminations during pandemic continues

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You may recall from my previous articles, the Ontario Court of Appeal (OCA) in Dawe v The Equitable Life Insurance Company of Canada, 2019 ONCA 512 reaffirmed the leading decision on the issue of notice of Lowndes v Summit Ford Sales Ltd. (2006), 206 O.A.C. 55 (Ont. C.A.) that the determination of reasonable notice is case-specific and while there is no upper limit, generally only exceptional circumstances will support a notice period greater than 24 months.  

Interestingly, in the recent pandemic-related wrongful dismissal case of Milwid v. IBM Canada Ltd., 2023 ONSC 490, the Ontario Superior Court awarded the employee, a 62 year old manager with 38 years service (one more year than Dawe, who is the same age; Dawe however held a more senior position as an executive) 27 months of reasonable notice: 26 months on account of reasonable notice and a one month pandemic bump given Milwid was terminated two months into the COVID pandemic. 

Why? In Milwid the Court acknowledged that the cases in Ontario confirm that, absent “special circumstances“, the upper limit set by the Court of Appeal is 24 months of reasonable notice. In this case, the Court found the “special circumstances” that justified an additional three months on top of the upper limit to be:

– the plaintiff’s age (62);

– the plaintiff’s lengthy service exclusively with the defendant (38 years); and

-the character of his employment (managerial) and his compensation and benefit package that included the equity awards; and

– the specialized nature of his work/technical skills in an uncertain economy. Particularly the Court focused on the fact that Milwid’s technical skills were geared towards the defendant’s business.

As you will recall, the four Bardal factors (consistent since 1960) are:

– age (the higher the age, the longer the notice, particularly above 45);

– length of service (the longer the service, the greater the notice);

– character of employment of the position (the more senior, skilled, professional, or specialized the employment and presumably the harder to replace the position and its compensation, the greater the notice); and 

 – the availability of similar employment 

The concern arising from this decision is that no exceptional circumstances exist.  

This decision undermines the direction and certainty provided by the Ontario Court of Appeal decisions in Lowndes and Dawe because the factors that the Court relied on in Milwid are the normal Bardal factors and do fall within any of the required or expected “exceptional circumstances”.

What would constitute an “exceptional circumstance”? 

Certainly not was relied on in Milwid. Previously in Russell v. The Brick Warehouse LP 2021 ONSC 4822 the Court expressly held that Russell ,who was dismissed on July 21, 2020, at the age of 57, after 36 years of service, lifetime service to The Brick, his “limited” high school education, COVID-19, lack of a reference letter and relocation counselling and post termination conduct of The Brick do not constitute extraordinary circumstances justifying a longer notice period as the same factors have already been factored into the notice period already.

An exceptional circumstance could, by way of example, be heavy-handed post-employment employer misconduct that negatively interferes with an employee’s ability to secure and perform a new job.   

This case is also of note but not in relation to any uncertainty. It reinforces the applicability of a COVID bump and the need to define it.  

What is a COVID-bump? A COVID-bump is additional or “bump” up to the reasonable notice awarded based on consideration of the economic downturn and uncertain financial times caused by the pandemic. The same is treated like a stand-alone factor to be added to the considerations (like Wallace Damages used to be) when assessing reasonable notice.

In July 2021 the Court in Kraft v. Firepower Financial Corp., added an apparently arbitrarily determined one month of notice on top of the assessed nine-month “average” of reasonable notice award. In doing so the Court provided this bump based on its assessment of adverse economic conditions. It should be noted that that for many years the Court has already taken into consideration this “adverse impact” under the fourth Bardal factor of “availability of similar employment” when assessing an individual employee’s entitlement to reasonable notice. 

Then in Williams v. Air Canada2022 ONSC 6616, Miller v. Ontario Potato Distribution Inc.2022 ONSC 1490 and Pavlov v. The New Zealand and Australian Lamb Company Limited2021 ONSC 7362, the Court in each of these three cases was unclear of what it was awarding as a COVID bump but apparently did provide one. In Pavlov, based on the legal reasoning, it appears that such an award resulted in the doubling of the assessed maxim awardable reasonable notice period from five months to 10 months but without stating so. In Williams the awarding of a COVID bump resulted in awarding the maximum notice available in the assessed range of entitlement of 22 to 24 months.  

When will a COVID bump be provided? The timing of the employee’s termination from employment and whether the pandemic negatively impacted the employee’s prospects of re-employment (i.e., in the employee’s particular industry and evidence is provided to substantiate the same) will influence whether or not a pandemic bump may be awarded by the Courts in Ontario. Terminations prior to the pandemic have not been awarded a COVID bump – even if the “reasonable notice” period coincides at least in part with the onset and continuation of the pandemic (given that the Court does not apply hindsight and the courts will assess the Bardal factors at the time of termination and not by looking back at the time the award is made). 

Take aways for employers: If you have wrongful dismissal cases before the Courts where the employee is terminated in or permanently laid off as of 2020 after the pandemic commenced, depending on the industry and sector, you may be liable for: (a) a COVID bump, but its duration and how such duration will be calculated is uncertain; and (b) an extended notice period for long-term employees. In my assessment, the courts ought to be only weighing in the negative economic impact of the pandemic once and not twice – which it failed to do in Milwid.      

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