Introduction

Employees in common law provinces who are offered a job in the sale of business context may not necessarily be required to accept or be subject to a maximum common law notice period. In Dussault v Imperial Oil Limited (2018 ONSC 1168) the Ontario Superior Court of Justice addressed the issues of:

  • whether there is a maximum common law notice period; and
  • when an employee is required to accept a job offer from a purchaser of a business to meet their duty to mitigate.

The court determined that there is no upper limit on notice periods and that more than 24 months will be appropriate in exceptional circumstances, such as where:

  • an employee's service is in excess of 24 years, including working for the company for most or all of their adult working life;
  • the employee is nearing retirement age;
  • the employee occupied a significant role in the company; or
  • it would be difficult for the individual to find similar employment.

The court also confirmed that the duty to mitigate does not require employees to accept employment with a purchaser of the business where the offer would significantly affect them going forward.

Facts

Mr Dussault worked for Imperial for over 39 years and was 63 years old when his employment was terminated. Ms Pugliese worked for Imperial for 36 years and was 57 years old at the time of termination. Both employees held management roles with significant responsibilities and had generous compensation packages; neither had worked anywhere else since graduating from college or university.

In 2016 Imperial sold its Ontario retail locations under the Esso brand to Mac's Convenience Stores. Pursuant to the sale, the plaintiffs were offered employment with Mac's. The offers of employment included the following terms:

  • continuation of the base salary paid by Imperial for an 18-month period, following which it would likely decrease significantly;
  • payment of a lump sum amount representing the difference between the benefit plan offered by Mac's and the benefit plan received at Imperial for an 18-month period – it was also a condition of receiving this payment that the plaintiffs sign a release in favour of Imperial; and
  • years of service with Imperial would not be recognised for the purpose of the employees' entitlement to reasonable notice or pay in lieu of reasonable notice on termination.

Both plaintiffs declined Mac's offers of employment and brought a wrongful dismissal suit against Imperial, claiming that they were entitled to 32 months' notice at common law.

In addition to challenging the plaintiffs' position around notice by arguing that there were no exceptional circumstances warranting a notice period exceeding 24 months, Imperial held that the plaintiffs had failed to meet their duty to mitigate since they rejected the offers of employment from Mac's.

Decision

The court ruled in favour of the plaintiffs on both issues. It found that the employees were entitled to 26 months' notice and that they did not act unreasonably in failing to accept employment from Mac's.

Comment

It is likely that more and more cases will arise in which employees are found to be entitled to more than 24 months' notice on termination. To help protect against this, employers in common law provinces should have a written employment agreement in place that contains a severance provision limiting the amount of notice on termination.

In addition, when it comes to a purchaser offering employment to the seller's employees in an asset sale, the seller should insist as part of the deal that the proposed terms and conditions be substantially similar to those enjoyed previously. It should also avoid tying the offer to other significant conditions on the employee's part.

For further information on this topic please contact Clayton Jones at Fasken by telephone (+1 604 631 3131) or email (cjones@fasken.com). The Fasken website can be accessed at www.fasken.com.

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