Small to midsize employers, many HR professionals, and many lawyers proceed based upon completely inaccurate understandings of how employment law works. While there are many examples of this, there are three that I see regularly in my practice:
- the myth that the severance entitlement in Canada is one month per year, regardless of other factors such as age or position;
- the belief that every employee is automatically subject to a probationary period; and
- the belief that when there is a shortage of work, employers automatically have the right to lay employees off temporarily.
As counsel, part of our job is to ensure that both employers and employees understand their rights and obligations. In many cases, employers break the law not out of a desire to shortchange their employee, but simply due to a misunderstanding. Sadly, in many of those cases, the employee in question does not know any better and simply accepts the decision in question.
The second and third misconceptions listed above arise largely out of the employment standards legislation. The legislation across Canada invariably provides for dismissal without cause or notice during the first few months of employment, and also provides parameters for the temporary layoff of employees. However, as regular readers will already be aware, employment standards legislation sets out the absolute minimum rights of the employee. The common law adds additional rights which can be avoided by contract, but which otherwise apply in the absence of a contractual term to the contrary.
In the context of probationary periods, while legislation such as the Employment Standards Act, 2000 in Ontario provides that an employee is not entitled to notice of termination during the first 90 days of employment, that is no different than the balance of the termination provisions which provide for the minimum amount of notice that is required. In all cases, the common law will require that “reasonable notice” be provided to an employee that is to be dismissed unless there is a contractual term, otherwise enforceable, that provides otherwise.
No one should assume that every employee is subject to a probationary period. Furthermore, simply putting language into an offer letter such as “probationary period for the first 3 months” is insufficient, as it does not set out what the terms of that probationary period will be. In order to have an effective clause, it must be explicitly clear that during the probationary period, the employee can be dismissed without cause, notice or pay in lieu thereof. Any ambiguity will be interpreted contrary to the interests of the drafting party, inevitably the employer. Furthermore, the probationary terms cannot breach the applicable legislation; for example, in Ontario, after 90 days employees are entitled to at least one week of notice.
With respect to temporary layoffs, a similar situation exists at law. The Employment Standards Act, 2000 sets out the parameters of a temporary layoff, and establishes when that temporary layoff will become a termination. However, it does not grant an employer the right to temporarily lay an employee off; that right must be granted by contract. The contract can either be explicit or implied. For example, some companies or industries are known for occasional or seasonal layoffs, such as the construction industry. In those cases, it can credibly be argued that the employee knew that their employment can be subject to temporary layoff. Otherwise, it is necessary that an agreement in writing to that effect be entered into. In the absence of such an agreement, even an employer that complies with the terms of the applicable legislation will be found to have effectively dismissed the employee by virtue of the common law, which does not allow for temporary layoffs.
To provide evidence of the fact that the law is always changing, and is sometimes uncertain, the issue of temporary layoffs has seen some controversy in recent years. Historically, the law has always been that employers do not have the automatic right to temporarily lay an employee off. However, in the Ontario Superior Court of Justice’s decision in Trites v. Renin Corp., the court acknowledged the long-standing rule but then held as follows:
In my view, there is no room remaining at law for a common law claim for a finding of constructive dismissal in circumstances where a temporary layoff has been carried out in accordance with the terms of the ESA.”
This case seemed to dramatically change the law and grant employers rights that they did not previously enjoy. However, while that decision was not appealed, the next Ontario court to consider the issue, which was the Ontario Small Claims Court in Wiens v. Davert Tools Inc., explicitly rejected the decision in Trites and concluded that a temporary layoff continues to constitute a constructive dismissal.
With respect to notice of dismissal, although employment lawyers have been saying for decades that there is no “rule of thumb”, this continues to be a common myth that is perpetuated by many, including lawyers that do not specialize in employment law. Whether the myth is one month per year, or some other amount, does not matter. The bottom line is that our courts have been quite clear that there are many factors to be considered, the primary ones being:
- the employee’s age;
- the employee’s length of service;
- the employee’s position/character of employment; and
- the availability of similar employment.
Other relevant factors, such as inducement from prior secure employment, will also be considered. The bottom line is that there is no rule of thumb, and a statistical analysis of court awards over several decades confirms that there is no easy calculation. Every case must be determined based upon its own particular circumstances.
Employers must be extremely cautious before acting based upon what they assume the law to be. Similarly, employees should be mindful of their rights and not assume that they are always being treated in accordance with the law. As employment lawyers, we must do our best to educate the public, be they employee or employer, with respect to their rights and obligations.
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