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Only in "Exceptional Circumstances"

2 minute read

Recently the Superior Court of Justice confirmed that there is no “cap” on reasonable notice damages in the termination of a long-term employee. In Milwid v. IBM the Court recognized that “exceptional circumstances” existed to extend what some believed to be a 24-month cap on damages. The employee had been employed by IBM for 38 years in a senior management position. In addition to his base salary, he enjoyed additional collateral benefits, including restricted stock units, a discretionary bonus, and an employer contribution to the company pension plan. In its decision, the Court reviewed all of the Bardhol factors plus the fact the employee was terminated shortly after the declaration of the Covid-19 pandemic.

Importantly, the Judge recognized the 24-month cap as reasonable in most circumstances but noted there are “exceptional circumstances” that support the Court extending the notice period before even considering the impact of Covid-19 and the consequential impact of the widespread shutdown of the economy. Covid by itself was not sufficient to extend the notice period but was recognized as a factor along with the traditional common law criteria of length of service, age, and the inability of the employee to mitigate his damages despite applying for 122 jobs and receiving not one interview. In this case, the Court extended the notice period by two months upon a consideration of the usual factors and then added a further month recognizing the impact of Covid on the ability to seek alternate employment for a total of 27 months.

When a long-term employee is discharged without cause, the employer is well advised to consider whether exceptional circumstances exist when applying the traditional considerations in determining the appropriate notice period. The often cited “cap” of 24 months remains in place, but when exceptional circumstances do exist, the court will not be reluctant to increase the notice periods.

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Michael M. Lerner

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