Termination Timing Proves Critical in COVID Climate

By Daniel Standing LL.B., Editor, First Reference Inc.

The Ontario Superior Court of Justice’s decision in Yee v Hudson’s Bay Company, 2021 ONSC 387 is welcome news for anyone wondering about COVID-19’s effect on a reasonable notice period. For all of the upheaval that the pandemic has caused, it proved to be of little consequence to the notice owed to a dismissed company executive in this case.

Background

Melvin Yee worked for Hudson’s Bay Company for almost 12 years until he was dismissed in August 2019. At that time, he was 61 years old and held the position of Director, Product Design and Development. His role included supervisory duties, and he oversaw a handful of people. Earning a base salary of more than $162,000, Mr. Yee’s income was also comprised of an annual bonus (which, in 2019, was potentially $28,411.78), as well as disability and life insurance, pension plan contributions and discounted pricing on purchases of HBC products.

Mr. Yee’s progression through the company ranks was documented by letters or contracts. His second-most-recent position was awarded in 2015, and the contract provided for specified payments in the case of termination. His last position with the company-the one he held at termination-was formalized by an April 2018 document which included a “Transfer Offer Letter” which confirmed that it contained his current terms and conditions of employment. However, it had no provisions for specified payments in the event he was dismissed.

The April 2018 document caused a wrinkle at trial, since it was not disclosed until very late in the litigation process, even though it contained a notation indicating that a copy of it was found in Mr. Yee’s human resources file. Inexplicably, it had not been produced in a timely way. Mr. Yee would eventually argue that the company’s late disclosure of the letter showed bad faith conduct which should result in an award of punitive damages against it.

When Mr. Yee was terminated in 2019, the letter he was given made reference to the 2015 contract and attempted to comply with the specified payments contained in it. This resulted in a payment of 11 months of salary and benefits and continued discounts on company products. Mr. Yee also received compensation for relocation counselling expenses and a bonus for 2019. These items had a cumulative value of $159,907.49. Mr. Yee sought notice of 18 months.

The court’s decision

The seven-month differential between the parties’ estimations of a reasonable notice period was significant. The court’s analysis focused on the four factors identified in Bardal v. Globe and Mail, namely: the employee’s age, his years of service, the character of his employment and the availability of similar employment. Mr. Yee’s age, while not “old,” was considered to be “within the latter stages of the usual working life career for most persons,” which favoured a longer notice period. His years of service also favoured a longer notice period, although only slightly. The court noted that Mr. Yee was an executive with managerial duties and a high income level. Therefore, it assessed this factor as favouring a longer period of reasonable notice.

Of the four time-honoured factors, the availability of similar employment having regard to Mr. Yee’s experience, training and qualifications occupied most of the court’s attention. Mr. Yee argued that the ongoing global pandemic made the task of finding alternate employment markedly more difficult, as evidenced by his almost 90 unsuccessful employment applications. Counsel for the company argued that this evidence could be used to reach a different conclusion, namely that there were many positions available in the post-COVID economy.

To resolve this argument, the court followed the Ontario Court of Appeal’s 2015 ruling in Holland v. Hostopia.com Inc. The Court of Appeal held that

“Notice is to be determined by the circumstances existing at the time of termination and not by the amount of time it takes the employee to find employment.”

On that basis, the court concluded that

“[i]t seems clear terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect on finding comparable employment.”

After weighing through the authorities each side presented in support of their submissions on reasonable notice, the court fixed the period at 16 months.

Included within that 16-month period was the plaintiff’s base salary of $162,353 per year, as well as the $6,635.02 performance bonus he would have earned in the notice period. Additional amounts were granted representing the value of Mr. Yee’s benefits and pension plan contributions during that timeframe.

Lastly, the court dealt with Mr. Yee’s claim of bad faith in connection with the late disclosure of the April 2, 2018, Transfer Offer Letter, which he claimed should entitle him to punitive damages. The court found that it was clear that HBC either initially overlooked it or failed to appreciate its impact, however it was not prepared to go so far as to find that HBC had acted in a way that would attract an award of bad faith, moral and/or punitive damages.

Takeaways for employers

Employers who dismiss employees during the COVID pandemic may be on the hook for longer notice periods by virtue of the timing of the dismissal. To the extent that this decision will serve as a precedent in other jurisdictions, it is the timing of the termination itself which is critical, regardless of whether the individual is still dealing with the aftermath of the termination during the pandemic.