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Goods news and bad news: ONCA rules on notice requirements during mass terminations

In a recent case in Ontario, the Court of Appeal released a decision on notice requirements in the case of a mass termination.

notice requirementsOn September 19, 2018, the Ontario Court of Appeal released the decision of Wood v. CTS of Canada Co., and addressed several important issues surrounding mass termination events in Ontario. Specifically, the Court addressed the requirement to post prescribed notices at the commencement of the statutory notice period, that non-consensual overtime demands may dis-entitle employers to credit for working notice, and that notices of termination must always be clear and unequivocal in order to remain valid.

The appeal arose from the closure of a manufacturing plant operated by CTS of Canada Co. This resulted in a “mass termination” for purposes of the Employment Standards Act, 2000 (“ESA 2000”). The employees were first given notice on April 17, 2014, that the plant would be closing on March 27, 2015. After the closure, a class action was commenced and a summary judgment motion was heard on several issues. In particular, the former employees alleged that the employer’s failure to post the requisite “Form 1” notice in the workplace at the time working notice was provided was contrary to the ESA 2000 and rendered the previously provided working notice invalid. CTS argued that the Form 1 was only required to be posted at the commencement of the statutory notice period which was 8 weeks prior to the termination date. The motion judge agreed with the employees and found that the notice was required to be posted when it initially gave notice in April, 2014 and pursuant to s. 58(4) of the ESA, the notice was not effective until the day it was posted, invalidating 13 months of working notice already provided.

The Court disagreed with the motion judge and ruled that based on the wording of the ESA 2000, a “Form 1” notice was only required to be posted and provided at the commencement of the statutory notice period. The motion judge had largely relied on the fact that prior to the amendments brought in by the ESA 2000, the previous iteration of the ESA, specifically mentioned that the notice must be posted at the beginning of the “statutory notice period.” In the present version of ss. 58(4) and 58(5), there was only mention of “the notice period”. Based on this amendment, the judge determined that this had broadened the requirement to post a Form 1 to when notice was actually given, and not when the statutory notice period began. The Court of Appeal disagreed, finding that the changes to the ESA 2000 were meant to be minor, and that creating such an expansion of notice requirements would have not been a “minor” change. The Court also found that in the overall context of the legislative scheme, the sections clearly meant the statutory notice period and not the actual notice provided.

In finding that notice was only required to be given at the start of the statutory notice period, the Court was required to address the consequence of CTS’ failure to post the Form 1 until 12 days into the statutory notice period. The Court found that the only consequence was that the statutory notice period did not begin to run, and that the employees were entitled to an additional 12 days of pay. The failure to post the Form 1 did not invalidate all other notice provided.

Interestingly, the Court of Appeal upheld the motion judge’s two other findings that (1) CTS was not entitled to credit for working notice for any week in which overtime worked had a significant adverse effect on the ability of an employee to look for employment, and (2), the notice provided to a subset of employees who worked 13 weeks beyond the original termination date was ineffective.

In upholding the motion judge’s determination on the first point, the Court deferred to the judge’s finding of fact that a certain number of employees had been required to work extensive overtime during the notice period without their consent. The Court affirmed that generally requiring an employee to work their normal hours during a period of working notice does not dis-entitle the employer to credit for working notice. However, the Court  found that exceptional workplace demands on an employee during the notice period that negatively affected the ability to seek alternate work, if not consensual, may warrant dis-entitling an employer to credit for some of all of the working notice period. In the present case, the employers were required to work overtime over and above the ESA limits. This constituted an exceptional demand.

Finally, the Court upheld the judge’s finding that the initial notice of termination provided to certain employees in April, 2014 was not valid due to the employer’s request that the employees continue to work 13 weeks beyond the initial termination date. The Court found that Section 6(1) of the Regulation permits an employer to continue to provide temporary work to employees for up to 13 weeks after the termination date specified in the notice of termination given, without giving a further notice of termination. Following the initial April, 2014 termination notice, 5 employees were asked to stay on for an additional 13 weeks to assist with the wind down, in exchange for an additional $500.00. The employees agreed. A subsequent letter dated September 18, 2015, requested that the employees agree to a “final extension”  until October 30, 2015. No additional payment was offered for this “final extension”. The Court found that the work provided during the 13 week period is “temporary” work after the termination date. It did not extend the employee’s termination date. The Court determine that it was clear from s. 6(1) of the Regulation that if an employer provides further work beyond the 13-week period, the employer changes the employee’s termination date and a further notice of termination is required.

So what are the takeaways?

Ultimately there is a lot to unpack in this decision. It contains good news and stern reminders for employers. The Court of Appeal has clarified that in dealing with notice periods within section 58, the section is to be read as only the statutory notice period. In the context of mass termination notifications, this means an employer is only required to post the requisite Form 1 eight weeks prior to the termination date. Additionally, if an employer fails to do so, the consequence is not the invalidation of all previous notice, but only an extension of the statutory notice period. In contrast, employers need to remain aware that while the closure of an operation may bring with it unforeseen delays and complications, they must continue to provide their employees with opportunities to pursue alternate employment during the working notice period and remain clear and unequivocal in when the final termination date will be. Ultimately, proper documentation and established procedure may have avoided significant expense. In the present case, the failure of the employer to “re-hire” the five employees on a one month fixed term contract at the expiry of the 13-week temporary work period resulted in the invalidation of 13 months of previously provided notice.

The Court’s decision in Wood v. CTS of Canada Co., 2018 ONCA 758 can be found here: http://canlii.ca/t/hv559.

Post Script: Special thanks to Sean Bawden of Kelly Santini for bringing this decision to my attention so soon after it was released.

Devan Marr

Devan Marr is a lawyer at Strigberger Brown Armstrong LLP. With two offices located in Toronto and Kitchener/Waterloo, the firm offers a full range of legal services to our industry partners in insurance and risk management. The firm aims to provide its clients with focused, practical, and cost efficient legal advice. Devan primarily defends insurance claims with a particular interest in the intersection of the contractual, statutory and common law obligations of parties in long-term disability and employment practice liability claims. His practice also includes providing employment related legal advice to both employers and employees in the context of contract negotiations, evaluation of termination clauses, workplace investigations, and assessment of exposure to wrongful dismissal claims.
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2 thoughts on “Goods news and bad news: ONCA rules on notice requirements during mass terminations
  • Devan Marr says:

    Hi Jim! That scenario sounds a little less than hypothetical. Bankruptcy/CCAA proceedings are tricky. I’d recommend discussing it in person with counsel who has experience in both areas (or access to a corporate/bankruptcy practice).

  • jim anderson says:

    How would this play out in a mass layoff on only a few days notice, that subsequently became termination. No notice or severance was paid . The company was in receivership under creditor protection. The plant closed shortly after and all operations were wound up a few weeks later. I believe the company is now in bankruptcy proceedings.

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