In Alberta’s latest wrongful dismissal case, Lischuk v. K-Jay Electric Ltd., 2025 ABKB 460, the Court of King’s Bench of Alberta (the Court) awarded a common law reasonable notice period of 26 months, marking the first time an Alberta court has exceeded the 24-month “rough upper limit” that employers in the province have relied upon for many years.
Facts and decision
In his early 20’s, Mr. Lischuk began working for K-Jay Electric Ltd. (K-Jay) in 1978 as a helper. He subsequently earned his Master Electrician certificate. In 2008, Lischuk became General Manager. Lischuk also became a shareholder in K-Jay through his own numbered company in 2002, eventually holding 20.1% of K-Jay. In 2013, K-Jay implemented management changes and terminated Lischuk without cause. Lischuk’s termination also triggered the repurchase of his shares. In this wrongful dismissal action, the Court was faced with several key issues, with the central discussions summarized below.
What is Lischuk’s reasonable notice period?
Most notable in this case was the Court’s reasonable notice findings. K-Jay acknowledged that Lischuk was owed 24 months’ common law reasonable notice but argued that 24 months was the maximum that could be awarded. The Court disagreed, finding that the focus must be on what is reasonable in the circumstances, considering the Bardal factors, and not on a set maximum.
At the time of termination, Lischuk was 58 years old and had worked for K-Jay for 34 years, which was substantially his entire working career. The Court also noted that Lischuk had been a key employee at K-Jay as it grew to be a profitable, top company in its industry. Lischuk did not complete a degree and, while he had his Master Electrician certificate, he had not worked in that role for many years. The Court found that his ability to work a physical job had diminished. The Court further noted that Lischuk’s “old school mentality would be difficult to sell to potential employers,” decreasing the likelihood that he would be able to secure new employment. In any event, there were very few other comparable companies in the electrical contracting industry.
Given these factors, the Court found exceptional circumstances that gave rise to a notice period of 26 months.
Mitigation
The Court further confirmed the high burden on employers to prove a failure to mitigate. The Court reiterated the two prongs to assessing mitigation: i) whether the plaintiff took reasonable steps to seek out comparable employment, and ii) whether the defendant could prove that suitable jobs were available and that, had the plaintiff taken steps to pursue those opportunities, they probably would have found employment. The onus remains with the defendant to prove both that the employee failed to make reasonable efforts to find work and that work could have been found.
In this case, Lischuk did not take any steps to find employment following his dismissal. However, K-Jay failed to establish that Lischuk likely would have been able to find employment had he been seeking it. There was a very slim market for comparable employment in the electrical contracting industry, and no evidence that Lischuk’s skills would transfer to other industries. This, along with Lischuk’s age and relatively high compensation in the industry, made it highly unlikely that Lischuk could obtain work. Therefore, K-Jay failed to establish that Lischuk did not mitigate his damages.
Annual bonus
The Court further considered annual bonus entitlements following Lischuk’s wrongful dismissal. Beginning in 2008, in order to compensate employees in the most tax advantageous manner, K-Jay established an annual bonus pool that consisted of K-Jay’s income that exceeded the small business limit. This pool was then distributed between the employees, who held shares in K-Jay, with 10% based on employee performance and the other 90% based on employee shareholdings. This bonus was paid to Lischuk directly as employment income and not to his numbered company. However, K-Jay also paid out dividends, which went to Lischuk’s numbered company. In 2014, after Lischuk’s termination, K-Jay no longer paid a performance bonus to any of its employees or dividends to its shareholders, but it did still continue to distribute some of its profits to the employees who held shares by providing an annual bonus.
Relying on Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, the Court found that there was no written document that clearly and unambiguously limited Lischuk’s right to a bonus following his termination date and therefore, he was entitled to the annual bonus through to the end of his notice period. Had he continued to be employed, he would have continued to hold shares and therefore would have received the annual bonus. The Court further noted that although the bonus was paid out based on shareholdings, it went directly to Lischuk as an employee rather than to his numbered company as a shareholder, so the repurchase of the shares on termination did not affect his right to the annual bonus through the notice period.
In order to value Lischuk’s damages for the annual bonuses he would have earned, the Court considered three methods: 1) using the same bonus that Lischuk received in the May 2013 fiscal year (historical method); 2) determining a bonus based on the same formula that previous bonuses were calculated upon (formula method); or 3) establishing a calculation based upon the changes to the bonus structure made by K-Jay following Lischuk’s termination (future method). The Court ultimately used a combination of the historical and future methods.
Had Lischuk remained an employee, he would have continued to hold 20.1% of the shares. Therefore, Lischuk would have expected to receive at least 20.1% of the bonus pool and, with performance factored in, he received an average of 20.9% of the bonus pool. This is the percentage that the Court ultimately used to determine Lischuk’s 2014, 2015 and 2016 fiscal year bonuses. As Lischuk would have been employed up to January 13, 2016, he would have been employed for the first six months of the 2016 fiscal year, which ran from June 31, 2015 to May 31, 2016, when the bonus was earned and when the midyear bonus was paid out in December 2015.
The Court also adjusted the bonus pool numbers that K-Jay had provided. The Court found that a CA$500,000 liability that K-Jay had withheld based on potential liability for Lischuk’s termination should be added back into the bonus pool. However, the bonus pool for 2015 and 2016 was reduced to reflect that K-Jay was providing a disproportionate amount of the bonus pool in those years to a different employee for the purposes of buying him out, which left a smaller share of the bonus pool to be provided to the remaining employees, including Lischuk.
Takeaways for employers
This decision sparks concern for employers in Alberta that courts may be trending towards awarding higher common law reasonable notice periods, or at the very least, demonstrating a willingness to accept “exceptional circumstances” that were not previously recognized within the province. While Alberta courts have always refrained from setting a ceiling on reasonable notice periods, until this case, Ontario was the only province to have awarded a notice period in excess of 24 months.
It remains to be seen whether this decision will be appealed, but, in any event, it is a stark reminder of the importance of clear, enforceable termination provisions that limit the employee’s right to common law reasonable notice, as well as policies and records that establish how compensation components, such as vacation and bonuses, will be handled on termination.
For more information, please reach out to the authors, April Kosten and Carly Kist.
