Firm News Alert

January 2023

Compensation expectations for long-term employees terminated

Case Study: Williams v. Air Canada

Howard Borlack
Howard Borlack,

Anita Zamani
Anita Zamani,
Articling Student


by Howard Borlack and Anita Zamani

Employers must be wary of what compensation long-term employees are entitled to in lieu of notice when laid off during times of economic uncertainty. The entitled compensation will likely not be the statutory minimum in applicable provincial and federal employment legislation. In Williams v. Air Canada, 2022 ONSC 6616, the Ontario Superior Court granted summary judgment in favour of an Air Canada employee who was dismissed without cause, awarding $132,772.33 in lieu of a 24-month notice period.

Due to the COVID-19 pandemic, Air Canada laid off thousands of employees in 2020, one of which being the plaintiff, Masayo Williams. Williams was employed  for just under 25 years and was 52 years old when she was laid off. At that time, her title was International Operations Training Manager. Williams was also eligible for group benefits, pension, an annual incentive plan (“AIP”) and a profit-sharing plan (“PSP”), as well as travel privileges. The main issues the court faced were the appropriate notice period and William's entitlement to extra compensation damages, including group benefits, pension, AIP and PSP, and travel privileges.

 To determine the reasonable notice period, the court analyzed the character of the employment, the length of services, the age of the employee, and the availability of similar employment, considering the experience, training, and qualifications of the employee.  Along with her years of service and managerial role, Williams was laid off during a pandemic. The court noted that economic uncertainty is a relevant factor in lengthening the reasonable notice period. Considering all these factors, Williams was entitled to the higher end of the range with a notice period of 24 months.

The court then dealt with Williams' various benefit compensation claims. Williams was awarded compensation of $327.70 for lost benefits during the 24-month notice period.

The court then turned to the issue of whether Williams was entitled to bonus and incentive benefits. The court outlined a two-step approach asking:

  • would the employee be entitled to a bonus or benefit as part of their compensation during the reasonable notice period? And, if so,
  • do the terms of the employment contract clearly remove or limit that common right?

... the term “termination of service” was unclear...

In this case, the contracts for pension, AIP and PSP payments specifically stated that employees were not entitled to a pension upon the termination of service. However, the court found that the term “termination of service” in the employment contract was unclear and could mean the end of the period of working notice. As such, the court found Williams was entitled to damages representing pension contributions during the reasonable notice period of 24 months. The court also found that Williams is entitled to AIP and PSP payments for the 2021 fiscal year, as this would have fallen within the same notice period.

Williams  also argued that she was entitled to be enrolled in Air Canada's travel privileges program and to receive a 25th-anniversary service award. However, the court determined that these benefits were gratuitous in nature as they were not in her employment contract. Therefore, Williams was not entitled to either the flight privileges or the anniversary service award.

It is worth noting if an employment contract has any ambiguous terms regarding compensation post-termination, it should be read in favour of the vulnerable party who did not draft the contract.

In light of Williams, both employers and employees would be wise to consult with a knowledgeable lawyer to determine their respective obligations and rights when there is a termination of employment.

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