Severance on termination

Love v. Acuity Investment Management Inc., 2011 ONCA 130, released today, makes clear that damages for wrongful dismissal are not to be determined merely by considering length of service. The calculation is far more subtle:

[14]         The trial judge then moved immediately to the appellant's length of service, finding that "relatively speaking Mr. Love was a short service employee", and agreeing with the views regarding notice periods for such employees expressed in Iliescu v. Voicegenie Technologies Inc. (2009), 71 C.C.E.L. (3d) 123 (Ont. S.C.). He quoted from para. 57 of that decision where the court held that 4 months' notice was appropriate when the circumstances there were compared to an earlier case, Chen v. Sigpro Wireless Inc., [2004] O.T.C. 466 (S.C.) in which a 45 year old software engineer with two years' service and a salary of $102,000 per year received 5 months' notice. The remainder of the trial judge's analysis of the Bardal factors consisted of the following:

Mr. Love was 50 years of age at the time of termination following 2.53 years of service. He was a chartered accountant and a senior vice president but he held a senior level sales position and did not manage or supervise other people.

[15]         He then noted that this was not a case where the appellant was lured away from his prior employment. Thus this aggravating factor need not be considered. He concluded simply that "in all of the circumstances of this case the reasonable notice period applicable is five months".

[16]         The appellant challenges this assessment and argues that it warrants appellate intervention. I agree.

[17]         The respondent quite correctly points out that because determining the appropriate period of notice requires the weighing and balancing of a variety of relevant factors, the trial judge's conclusion is entitled to deference in this court. However, as was said in Minott v. O'Shanter Development Co. (1999), 42 O.R. (3d) 321 (C.A.), if the trial judge erred in principle, this court may substitute its own figure, although it should do so sparingly if the trial judge's award is in an acceptable range despite the error in principle.

[18]         In my opinion, the trial judge's determination of the appropriate period of reasonable notice reflects error in principle in three respects.

[19]         First, it overemphasizes the appellant's short length of service. While short service is undoubtedly a factor tending to reduce the appropriate length of notice, reference to case law in a search for length of service comparables must be done with great care. The risk is that while lengths of service can readily be compared with mathematical precision that is not so easily done with other relevant factors that go into the determination of notice in each case. Dissimilar cases may be treated as requiring similar notice periods just because the lengths of the service are similar. The risk is that length of service will take on a disproportionate weight.

[20]         In my view, that appears to have happened here. The two cases from which the trial judge drew guidance in awarding 5 months were cases in which the length of service was comparable to the appellant's and the notice period was assessed at 4 and 5 months respectively. However these cases can provide very little guidance if one looks at other important factors. They were not cases involving a senior executive reporting to the chief executive officer. In neither case was the employee an owner of the business. In both cases, the employee's average annual compensation was a small fraction of the appellant's. The fact that these employees were awarded 4 and 5 months' notice is of little help in deciding what was appropriate for the appellant.

[21]         The second error is the under-emphasis on the character of the appellant's employment. To describe it as a senior vice president holding a senior level sales position but not supervising others ignores a number of relevant aspects of the appellant's employment. He was one of only two senior vice presidents. He reported directly to the chief executive officer. He was responsible for an important part of the respondent's operation, namely the investments of its institutional clients. He received significant average annual compensation and was one of nine owners of the company. He was clearly a high level employee, something that this court has said favours a longer notice period: see Cronk v. Canadian General Insurance Co. (1995), 25 O.R. (3d) 505 (C.A.).

[22]         Third, the trial judge gives no consideration at all to one of the Bardal factors, the availability of similar employment. Both his substantial average annual compensation and the possibility of equity participation in his employer were important aspects of the appellant's employment. Both are relevant in assessing similar employment opportunities: see Belzberg v. Pollock (2003), 10 B.C.L.R. (4th) 255 (C.A.) for an example of the relevance of equity ownership in this assessment. Here both considerations suggest that obtaining similar employment would be harder rather than easier. This Bardal factor therefore clearly points to a longer period of reasonable notice.

[23]         Taking these errors together, I conclude that the trial judge's assessment of five months is the product of error in principle. Moreover, the award is sufficiently wanting that this court is warranted in substituting its own figure. Considerably more than tinkering is required to adequately reflect the factors under-emphasized or ignored.

[24]         In my view, the character of the appellant's employment, viewed fully, and the challenge of finding similar employment both require a significantly longer period of notice. Giving appropriate weight to these factors, and keeping in mind the appellant's age and short service I would set aside the 5 months awarded at trial and substitute a period of 9 months.