In Plotnikoff v Associated Engineering Alberta Ltd., 2024 ABKB 706 (Thompson), the Alberta Court of King’s Bench found that the plaintiff was entitled to common law reasonable notice (severance) despite the termination clause in his employment contract.
This case is important because it considers several lines of authority on: (1) the interpretation of employment agreement termination clauses, and (2) the nature of the duty to mitigate of an employee during a reasonable notice period.
This decision upheld the Alberta Court of Justice decision of Justice D.B. Higa.
Our firm wrote a blog post on the original Plotnikoff decision when it came out.
Facts
The following were some of the pertinent facts summarized by the Alberta Court of King’s Bench:
- The plaintiff Christopher Plotnikoff worked for the defendant Associated Engineering Alberta Ltd. for almost 10 years when his employment was terminated without cause
- Associated Engineering paid him 6 weeks of statutory termination pay, but no common law reasonable notice (severance)
- Plotnikoff sued for wrongful dismissal, seeking severance pay
- Associated Engineering defended, and tried to use the termination clauses in Mr. Plotnikoff’s employment contract to avoid paying severance. The clause read as follows:
Termination without Cause: The Company may terminate employment without cause upon providing the Employee with notice as may be mandated by the Employment Standards legislation or such additional notice as the Company, in its sole discretion, may provide or, at our option, pay in lieu of such notice.
- Plotnikoff was successful in his trial before Justice D.B. Higa in Alberta Court of Justice
- Associated Engineering appealed to the Court of King’s Bench. The decision summarized here is the appeal, heard before Justice C.B. Thompson
Analysis / Conclusion
Associated Engineering relied on a decision called Nutting v Franklin which had held that an employer could oust the common law reasonable notice by expressly or impliedly specifying another period of reasonable notice. Associated Engineering argued that based on this caselaw, the termination clause in Mr. Plotnikoff’s employment agreement prevented a claim for common law reasonable notice.
The Court expressly rejected the reasoning from Nutting when it set out the following test:
[48] In my view, the principle of general application is that, in Canada employment contracts for an indefinite period require the employer, absent express contractual language to the contrary, to give reasonable notice of an intention to terminate the contract if the dismissal is without cause. Thus, the employer’s legal obligation to give reasonable notice of termination can be displaced only by an express contrary agreement.
[49] […] With great respect, the test set out at para 21 of Nutting is not consistent with binding Alberta case law.
[50] As stated in Bryant, the proper approach is to start the interpretation analysis with the presumption that the employee is entitled to common law reasonable notice, and then examine the employment contract to see whether it unambiguously removed or limited the employee’s right. The correct test to determine whether the employment contract unambiguously removed or limited the employee’s right, is that the language in the employment contract must be “clear and unambiguous”, “clear and unequivocal”, or meets a “high level of clarity” to extinguish the common law right to reasonable notice.
The Court found that the clause in Plotnikoff’s employment agreement did not have the high level of clarity required to limit Mr. Plotnikoff’s common law right of reasonable notice, which the Court said is preserved under Section 3 of the Employment Standards Code:
[81] On its face, Clause 4(c) provided that the Company will provide Mr. Plotnikoff with (i) notice as may be mandated by the Employment Standards legislation or (ii) such additional notice as the Company, in its sole discretion, may provide.
[82] I agree with the Trial Judge that the words “mandated by the Employment Standards legislation” in the first part of Clause 4(c) simply establishes Mr. Plotnikoff’s minimum period of notice and compliance with statutory requirements under the Code.
[83] I find that this wording in Clause 4(c) does not reference section 3 of the Code and does not contain any language to limit or extinguish Mr. Plotkinkoff’s common law rights. Therefore, that wording leaves open the ability of Mr. Plotnikoff to pursue his common law entitlements preserved under section 3 of the Code. As set out in Smith, Turner, and Cunningham, minimum notice periods do not in any way affect an employee’s right to have the issue of reasonableness of the notice determined by common-law, and compliance by the employer with the minimum statutory standards does not operate to circumscribe the employee’s common law rights.
The Court then considered severance. The Court upheld the 10 month reasonable notice period that had been found by the ACJ Trial Judge.
The Court then considered whether the plaintiff failed in his duty to mitigate, given the limited activity he had undertaken to find a job after termination of employment.
The trial judge had described the test as being whether the employee would have secured alternative employment if he had made a reasonable effort. The employer was arguing that the correct test on the duty to mitigate was whether the employee could have secured alternative employment if he had made a reasonable effort to do so.
The Court of King’s Bench found that Mr. Plotnikoff had not failed to mitigate his damages, reasoning as follows:
[137] Upon my review of the Trial Transcript with respect to the available evidence on this issue, I find that the Trial Judge’s finding is supported by the record. The Trial Judge found that the evidence that met the first part of the test (that Mr. Plotnikoff failed to take reasonable steps to mitigate his damages) was insufficient to meet the second part of the test (that had Mr. Plotnikoff taken reasonable steps to mitigate he “would likely have found a comparable position within the reasonable notice period”). If translated into the words of Lee J in Robinson, the Trial Judge in this case found that the Plaintiff’s lack of effort, by itself, was insufficient to meet the burden on the Defendant employer.
[138] For the employer to meet the onus on it in respect of the employee’s mitigation of claimed losses, the Court requires evidence, which proves that, had the employee taken reasonable steps the employee would have probably found or secured employment. One example of such evidence is evidence demonstrating a vibrant labour market in comparable positions of employment reasonably adapted to the employee’s abilities. However, the evidence required to satisfy the onus on the employer will vary, depending on the facts and circumstances of each case.
My Take
This case is a fairly major win for employees on the issues of interpretation of termination clauses and the law of the duty of a dismissed employee to mitigate damages in Alberta.
In Alberta, legal counsel for employers have been relying on Nutting v Franklin in argument about termination clauses since it came out years ago. I am not aware of another Alberta Court of King’s Bench decision that has so clearly rejected Nutting v Franklin as this Plotnikoff decision has. Effectively, this decision makes it more difficult for an employer to avoid providing a severance package.
Regarding mitigation of damages, this case preferred the more challenging threshold for an employer to meet. An employer needs to show that an employee would probably have found alternative employment if he made a reasonable effort – which is harder for an employer to show than that an employee “could have” found it.
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Bow River Law is a team of knowledgeable, skilled and experienced employment lawyers handling employment law, human rights (discrimination) and labour law matters. Bow River Law is based in Calgary but we are Alberta’s Workforce Lawyers.
