What Recent Court Rulings Mean for Terminations and Severance in Canada 

How small business owners and HR managers can stay compliant and prepared 

Across Canada, recent court rulings have reset expectations around what “reasonable notice” really means when terminating employees. For small business owners and HR managers, these rulings highlight how quickly employment law evolves and why it’s critical to understand both legal obligations and financial implications before making termination decisions.  

The common thread in these new decisions? Courts are awarding longer notice periods to long-serving employees, especially older workers with limited re-employment prospects. What was once considered an upper limit of 24 months is now being stretched — with new precedents that go well beyond.  

What Is Common Law Reasonable Notice? 

In the absence of a valid contract limiting severance, employees terminated without cause are entitled to “common law reasonable notice” or pay in lieu of that notice. The idea is to provide financial stability while the person searches for comparable work.  

Courts determine this notice based on a number of factors including:  

• Age 
• Length of service 
• Position and level of responsibility 
• Compensation 
• Ability to secure new employment 
• Whether the employee was recruited from another job 

Reasonable notice can be delivered as working notice, pay in lieu, or a combination of both - typically covering base pay, commissions, benefits, and any other regular forms of compensation.  

For decades, 24 months of notice was widely viewed as the ceiling. But in 2024 and 2025, several landmark cases showed that ceiling no longer holds.  

Three Landmark Cases Impacting the Standard 

Milwid v. IBM Canada Ltd. (Ontario) 2023 ONCA 702

Mr. Milwid had built his career at IBM over 38 years, rising to a senior managerial position just below the executive level. At 62 years old, he was terminated without cause after decades of service. IBM, relying on long-standing precedent, expected a notice period capped at 24 months.  

Instead, the Ontario court awarded 27 months of reasonable notice. The decision underscored the courts’ willingness to exceed the old “hard cap” in cases involving senior, long-tenured employees near retirement age. The court emphasized that long service, advanced age, and a diminished likelihood of finding comparable employment warranted a longer notice period.  

Lynch v. Avaya Canada Corporation (Ontario) 2023 ONCA 696

Mr. Lynch, a 64-year-old professional engineer, was part of a company restructuring after nearly 38 years of continuous employment. Although his position wasn’t managerial, the court viewed his professional role and long service as significant factors in determining compensation.  

Avaya argued for the traditional upper limit of 24 months, expecting the court to apply consistency. Instead, the court awarded 30 months of reasonable notice — the longest confirmed notice period in Ontario to date. The ruling reinforced that each case must reflect its own facts and that “exceptional circumstances” can justify going beyond the perceived cap.  

Lischuk v. K Jay Electric Ltd. (Alberta) 2025 ABKB 460

In Alberta, often considered a more employer-friendly jurisdiction, the courts signaled a shift. Mr. Lischuk, age 58, had worked for K Jay Electric for 34 years as a General Manager. The employer believed Alberta courts would uphold the 24-month cap, but the court instead described it as a “rough upper limit,” awarding 26 months of reasonable notice.  

The Key Takeaway: The 24-Month Rule Is No Longer a Rule  

These cases demonstrate a clear national shift. Courts are prepared to expand the definition of “exceptional circumstances” by attaching even more weight to the former employee’s personal situation including age, tenure, and employability to bypass the former 24 month “hard cap”.  

For small businesses, this means the potential cost of a termination without cause could be higher than expected. It also underscores the importance of clear, enforceable employment contracts and accurate payroll records that reflect tenure, pay history, and benefits.  

What Employers Should Do Now  

1. Review contracts and termination policies. Even if your contracts were once compliant, precedents evolve. Make sure employment agreements clearly outline notice and severance entitlements that meet provincial standards.  
2. Factor in financial exposure. If you’re considering restructuring or downsizing, build flexibility into your budgets. Severance obligations can now stretch well beyond the old benchmarks.  
3. Treat long-service terminations with care. Older, long-serving employees are most likely to receive extended notice awards. Plan communications and transitions thoughtfully to protect both your brand and your bottom line.  
4. Keep records organized. Accurate payroll, tenure, and benefits data are critical in calculating proper notice and demonstrating compliance if challenged.  
5. Stay informed across provinces. While Ontario is setting many of the precedents, Alberta and BC are following closely. National employers must monitor how rulings in one province influence others.  

How Powerpay Supports Compliance and Confidence  

Managing payroll and terminations isn’t just about number juggling, it’s about reducing risk. Powerpay helps you do both.  

With built-in tools to track tenure, calculate pay, and maintain accurate employment records, Powerpay gives small businesses clarity and confidence when navigating terminations.  

• Automatic pay calculations that reduce manual error 
• Comprehensive reporting that supports audits or disputes 

When court standards shift, your payroll system should support you with the information you need.  

Looking Ahead  

As the line between “standard” and “exceptional” notice periods continues to blur, small businesses must stay proactive. What was once predictable is now evolving — and preparation is your best protection.  

By keeping contracts current, records accurate, and payroll systems reliable, you can manage compliance confidently, no matter how the legal landscape changes.  

Ready to simplify compliance and protect your business from payroll and severance surprises? See how Powerpay helps Canadian businesses stay compliant, accurate, and confident.