In Lischuk v K-Jay Electric Ltd, 2025 ABKB 460, the Alberta Court of King’s Bench awarded damages in a wrongful dismissal action based on a reasonable notice period of 26 months. The Justice found that a long-term, key and highly specialized employee was entitled to just over $1.5 million in damages for 26 months’ pay in lieu of notice of the termination of his employment, without reduction after the employee took no steps to mitigate his lost income. This is the first decision in Alberta to assess an employee’s common law entitlement to reasonable notice of termination as higher than the generally recognized “rough upper limit” of 24 months. For that reason, this decision is exceptional, and for other reasons, discussed below, the impact is nonetheless limited – the approach to evaluating damages from a wrongful or constructive dismissal remains unaffected.

Exceptional Circumstances

The Court was clear – this is not your average fact pattern and not your average piece of employment litigation. The reason for awarding damages using a reasonable notice period of 26 months was the presence of exceptional circumstances, which included:

• The employee, Mr. Lischuk, was effectively “forced into retirement” due to a lack of transferable skills and specialization in one field of work;
• He spent his entire working life at the company with 34 years’ consecutive service, working up the ladder from the position of labourer;
• At the time of termination in 2013, the employee was General Manager, responsible for the day-to-day running of the business he helped build and second in command to the company’s owner;
• The employee’s total compensation was significantly higher than that of others in similar management positions within the electrical industry and he was the co-owner of a numbered corporation with a 20% equity stake in the company. The Unanimous Shareholders Agreement (USA) was the only written contract of relevance to the dispute.

The combination of these facts led the Court to endorse the employee’s request for 26 months’ notice, including compensation for bonus payments over that period (which was a significant component of the dispute between the parties and the largest element of the damages award).

An Affirmation of the Existing Law on Reasonable Notice

There has never been a strict cap in Alberta precluding an award of damages in excess of 24 months’ compensation for breach of the implied term of reasonable notice in an employment contract. This point is reviewed in detail by the Court in this decision. The Justice expressly commented on the caution that a court should exercise in exceeding the rough upper limit of 24 months. 

This decision does not change the approach in Alberta to evaluating the notice period at common law in wrongful dismissal cases and the following Bardal factors continue to guide the assessment: the character of the employment, the length of service of the employee and the availability of similar employment, having regard to the experience, training and qualifications of the employee.

No Failure to Mitigate Despite Taking No Steps to Find Alternate Comparable Work

The Court found that Mr. Lischuk did not take any steps to seek comparable income or employment after being terminated and that his “old school mentality” would make it difficult for him to find comparable work within the electrical contracting industry.

The Court affirmed that the test for establishing a failure to mitigate is two-fold: 1) the employee did not make a reasonable effort to find comparable work, and 2) that had the employee looked for comparable work, they likely would have secured it.

The first part of the test was met. However, this decision emphasizes that it is the employer’s burden to produce evidence convincing the Court that the second stage of this test has also been satisfied on a balance of probabilities standard. The Court found that there was no evidence to support Mr. Lischuk’s ability to find comparable work, whether in the same industry or elsewhere. The employer did not present any evidence of available jobs comparable to Mr. Lischuk’s position, which would likely have been very difficult to produce. Because of this, the Justice ruled that the test for establishing a failure to mitigate was not met, there was insufficient evidence “of a labour market or specific job opportunities that would have sufficient potential to give rise to comparable employment for the plaintiff, had steps been taken to pursue the market.”

As such, it also continues to be the case that the employer needs to lead convincing evidence that will permit the Court to draw a reasonable inference that had steps been taken to pursue the market, the terminated employee would likely have found a comparable position within the reasonable notice period.

Insights for Employers

This decision will no doubt become an oft-cited resource for both employee and employer counsel moving forward.

The case is notable for the analysis on the issues of the reasonable notice period and mitigation, but it also emphasizes that where compensation rights under a USA are employment-related (and the ability to hold shares is tied to employment), the approach developed by the Supreme Court of Canada in Matthews v Ocean Nutrition Canada Ltd., 2020 SCC 26, will apply when evaluating entitlements through the notice period: an employee may be prima facie entitled to receive damages for lost bonus payments calculated on the basis of shareholdings subject to a USA where if not for the termination, the employee would have remained a shareholder, and the USA does not unambiguously limit or remove the common law right in this regard. This was a key point of contention between the parties and the dispute over Mr. Lischuk’s participation in a generous bonus plan or profit-sharing arrangement post-termination by virtue of former shareholdings subject to the USA.

In affirming these legal principles, the Court of King’s Bench has reinforced the necessity of carefully drafted employment contracts and related plan documents. The decision serves as a reminder of the risks with operating without written contracts of employment and that a missing or invalid termination clause can result in a significant damages award payable by an employer. While the facts of this case are unique, employers are encouraged to regularly review their employment contracts and plan documents to ensure they are updated and contain appropriate language dealing with entitlements on termination.

Lastly, mitigation remains a relevant issue in many wrongful dismissal cases and gathering evidence supporting the availability of comparable work continues to be important for reducing damages. We note that on different facts, the employee’s decision to take no steps to find a new position would likely prove highly problematic when paired with evidence about available comparable work for which the employee was qualified within the job market generally.  

If you have any questions regarding this case, please contact any member of the Mathews Dinsdale & Clark team.

Prepared with the assistance of Mathews Dinsdale articling student Keira Ostrosser.