Reasonable notice period capped at 24 months absent special circumstances

July 5, 2022 | Veronica S. C. Rossos, Andrew Hefford

In a recent ruling the Supreme Court of British Columbia has reaffirmed that notice periods for wrongful dismissal in BC are capped at an upper limit of 24 months, absent special circumstances.

In Okano v Cathay Pacific Airway Limited, 2022 BCSC 881 (“Okano”), the plaintiff was 61 years old and had been employed by the defendant on a full-time basis for almost 35 years. At the time of termination the plaintiff’s annual salary was approximately $119,000 plus benefits. She brought this action claiming entitlement to a notice period of 24-26 months.

It will come as welcome news to employers that even long serving, senior employees will be limited to a 24 month notice period absent special circumstances such as bad faith. As common-law notice periods are substantially longer than the minimums stipulated in employment standards legislation, and as there is no definitive method of calculating notice, having some certainty in the absence of a valid employment agreement is certainly a benefit to employers.

The plaintiff began her employment with the defendant as a frontline reservation agent; for the last 25 years leading up to her termination, she held a middle-management position. In her position she was responsible for budgeting and had hiring/firing responsibilities.

The plaintiff received notice in October 2020 that her employment would be terminated in early December, 2020. The termination was due to the downturn in airline travel caused by the COVID-19 pandemic. In total the plaintiff received five months notice or pay in lieu-of.

Justice Weatherill ruled in Okano that absent exception circumstances, the upper-limit for reasonable notice is 24 months:

[45]      Our courts have been clear that, absent exceptional circumstances, the upper limit for reasonable notice is 24 months: Ansari at 42. The mere fact that the plaintiff was a long-term valued management-level employee does not constitute an exceptional circumstance that would lead to an increase in the upper limit of 24 months: Waterman v. IBM Canada Limited2010 BCSC 376 at paras. 20–24, aff’d on other grounds 2011 BCCA 337.

After considering the circumstances the court determined that due to the plaintiff’s age, length of service and management status it was appropriate to award the upper limit of notice – a 24 month notice period. During the notice period the plaintiff was entitled to benefits, which included, inter alia, pension contributions. Deducted from the 24 months awarded were three months for a failure to mitigate. In so finding, the Court reaffirmed that reasonable mitigation requires that terminated employees actively pursue employment in their field of employment and/or industry.

Takeaway

While welcome news, the best way for employers to ensure some level of certainty is to carefully draft, and maintain, valid employment agreements with their employees. If employers wish to limit an employee’s entitlement to severance pay they should have their contracts reviewed regularly by legal counsel to ensure enforceability.

Please reach out to a member of Miller Thomson’s Labour & Employment team if you have any questions.

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