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Rule of thumb

One month per year of service is “rule of thumb”, not rule of law

Cristina Lavecchia, Editor, HRinfodesk, published by First Reference, September 2016

On May 23, HRinfodesk conducted a poll asking readers whether they apply the one month per year of service notice “rule” when terminating an employee. A majority (60 percent) responded “no”. That is a good thing because calculating the notice period is more complicated than that. It is important for employers to remember that, when it comes to an employee who has been terminated, one month per year of service is a considered a “rule of thumb” not a rule of law.

Why is that? In the 2012 matter Dimmer v. MMV Financial Inc., the Ontario Superior Court reminded us that each case requiring consideration of an appropriate reasonable notice period, in relation to a termination of employment without cause, will differ from nearly all others, at least in some significant respects. When it came to addressing the issue of determining a reasonable notice period, the starting point for consideration in the case was the approach outlined in the 1960 matter Bardal v Globe and Mail Ltd., which stated:

"There can be no catalog laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.” (i.e. Bardal factors) (emphasis added)

The Saskatchewan Court of Appeal, in the 2013 matter Capital Pontiac Buick Cadillac GMC Ltd v Coppola, went as far as to strongly warn employers of the risk associated with applying the “rule of thumb”, by stating the following:

[22] Of course, when used as a starting-point, the rule of thumb approach has the attractiveness of lending some measure of predictability and certainty to the calculation of reasonable notice while, at the same time, affording a similar measure of flexibility to adjust for other Bardal factors. Nevertheless, although the rule of thumb seems intuitively practical it is not, apparently, terribly reflective of the actual quanta of awards of pay in lieu of notice in wrongful dismissal cases.[2] Practically-speaking then, while employers may wish to use the “one month's notice per year of service” rule of thumb as a guideline in their day-to-day decision-making given its apparent facility, they do so at their own peril because the rule is not supported by the jurisprudence and is inconsistent with Bardal.

[23] As such, I conclude that the rule of thumb approach is neither doctrinally sound nor supported by the majority of cases…(emphasis added)

The Ontario Court of Appeal, in the matter of Minott v. O'Shanter Development Company Ltd., dating backing to 1999, too had reservations about relying on the “rule of thumb”: The Court of Appeal stated the following:

"The rule of thumb approach suffers from two deficiencies: it risks overemphasizing one of the Bardal factors, "length of service", at the expense of the others; and it risks undermining the flexibility that is the virtue of the Bardal test. The rule of thumb approach seeks to achieve this flexibility by using the other factors to increase or decrease the period of reasonable notice from the starting point measured by length of service. But to be meaningful at all, this approach must still give unnecessary prominence to length of service. Thus, in my opinion, the rule of thumb approach is not warranted in principle, nor is it supported by authority…”

When considering the statements made by the courts in the above noted cases, it is important for employers to keep in mind that there is no set formula when it comes to establishing what reasonable notice will be for all employees. All matters are different, and therefore they should be considered individually. This includes considering all factors, not only "length of service".

Nevertheless, if you are having trouble deciphering or determining the reasonable notice period for a terminated employee, you should seek the assistance of an experienced employment lawyer.