You know that “rule of thumb” of one month notice for each year of employment? The one we use as a rough guideline for getting in the ballpark when determining reasonable notice periods? The Court of Appeal has reminded us that the “rule of thumb” may not even get you near the ballpark when dealing with senior, high salaried employees.
In Love v. Acuity Investment Management Inc.[i], Justice Goudge held that the trial judge made an error in principle and substituted a 9 month notice period for the 5 month notice period awarded by the trial judge to Love, a 2.53 year employee of Acuity. He determined that the trial judge had overemphasized the length of service factor set out in Bardal,[ii] underemphasized the character of Love’s employment, and ignored the availability of similar employment opportunities in coming to the decision to award Love 5 months pay in lieu of notice.
Love is a chartered accountant. After leaving a large accounting firm in 2002, he sought employment in the investment management field specifically so he would have the opportunity to acquire an equity interest in his employer. According to Love, his discussions with Acuity demonstrated to him that the opportunity he aspired to was available. Upon joining Acuity, Love was one of two senior vice-presidents. He reported directly to the CEO. About 2 years into his employment with Acuity, Love became a 2% equity owner, one of 9 shareholders. By the time of his dismissal nine months later, Love had sole responsibility for managing Acuity’s institutional investment clients and the business they brought to the company. The value of his total compensation package and the value of his shares was an average of $633,548 per year.
The trial judge cited the Bardal factors in his reasons; however, in the cases cited to support his determination of the proper notice period, the trial judge allowed the length of Love’s service to take on disproportionate weight. Goudge J.A. commented that the only real similarity between the cases cited and Love’s was the length of service and cautioned against ignoring other important factors.
Justice Goudge criticized the trial judge for mischaracterizing the seniority of Love’s employment. The trial judge, in focussing on the fact that Love did not supervise or manage other workers, failed to place appropriate importance on the facts that Love reported directly to the CEO, was responsible for an important part of Acuity’s business and was one of nine owners of the company. These factors all favoured a longer notice period.
Further, Justice Goudge held that the trial judge gave no consideration at all to one of the Bardal factors, the availability of similar employment. Both Love’s substantial annual compensation and the possibility of equity participation were important aspects of his employment. For Goudge J.A. both considerations suggested that obtaining similar employment would be harder rather than easier and favoured a longer notice period.
Given the trial judge’s errors in principle, the Court of Appeal held that Love required a significantly longer period of notice than he was awarded at trial and increased it to 9 months.
This case serves a useful reminder that “one size fits all” guidelines should be approached with caution, as they place too much emphasis on length of service. Where senior, high compensation employees are involved, we must be mindful of all the Bardal factors and not let one factor take on disproportionate weight.