As we get closer to a full year of “pandemic life”, there is increased discussion of the impact of a global pandemic on notice periods. Employees argue that if there is a downturn in the industry in which the dismissed employee is looking for work, or a broader economic slowdown, jobs will be harder to come by and notice periods should be longer. Employers assert that the economic circumstances leave them with no choice but to reduce payroll in order to survive, and they cannot bear extended severance obligations.
So what does the law say? Does a situation like we are in now serve to increase notice periods, decrease them, or have no impact? A recent decision of the Ontario Superior Court of Justice in a case known as Yee v. Hudson’s Bay Company 2021 ONSC 387 suggests that it can serve to lengthen notice periods, but only if the dismissal took place during the pandemic.
When an employee is dismissed due to economic circumstances, they will be entitled to notice or pay in lieu thereof. Unless there is a clause in their contract displacing their common law rights, they are entitled to “reasonable notice” or pay in lieu. While there is a common belief that reasonable notice is one month for every year of service, the reality is that common law notice is not based solely on an employee’s length of service; in fact, there are many factors that can impact the notice period. The primary ones are the “Bardal factors,” named after a case that is now decades old:
- Length of service,
- Nature of position/character of employment,
- Age of employee, and
- Availability of similar employment.
In an economic downturn such as the situation we are currently in, the availability of similar employment can become a critical factor in assessing severance entitlements. After all, the reality is that those who lose their jobs are less likely to find comparable work than they would be in typical circumstances.
Canadian courts have been citing economic factors in this context for decades. For instance, the BC Court of Appeal held in a 1985 case, Hunter v. Northwood Pulp and Timber, that “The lack of available employment opportunities resulting from a depressed economy is a factor to be taken into account.” However, they cautioned that, “the economic factor must not be given undue emphasis.”
Similarly, in Lim v. Delrina Corp, the Ontario Supreme Court increased the applicable notice period by 33% to reflect the weak market for accountants like the plaintiff.
In Yee, the plaintiff argued that COVID’s impact on the prospects of finding a new job justified a notice period “at the highest possible end of the appropriate range.” The Court wrote as follows:
It seems clear terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect on finding comparable employment.
How can an organization that can’t afford to keep all of its workers be expected to pay out even greater severance packages? Employers might be tempted to believe that financial difficulties justify reduced notice periods. However, arguments to that effect have generally been unsuccessful. In Michela v St. Thomas of Villanova Catholic School, three employees at the school were terminated without just cause due to low enrollment. They had worked at the school for varying lengths of time (8, 11 and 13 years). At trial, they each received six months of pay in lieu of notice, with the court taking into account the employer’s financial hardship. However, when the employees appealed, the Ontario Court of Appeal made it clear that financial difficulties do not justify a reduction in the notice period, as economic difficulties should not be the burden of the employee. While this principle has been upheld in Ontario and British Columbia, the rest of the provinces have remained silent on the matter. Since British Columbian and Ontarian precedents are usually quite persuasive, these cases do carry a fair amount of weight on a national level.
The pandemic is likely to result in a slight increase in notice periods, and employer protests that they should be given a break due to their economic challenges are likely to fall on deaf ears.
That said, the assessment of an employee’s entitlement to notice must be based on the circumstances which existed at the time of termination; as such, an employee dismissed prior to the pandemic will not see any explicit increase in their entitlement.
Of course, all of the discussion about “reasonable notice” periods is irrelevant if there is a valid termination clause in the applicable employment agreement; in that case, there is no need or opportunity to assess what is “reasonable” in the circumstances, pandemic or otherwise.
Original title of blog post: How Does a Global Pandemic Impact Notice Periods?