Howard Levitt: Courts lift cap on severance, creating a looming litigation free-for-all

financialpost.com:

By Howard Levitt and Stephen Gillman

Leading up to the pandemic and continuing to present day, Canadian courts have delivered one blow after another to employers, including the near eradication of an employer’s ability to limit severance liability by way of enforceable contractual terms.

Consistent with this, and much to the dismay of employers, our courts have elected to take it one step further, signalling that the traditional high watermark of 24-months’ severance ought to be treated as a discretionary guideline rather than an ostensible cap on an employer’s liability.

Under the existing framework, the law was simple: a court would assess the ability of the dismissed employee to find another job based upon a number of factors and arrive at a reasonable notice period on that basis. While not a precise exercise, an employer could generally assess their worst-case exposure would not exceed two years, subject to a determination that “exceptional circumstances” must exist to justify any award in excess of that.

For a court to conclude that “exceptional circumstances” were present, and that an employee’s entitlements ought to be assessed outside the status quo framework, something truly exceptional was required. The best example would be an employee who requires additional training, education or designation in order to secure a comparable position in today’s employment market as a result of increased standards since the point at which they were hired for their previous role.

Until recently, the law was somewhat settled by way of the 2019 decision in Dawe vs. The Equitable Life Insurance Company of Canada. In that case, a vice-president who was dismissed on the eve of his eventual retirement after four decades of service