Northern Exposure

Notice Periods for Older Employees – 69-Year-Old Gets 24 Months

By Dominique Launay

In Quebec, an employer may fire an employee with “reasonable notice” of termination or pay in lieu of notice unless there’s a contract dealing with termination or there’s “just cause” for dismissal (and save for specific statutory regimes). Like the rest of Canada, reasonable notice is determined on a case-by-case basis taking into account factors such as the position, age, and length of service of the employee.

The purpose of a notice period is to compensate an employee while looking for comparable employment. With mandatory retirement not allowed in many provinces, courts are being asked to determine the reasonable notice period for older employees more often. The Superior Court of Quebec recently dealt with this issue in McBrearty v. Cerescorp Company, 2009 QCCS 3134 (CanLII), where a 69-year-old employee was fired after 39 years of service.

Facts
McBrearty was hired by Christos N. Kritikos in 1966 as general manager of Cerescorp, a wholly owned subsidiary of CTI. McBrearty was responsible for the development and management of Cerescorp’s business in Canada. Under his management, the revenues of the company rose from nothing in 1966 to $59 million in 2004. He reported directly to Kritikos and, in 1993, became president of Cerescorp.

In 2002, Kritikos sold CTI. Kritikos remained with CTI in the capacity of CEO until 2003, at which point McBrearty had to report to the new president and CEO of CTI. None of the terms of McBrearty’s employment, including his income, changed under the new owner. One of the terms of his employment was his bonus – $133,900 in 2002 and $220,900 in 2003.

In May 2005, CTI informed McBrearty that his annual bonus for 2004 would be $25,000. In response, McBrearty requested the financial statements of the company. Based on the financials, he claimed that his bonus for 2004 should have been $153,300. After demanding payment of the full bonus, McBrearty agreed to remain employed for a further two months to ensure an orderly transfer of files and information to CTI.

Constructive and wrongful dismissal
At trial, the company argued that the annual bonuses paid to employees were discretionary and could be amended or discontinued by resolution of the board of directors. However, because it couldn’t present any evidence of this having been done in the past, the court concluded that McBrearty had been constructively dismissed:

The Court believes that a reasonable person in the same situation as Mr. McBrearty would have considered that an essential term of his employment was being substantially changed. Mr. McBrearty’s annual employment remuneration was being reduced in a substantial manner unilaterally, retroactively and without valid reason.

The company also argued that it had cause to dismiss McBrearty because he had acted in bad faith and had breached his fiduciary duties and duty of loyalty when he requested, while still employed, certain information from CTI. It claimed that he did so only to prepare his claim against the company. The court determined that because McBrearty had full access to this information, he didn’t abuse his authority by asking an employee to supply it to him. CTI didn’t have cause to dismiss him.

Notice period
As a result, the court had to decide what notice period was appropriate. Despite the fact that McBrearty was four years past traditional retirement age, the court awarded him 24 months:

Attempting to determine the duration of what is a reasonable notice is somewhat of a balancing act. In the present case, the Court has before it, on the one hand, an apparently healthy individual who was approaching his 70th birthday, used to working at all hours of the day all over the world contributing to the success of an employer in a specialized business for almost 40 years. On the other hand, one of the purposes of the notice of termination is (at least in theory) to give the terminated employee sufficient time to find a new employer willing and able to use in a meaningful way such person’s acquired skill, knowledge and experience; it is not intended to be a guarantee of employment for life.

However, the reality of the business world is such that not many employers will hire as full-time employees persons in their seventies accustomed to annual remuneration of over $300,000. With the exception perhaps of a few professions, society considers that persons over 65 years of age are in the twilight of their careers. In the special circumstances of the present case, the Court concludes that a notice period of 24 months commencing July 1, 2005 is reasonable.

The significance
As the court pointed out in this case, the purpose of notice of termination is to give the terminated employee sufficient time to find a new employer. The older the terminated employee, the less likely he or she may be to find comparable employment. And so the risk of courts awarding long notice periods remains high. With the working population tending to work longer, it will be interesting to see what more courts do with notice periods for employees over 65 years old.