Friday, April 4, 2014

1-year Employee Entitled to Four Months Pay in Lieu

This week, a decision was released in Wellman v. The Herjavec Group, from the Superior Court of Justice.  Hat-tip to Sean Bawden of Kelly Santini in Ottawa, who successfully argued this case for the plaintiff, and posted about it on his blog, "Labour Pains".

This case was decided by way of summary judgment motion.  This has been increasingly common in wrongful dismissal matters, and in the wake of the SCC's recent Hryniak decision, will become even moreso.

Mr. Wellman was hired as an IT engineer on July 16, 2012.  He was dismissed on a not-for-cause basis on July 8, 2013.  There was a written contract purporting to entitle him to only two weeks pay in lieu of notice, but the defendant conceded that it could not rely on that provision.

He was 40 years old (rightly considered a "neutral" factor), Justice Aitken characterized his employment as "middle to senior management, though not within the high echelons of power or authority", and an unusual amount of evidence was led as to the availability of replacement employment in the area - it took Mr. Wellman five months to find a new job, and even then his new job was at 70% his previous salary.

The plaintiff argued for 5 months pay in lieu of notice (a figure no doubt influenced, but not determined by the length of time he was out of work), while the defendant argued for 2 months.  Justice Aitken determined that the reasonable notice period was 4 months.

Short Service Employees

It's widely believed that notice entitlements are formulaic based entirely on length of service.  There are contracts that work that way, and the statutory minimum entitlements work that way as well; however, at common law, the commonly-believed "rule of thumb" of a month per year of service has been expressly and repeatedly rejected by the Court of Appeal, and it generally does not hold true for employees with very short of very long periods of service.  (For employees in the middle-service range, there's a grain of truth to it, arguably.)

For short-service employees in particular, reasonable notice periods are notoriously difficult to assess.  And difficult to settle.  My view is that, on the case law, Justice Aitken's finding of four months is about right.  Yet, going in, there would have been a fair bit of uncertainty.  (The positions aren't so far apart that it shouldn't have been possible to settle, but dealing with it by way of a summary judgment motion is relatively affordable.)

The Nature of the IT Industry

The employer argued that the IT industry is one with typically short tenures, in the sense that employees don't typically stay in one place for long.  "Companies come and go, the needs of companies change rapidly, and employees have to expect a career with many career moves."

I'm not sure I agree with that generalization.  The IT industry has a lot of different types of workplaces.  For larger IT employers, long-term retention is not uncommon.  Smaller businesses do tend to have higher turnover, as employees look to move on to bigger and better things.  But this is a reality that extends beyond the IT industry.  Gone are the days when most people stayed in one job for 40 years, almost regardless of industry.  It's kind of true in Mr. Wellman's case, with his previous two jobs averaging a little over 3 years each.  On the other hand, I've dealt with IT employees dismissed after decades of service from positions which had long been thought to be 'positions for life'.

Justice Aitken held that the "nature of the IT industry may reduce the length of a reasonable notice period by a certain amount but, in the context of this case, not by much."

Especially given the questionable nature of the generalization in the first place, I would disagree that this is at all relevant to the notice period, in large part because it seems to compound the impact of length of service.  If I regard my position as a 'stepping stone', then yes, that might be relevant to the notice period; however, presumptions regarding the amount of time that the job would otherwise have lasted...seem to be generally unreliable, and could only really be applied to short-service employees in any event.


This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.

The author is a lawyer practicing in Newmarket, primarily in the areas of labour and employment law and civil litigation.  If you need legal assistance, please contact him for information on available services and billing.

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