Epiq Systems, Inc.
Employment & Labour

21 years at Company A + 1.7 years at Company B = 10 months’ notice

By Barry B. Fisher

In this case, the Master in Chambers had a situation where an employee of 21 years was recruited by a headhunter to join the defendant. The job requirement was that the person have at least 10 years experience in the field. He was let go by the defendant after only 19 months due to an economic downturn.

This is what the Master had to say about the concept of inducement as it affects the notice period;

[20] The nature of the recruitment, using a recruiter (rather than relying on advertisements in a newspaper, other periodicals, or online), suggests that [the defendant] intended to recruit someone who already had employment. In early 2014, it would have been unlikely, given the minimum 10 years’ experience that it was instructed to seek, that the recruiter would be looking at an employee who did not currently hold a secure position. In fact, when the recruiter identified [the plaintiff], management decided that he was their first choice, and management knew that he had 21 years’ experience.

[21] The concept of “inducement” of an employee to leave secure employment involves a spectrum of facts. At one end is an employee who is already on working notice when he or she is contacted by a recruiter.  That employee would be very motivated to pursue the opportunity, because his or her job is not secure.  At the other end of the spectrum is an employee who is securely employed and not interested in leaving for a new job until the recruiter offers some specific inducement, such as a signing bonus, more valuable benefits, or a better salary.  Most cases are somewhere along the spectrum.

[22] [The plaintiff] was 48 years old when his employment was terminated at [the defendant].  His job title was Senior Development Engineer, and that was a relatively senior position within the company.  He had no reports, but he worked in a relatively niche position in the upstream exploration and development subset of the oil and gas industry.  It was his specialty.  That was what [the defendant] wanted; they also wanted someone with some significant experience in the area.  That is why they hired [the plaintiff].

[23] [The plaintiff] was not being hired to work on project work, which is inherently volatile as projects are completed and new ones are started, or not.  His area of work was more stable in nature – that’s why he remained at [company] for 21 years – and long service at [the defendant] would have been expected by both parties.

[24] One of the Bardal factors is length of service, and it often is the single most important factor in assessing “reasonable notice”.  However, in the circumstances of this case it is only a small factor. When the employer knows that the individual has given up a long-term position – and was recruited for that factor – the actual length of service at the new job becomes only one of several factors to be considered in assessing the reasonable notice period.

[25] In my view, the facts here suggest that [the plaintiffs] secure employment at [company] should be taken into account, but not to the point that he should be treated as an employee with imputed service of 24 years.  Rather, it is a factor that tends to militate in favour of a somewhat elevated notice period.  It related to their mutual understanding – that he was giving up a secure position and was being hired to a secure position, but with no express promises of just how secure it was.

He awarded 10 months notice.

He also commented on some significant bonus issues. The plaintiff was terminated in December. The bonus was payable the following March.

The bonus plan had the following clause:

You will be eligible to receive an annual bonus. The annual bonus pool is determined by the Board of Directors and created by achieving corporate targets. Payment of the 2014 bonuses will be calculated based on achieving corporate targets (50%) and on individual performance (50%). Annual bonuses are paid in March of the following year and you must be a current employee of [the company] to receive your bonus payment.

The employer made the usual argument that as he was not an employee at the time of the payout he was not entitled to a payout.

The Master had this to say about that argument:

In my view this misses the point: the claim is not for the bonus, but for damages for the loss of the opportunity to earn the bonus, just as the claim is not for the salary that he would have earned, or the benefits he would have enjoyed, but rather for damages for them not being provided because the employer breached his contract of employment because it did not give him reasonable notice of termination. The only reason he was not a current employee in March 2017 is because [the defendant] breached the contract by dismissing him without giving him reasonable notice. This is discussed in [this case], at paragraphs 54-56, citing [this case] and [this case] and other cases.

But the plaintiff also claimed a pro-rata share of the next year's bonus to the end of the notice period. This is what the Master said:

[39] In addition to the opportunity to receive a bonus in March 2107, the plaintiff claims a pro-rated bonus for those months of 2017 that he would have worked had he been given reasonable notice.  However, this argument would only have traction if the period of reasonable notice would have extended his deemed notice period past March of 2018, and if it did then it would not be pro-rated.  That would be at least 16 months’ of reasonable notice, and his claim does not extend that far. 

[40] He is not entitled to damages for a lost “2017/payable in 2018” bonus.

Now the kicker. Having found that the plaintiff was entitled to the bonus that he would have earned had he been allowed to work until the March payout, that number would have been ZERO, because the defendant ended up having a terrible year and no bonuses were paid out at all.

The plaintiff said that he should have been paid out the bonus based on prior years performance because his case had crystallized at that point and the actual events following his termination should be ignored.

The Master had no trouble dismissing that argument:

[43] The concept that the amount of the damages are “crystallized” in this sense is not consistent with the assessment of damages in contract and tort claims alike. Courts virtually always look at subsequent events to assess damages. A victim of a personal injury may have a cause of action in negligence immediately following the injury, but the quantum depends on the extent of the injury, the extent of the recovery, the pace of recovery, lost wages, special damages subsequently suffered, and other factors.  A landlord whose tenant leaves before the lease has expired has a claim for breach of contract for lost rent and occupancy costs but that claim is affected by mitigation efforts, costs and success, and the actual occupancy costs claim that becomes payable after the breach.  A claim for breach of confidence by an employer against a former employee is assessed based on the actual damages suffered, not on a speculative and theoretical estimate of what might happen if the release of the employer’s secrets leads to damages.

[44] And in a wrongful dismissal claim, the assessment takes into account mitigation and other post-termination factors. A long-term senior employee who otherwise has a claim for 24 months’ compensation, but who finds a replacement job at comparable compensation only two months later has a claim for two months’ compensation (technically it may be described as a claim for 24 months’ compensation less twenty two-months’ credit for mitigation).

[55] In a wrongful dismissal claim, there are many questions that must be asked to allow a proper assessment of damages. Did he find a job? What is the compensation for it? Did he refuse to try to mitigate his damages by looking for work when it should have been available?  Did he incur costs in his attempts at mitigation?  Was he able to replace his group benefits at no or little cost by being added to his wife’s benefit plan with her employer? Did he need dental work that was no longer covered by a dental plan and exceeded the premiums paid for the benefit? Did he die or become disabled without life or disability insurance during the reasonable notice period, after his entitlement to the group insurance coverage was cancelled?  One can imagine all sorts of post-termination events that inform the assessment of damages.

[56] In my view, his expectation should be given the proper assessment that it deserves, which is that when March came and went, there was no bonus for anyone.  His damages on that point are the loss of the opportunity to be paid his share of that amount, which was zero.

In other words, when looking at a bonus issue the very first question to ask oneself is:

Assuming that the plaintiff had been at work at the payout date what would he have received, or what did his peers get as a bonus?

If the answer is zero or minimal, forget the bonus issue and focus on the notice period.

Read More at Barry Fisher’s Employment Law Blog

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