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 any maximum common law notice period. 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 were recently addressed by the Ontario Superior Court of Justice in Dussault v. Imperial Oil Limited, 2018 ONSC 1168. The Court determined that there is no upper limit on notice periods. and more than 24 months will be appropriate in exceptional circumstances (e.g. where an employee's service is well in excess of 24 years' including working for the company for most/all of their adult working life, the employee is nearing retirement age, they occupied a significant role within the company, and it would be difficult for the individual to find similar employment). The Court also confirmed that the duty to mitigate does not require an employee to accept employment with a purchaser of the business where the offer would result in significant impacts for the employee going forward.
Mr. Dussault worked for Imperial for over 39 years and was 63 years old at the time his employment was terminated. Ms. Pugliese worked for 36 years and was 57 years old at the time of termination. Both held management positions with significant responsibilities and had generous compensation packages. Neither had worked anywhere else since graduating from college/university.
In 2016, Imperial sold its Ontario retail locations under the Esso brand to Mac's Convenience Stores. Pursuant to this sale, the Plaintiffs were offered employment with Mac's. These offers included the following terms:
- Continuation of the base salary paid by Imperial for a period of 18 months, 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 a period of 18 months. It was also a condition of receiving this payment that the Plaintiffs sign a Release in favour of Imperial.
- Years of service with Imperial would not be recognized for the purpose of their entitlement to reasonable notice or pay in lieu of reasonable notice upon termination.
Both Plaintiffs declined Mac's offers of employment and brought a wrongful dismissal lawsuit against Imperial alleging 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 took the position that the Plaintiffs had failed to meet their duty to mitigate since they rejected the offers of employment from Mac's.
Justice Favreau ruled in favour of the Plaintiffs on both issues. He found that they were entitled to 26 months' notice, and they did not act unreasonably in failing to accept employment from Mac's.
Implication for Employers
It can be expected that there will be more and more cases where employees are found to be entitled to more than 24 months' notice upon 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 upon 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 is also advisable to avoid tying the offer to other significant "gives" on the employee's part.