Canadian HR Strategy

Spring/Summer 2014

Human Resources Issues for Senior Management

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28 Executive Series Digest hrreporter.com ThE EluSivE magic numbEr The recipe for the perfect severance package is difficult to master – and there are also costly damage options on the table By Shana French and Ryan Treleaven As a general principle, an employee ter- minated without cause is entitled to "reason- able notice" — a term used by the courts and intended to be a very rough estimate of how long an employee will take to find compara- ble alternate employment. What constitutes reasonable notice in any given circumstance depends upon a range of relevant factors which have been well established since 1960 by the Bardal v. Globe and Mail Ltd. ruling. ese factors — known as the Bardal factors — include: • type of work and degree of expertise or training • length of service • age of employee • quantum of compensation • availability of alternative employment • custom in the trade or business regarding termination • the circumstances surrounding the hiring of the employee. rough the application of these factors over time, rough general rules emerged, including: • one month notice per year of service • notice periods capped at 24 months • longer notice periods for highly skilled se- nior employees • employees on the cusp of retirement will only be "bridged" to age 65. However, there is a growing sense these general rules may no longer apply. new balance to bardal factors Traditionally, the Bardal factors were the sole elements courts used to determine the length of a reasonable notice period. How- ever, in the late 1990s, in the case of Wallace v. United Grain Growers Ltd., the Supreme Court of Canada endorsed an approach which led to courts extending the reason- able notice period to address "bad faith" on the part of the employer in the course of the dismissal. is bad faith extension, col- loquially known as a "Wallace bump," soon led to increasingly arbitrary extensions to the reasonable notice period. at was un- til 2008, when the Supreme Court Canada's decision in Honda Canada Inc. v. Keays brought an abrupt end to the bump era and returned the focus back to the length of time reasonably expected to find suitable alterna- tive employment. EmploymEnt law E mployers oen struggle when trying to determine an appropriate package to offer an employee terminated without cause. Calculating an employee's entitlements — in the absence of an enforceable employment agreement limiting them on termination — has always been more art than science.

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