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Severance Pay for Professionals

Is there a special rule for calculating severance for professionals? Are employees who are professionals such as lawyers, doctors, engineers, accountants etc. entitled to a reasonable notice ‘bump’ on account of their professional status? Yes – an employee’s professional status has been found to be an important factor increasing the reasonable notice period (i.e. severance) owed to an employee.

Reasonable Notice Calculation for Everybody

In Paquette v. TeraGo Networks Inc., 2015 ONSC 4189, (which my college Andrew Monkhouse successfully argued on appeal), Justice Perell described the relevant principles in assessing the length of reasonable notice of termination for every kind of employee as follows.

“The purpose of requiring reasonable notice is to give the dismissed employee an opportunity to find similar other employment. In determining what constitutes reasonable notice of termination, a court must consider:

  • The character of employment;
  • The length of employment;
  • The age of the employee at termination; and
  • The availability of similar employment having regard to the experience, training and qualifications of the employee”

The courts in Ontario have further elaborated that:

  • A longer notice period is justified for older long-term employees;
  • Generally, the longer the duration of employment, the longer the reasonable notice period;
  • A longer notice period is provided for senior management, professionals, highly skilled and specialized employees and a shorter period is provided for lower rank or unspecialized employees;
  • Economic factors such as a downturn in the economy or in a particular industry or sector of the economy may indicate that an employee may have difficulty finding another position and may justify a longer notice period;
  • An employee’s substantial average annual compensation and the possibility of equity participation are relevant in assessing the availability of similar employment opportunities;
  • While the reasonable notice period is a case-specific determination, there a hundred or more variables, and there is no absolute upper limit on what constitutes reasonable notice, generally, only exceptional circumstances will support a notice period in excess of 24 months.

Nevertheless, the determination of what period constitutes reasonable notice of termination is a principled art and not a mathematical science that turns on the particular facts of each case. There is no “right” figure for reasonable notice. Most cases yield a range of reasonable figures.

Reasonable Notice Calculation for Professionals

The courts usually give more reasonable notice to professionals than non-professionals. Although the law is somewhat mixed, traditionally, the courts have given much credence to the character of an employee’s position in calculating reasonable notice. Everyone agrees a chief executive officer of a large corporation likely has fewer opportunities for similar alternative employment than a general labourer. Accordingly, the same analogy applies to professionals who traditionally occupy high status at an organization. For example, a General Counsel at a corporation is essentially a senior manager if not an executive. A lawyer in a law firm, a doctor in a doctors office, a dentist in a dentists office or an accountant at an accounting firm is also at the top of the food chain save for the senior partners running those organizations. In the result, the courts have recognized that professionals should be afforded more reasonable notice than non-professionals generally because their character can be described as higher-tier and thus harder to replace.

I would put forth that professionals are as well afforded more notice than non-professionals generally because of their narrow specialization. The nature of a professional’s position presupposes a limited opportunity for similar employment. In this regard, many cases have held that an employee’s narrow specialization will militate towards a longer notice period since similar work may be harder to come by (see Gillies v. Goldman Sachs Canada Inc., 2001 BCCA 683 (CanLII). Put it this way, let’s say I’m an employment lawyer (I am). I can really only work at an employment law practice. I couldn’t be a family lawyer somewhere, so my options are limited. Likewise, an orthodontist can’t work at a general dentist’s office like a general family dentist freely can. An ophthalmologist may not be able to work for a neurologist. An audit professional may not be able to work at a retail tax preparation firm and so on. In summary, a professional can’t just work at any professional firm because all firms that hire professionals are specialized in some way. Thus, severance for professionals is higher.

Example Professional Severance Case

For an example case where a professional was awarded a proportionately large severance, see Magnusson v. Laing Property Corp., [1991] B.C.J. No. 859, where the plaintiff, a 36-year-old lawyer, was hired in the capacity of lease administrator by the defendant property management company. Through the course of more than 3 years’ employment, the plaintiff took on the duties of an “in-house” barrister and solicitor, in addition to her administrative functions. Later, the lawyer’s employment was terminated. In the result, the court found that, in particular, the plaintiff was 36 years of age, was employed as a professional for 3 years and 3 months, and found it difficult to find alternate employment (by the nature of her narrow professional specialization), and thus an appropriate amount of reasonable notice should be 8 months.

In closing, professionals are generally owed more reasonable notice than non-professionals. In calculating a professional’s severance, the courts will usually take into account the employee’s profession and may award a silent ‘bump’ in terms of the number of months’ severance owed to the professional employee.