COVID and the rise of reasonable notice periods

Hawes v Dell Canada, 2021 BCSC 1149

The plaintiff, Mr. Hawes, commenced an action against his former employer, Dell Canada Inc., for wrongful dismissal. Dell terminated Mr. Hawes’ employment as a senior sales representative without cause on March 25, 2020. Mr. Hawes was 64 years old at the time of termination and had worked for Dell and its predecessors for 23 years. The matter was heard by way of summary trial. At the time of the summary trial (14 months after his dismissal), Mr. Hawes had not yet found employment.

Mr. Hawes had worked at Dell as a senior sales representative, selling information technology to governmental and commercial healthcare entities. His income was comprised of a base salary and variable commission. His average income over the seven years prior to his dismissal was $300,000.

Issues

1. What length of reasonable notice is Mr. Hawes entitled to?
2. What amount of damages is Mr. Hawes entitled to?

Legal Test/Analysis

The court said it was relevant that Mr. Hawes’ termination was at the beginning of the pandemic. Although the pandemic does not automatically lead to a longer notice period, there was evidence that there was a significant economic downturn. Furthermore, Mr. Hawes was bound by a non-compete and non-solicitation clause for one year following termination. These factors were held to support a notice period of 22 months.

Dell argued that Mr. Hawes had failed to mitigate his damages. Mr. Hawes had spoken to five industry contacts about employment opportunities. He looked at jobs outside of his industry, but then excluded them because of low pay or lack of qualifications. It was unclear whether he actually applied for these positions. He had one interview for a sales position in the past 14 months. Dell was unable to prove that Mr. Hawes had failed to mitigate his damages. However, his notice period was reduced to 21 months to allow for the contingency that he could find employment within the notice period.

Regarding the amount of damages, both parties agreed that Mr. Hawes would have earned his base salary during the notice period. The remaining portion of his pay, made up of commissions, varied depending on whether he met or exceeded the sales quota that Dell established. The parties disagreement about the calculation of commission focused on Mr. Hawes’ commission earnings for 2018. He had made large sales to a public sector client that year, resulting in significantly increased commission. Mr. Hawes argued that his commissions during the notice period should be based on the average of the past three years. Dell argued that the unusually high commission in 2018 should be excluded as should low earnings in 2016 and the average commissions from the other years from 2013 to 2019 represented the best estimate of what he would have earned during the notice period.

The court said there was no set formula in determining commissions in a situation such as this and the court must award what is fair in the circumstances. The court decided it was not appropriate to take the average of the last three years because 2018 was clearly an outlier. There was evidence to indicate that the downturn due to the pandemic would likely adversely affect sales. It was estimated that his annual commission would be $165,000 based upon typical, and not outlier, past years.

Takeaway

Due to the economic downturn from the pandemic, notice periods may be significantly extended depending on the employee’s industry and availability of similar employment. If the employee’s notice period is not limited to the statutory minimum, their common law reasonable notice period may be longer than it would have otherwise been.

Have questions about common law reasonable notice? Contact Deanna Froese at [email protected] or anyone else from our team listed on the Authors page.