If you fire a senior employee after only a brief period of employment, there is a good chance you will end up having to pay her more severance than you expected – unless of course she is subject to an air-tight termination clause in her contract. Whether, as some have suggested, such employees will always be entitled to 6 months’ pay is an open question.
In his leading text on wrongful dismissal law in Canada, David Harris considers a number of court decisions involving the dismissal of senior level, short term employees and concludes:
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Accordingly, it appears, barring any unusual circumstances, that a notice period of approximately six months would be applicable to senior level employees with only a short period of employment. The all-too-usual factor that tends to lengthen the notice period is inducement of the plaintiff to leave previous secure employment in order to take a position that is foreseeably of short duration, whether because of the volatility of the industry or otherwise.
The claim set out in this passage has been nicknamed the so-called “six month rule” by both litigants and judges alike, and has been explicitly endorsed by at least one BC Supreme Court judge. But are employers really legally obligated to make such significant payouts when discharging senior employees (again, assuming there is no contractual provision governing the issue)?
In a case now more than 20 years old, the BC Court of Appeal expressed “doubt” that any such general rule can be laid down in these cases, and suggested that six months was more likely a maximum notice award (unless the employee had been induced to join the company and leave an existing position). Despite this, a number of British Columbia judges have assessed notice periods of six (or sometimes five) months for senior level employees with terms of employment ranging from four to 15 months. In one recent case, the court avoided direct mention of the six month rule, but still awarded 5 months’ notice to a 7 month senior employee.
Whether we call it a rule or a principle, there does seem to be some legitimacy to the senior, short term employee = (five or) six months’ notice equation. However, experienced employers (and their legal counsel) will keep in mind that, in Canada, calculation of any employee’s reasonable notice period will depend on the employee’s particular circumstances, with reference to the Bardal factors (set out in a 1960 Ontario High Court decision), namely:
- The character of employment
- The length of service
- The age of the employee
- The availability of similar employment, having regard to the employee’s experience, training and qualifications
The lessons for employers? Bulletproof your executive (and other) employment contracts by including a clear, unambiguous severance clause…and beware any claim that there is a hard and fast employment law “rule” that will be strictly followed by Canadian courts.
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