What is Fair?
When presented with a termination package, some of the first questions people ask themselves are “Is this fair?”, “Is this reasonable?” and “Is this all they should have to pay?” The answer to all or one of those questions is most likely “No”.
Termination packages are intended to protect employees while they are looking for a new job. When looking at any termination package, the analysis has to include a number of critical factors, which affect how long it will take to find a new position. What is a reasonable notice period and what elements should be included in a termination package are questions that can make sense only after an individual analysis. One employee’s sweet spot may be another’s Achilles heel. An important factor is the analysis is whether there exists a legally binding employment contract that governs the employment relationship and contains provisions dealing with termination.
While the rule of thumb for reasonable notice is in the range of a month per year of service, in Ontario there was (and some employer counsel will argue there still is) an unofficial ‘cap’ on reasonable notice at a payment equal to 24 months' salary.
Back in 2006 the Ontario Court of Appeal in Lowndes v. Summit Ford Sales Ltd., 2006 CanLII 14 (ON CA) waded in on the 24-month cap idea, stating, “Although it is true that reasonable notice of employment termination must be determined on a case-specific basis and there is no absolute upper limit or ‘cap’ on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months”.
Of course, that fuelled the debate on what constituted “exceptional circumstances”. Not all judges agreed with the idea of a cap being established. In Abrahim et al v. Sliwin et al, 2012 ONSC 6295 (CanLII), Justice Douglas Gray stated, “I fail to see how a cap of 24 months, or indeed any maximum, is appropriate.”
Ten years later, in 2016, the Ontario Court of Appeal affirmed an award of 26 months and set out the circumstances that a Court may consider to be “exceptional” at para 32 of Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 (CanLII).
Lawrence Keenan and Marilyn Keenan worked for Canac for approximately 32 and 25 years respectively. Together, their average length of service was 28.5 years. They were 63 and 61 years of age at the time of termination. They held supervisory, responsible positions in which they oversaw the installation of Canac’s products and met with Canac’s customers as its representatives. For over a generation, they were Canac’s public face to the outside world. Over a period of approximately thirty years – the entirety of their working lives – the Keenans’ income had come from Canac and they relied on that income to support themselves and their family. Even during the approximately two years that they provided some services to Cartier, a “substantial majority” of the Keenans’ work continued to be done for Canac. These circumstances justify an award in excess of 24 months and I see nothing wrong in the trial judge’s finding that 26 months’ notice was reasonable.
To conclude, despite the language around “exceptional circumstances”, there are a growing number of awards in excess of 24 months. In my experience, when the necessary exceptional facts exist and are brought to the employer’s attention, larger severance packages can also be achieved in negotiated settlements. If the stars align, a settlement in the range of 26 months is not nearly as unusual as it was five to ten years ago.
So when you find yourself asking those original three questions the best thing you can do is involve an experienced employment law lawyer.