Canada: Ontario, Canada: Absent Exceptional Circumstances, 24 Months Is "High End" Of Reasonable Notice Award For Certain Managers & Adverse Unilateral Changes To Bonus Plans Must Be Communicated

Last Updated: July 9 2019
Article by Rhonda B. Levy and George J.A. Vassos

Early this year, we wrote about Dawe v. Equitable Life Insurance Company, 2018 ONSC 3130, a case in which the Ontario Superior Court of Justice substantially extended the traditional 24 month upper limit on the reasonable notice period for an older, long-term, senior manager who was unable to secure comparable employment. The motion judge awarded 30 months' notice and stated that, if asked, he would have awarded 36 months.

The award and ancillary comments set off alarm bells for employers that worried they had lost a vital negotiation tool: the 24 month "cap" on notice periods, which, absent exceptional circumstances, was generally not exceeded in wrongful dismissal judgments.  The motion judge's decision left open the question of whether 30 months - or even 36 months – was now the new "high end" of the appropriate range of reasonable notice for older, long-term, senior managers. 

Given the unexpected nature of the motion judge's decision, it is no surprise that it was appealed.  In this analysis, we explain why the Court of Appeal decision, Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512, released this month, held that the motion judge's approach to reasonable notice was incorrect. 

We also review the implications of the Court's finding that the employee was entitled upon termination to damages for the loss of his bonus payments under a Long term Incentive Plan (LTIP) and Short Term Incentive Plan (STIP), despite the introduction of a termination provision in the plans intended to restrict this entitlement.

Decision of the Court of Appeal for Ontario

The Appropriate Notice Period

The Court of Appeal relied on its own jurisprudence to reduce the notice period from 30 to 24 months. Specifically, the Court referred to the motion judge's failure to adopt "the Lowndes approach," set forth in the leading case on determining proper notice periods, Lowndes v. Summit Ford Sales Ltd. (2006), 2006 CanLii 14 (ONCA), and endorsed ten years later in Keenan v. Canac Kitchens Ltd., 2016 ONCA 79 (CanLII).

The guiding principles of the Lowndes approach are: 

  • Determination of the notice period is case specific;
  • There is no absolute upper limit or "cap;" and
  • Generally only exceptional circumstances will support a base notice period in excess of 24 months.

The Court observed that the motion judge did not conclude that a 30 month notice period was appropriate based on exceptional circumstances.  Instead, his decision rested on "his perception of broader societal factors," such as changes in society's attitude toward retirement, and the abolishment of mandatory retirement in Ontario.

The Court concluded that the motion judge should have applied the Lowndes line of authority and his own perceptions of societal factors should not have influenced his decision.  Furthermore, the Court noted that although the motion judge concluded appropriately that the employee was entitled to a substantial notice period based on his senior position, years of service, age, and difficulty in finding new employment, these factors are "recognized" and "rewarded" by 24 months' notice, which is at the high end of the appropriate range of reasonable notice for long-term employees.  

Entitlement to Damages for Bonus Payments  

The Court of Appeal also considered whether the employee was entitled to damages for the loss of bonus under the LTIP and STIP during the notice period following termination without cause.  In analyzing this issue, the Court endorsed the two-part test in Paquette v. TeraGO Networks Inc., 2016 ONCA 618 for determining whether a wrongfully dismissed employee is entitled to damages for the loss of bonus:  

  1. Was the bonus an integral part of the employee's compensation package, triggering a common law entitlement to damages in lieu of bonus?; and
  1. If so, is there any language in the bonus plan that would specifically remove the employee's common law entitlement? 

The termination provision provided: 

Termination without Cause:  An Eligible Participant terminated without cause will be entitled to receive only Terminal Awards calculated in sub-paragraph (a)(iv) (below), pro-rated to the last day of active employment, regardless of whether notice of termination is given or not given and regardless of whether termination is lawful or unlawful, and only if the Eligible Participant provides the Corporation with a Full and Final Release in the manner required by the Eligible Participant's termination letter. 

An "Eligible Participant" was defined as someone "employed by the Corporation on the date an award is paid in order to receive an award."  "Terminal Awards" in circumstances of retirement, death, and termination for cause, were pro-rated awards, determined by a complicated calculation.

The motion judge found that the employee was entitled to the bonus payments because:

(a) They were an integral component of his compensation; and

(b) His right to bonus payments during the notice period was not displaced by the termination provisions:

(i) They were ambiguous;

(ii) They were not brought to the employee's attention and the employer did not meet its obligation to communicate them; and

(iii) The employer's requirement that the employee sign a release contravened the Employment Standards Act, 2000 (ESA).   

The Court of Appeal agreed that the company's bonus plans were an integral part of the employee's compensation, giving rise to a common law entitlement to damages in lieu of bonus. It did not agree, however, that the termination provision was ambiguous and found instead that the LTIP and STIP unequivocally restricted the employee's common law rights upon termination.  Nonetheless, the Court concluded that the termination provision could not be enforced because the employer could not prove that the employee accepted it.  Nothing in the record provided direct evidence that the employee knew he would be forfeiting large bonus payments even if his employment was terminated without cause, or that this was effectively communicated to him by the employer.  The Court thus denied the employer's appeal of the finding that the termination provision was unenforceable, and did not have to decide the ESA issue.   

Bottom Line for Employers

The decision of the Ontario Court of Appeal in Dawe sends an unequivocal message that to determine what constitutes reasonable notice on termination for older, long-term, senior managers, employers should follow "the Lowndes approach," which provides that absent exceptional circumstances, 24 months is the "high end" of reasonable notice.  Notably, the Court emphasized that factors such as an employee's senior position, long years of service, and advanced age are not exceptional circumstances supporting a notice period in excess of 24 months, and that these factors are already "recognized" and "rewarded" by 24 months' notice. 

In addition, the Dawe decision clarifies that if unfavourable changes to the terms of an employee's entitlement to a bonus upon termination without cause are to be enforceable, the employer must prove that the employee accepted the changes by introducing evidence that the employee knew about the changes, or that the employer effectively communicated them to the employee.  Employers should take specific steps to satisfy their duty to inform beyond merely posting a bonus plan on a company Intranet or delivering a hard copy, such as bringing new limiting conditions to the attention of affected employees, orally or preferably in writing.  Employers that cannot demonstrate sufficient notice may be unable to rely on an adverse change to defeat an employee's bonus claim. 

This article was originally published by The Lawyer's Daily (, part of LexisNexis Canada Inc.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions