Generally, construction employees are not entitled to termination or severance pay under the Employment Standards Act (the “Act”). Section 1 of Ontario Regulation 288/01 of the Act explicitly exempts them from such minimum employment standards.
However, a long-term construction employee may still be entitled to common law reasonable notice, which is much more lucrative than what the Act provides for anyway.
Nevertheless, how much notice a construction employee is entitled to under the common law remains an unsettled test in Ontario. That test, as it stands, is as follows:
- Is the employee covered by a collective bargaining agreement (“CBA”)
- If so, does the CBA explicitly limit or formulize notice of termination?
- Is the employee a “construction employee” in the “construction industry”?
Regulation 285/01 of the Act defines a ‘construction employee’ as:
(a) an employee employed at the site in any of the activities described in the definition of “construction industry”, or
(b) an employee who is engaged in off-site work, in whole or in part, but is commonly associated in work or collective bargaining with an employee described in clause (a);
The Regulation also says:
“construction industry” means the businesses that are engaged in constructing, altering, decorating, repairing or demolishing buildings, structures, roads, sewers, water or gas mains, pipe lines, tunnels, bridges, canals or other works at the site.
- Is there a custom in the industry that employees can be terminated without termination pay?
Here, the courts assess whether the construction employee could foretell whether he would be terminated in advance. In this regard, the leading authority on this issue, the trial court decision of Scapillati v. A. Potvin Construction Ltd., 1997 CanLII 12420 (ONSC) (“Scapillati“), considered a few of the following relevant factors:
- The irregular nature of the construction industry;
- The seasonal nature of the construction industry;
- Whether the industry prospers and declines, being strongly influenced by business cycles both general and local, by interest rates and by legislation;
- Whether the employee was aware their employer was running out of work on any given project;
- Whether the employer was clear in warning employees of future job loss;
- Whether the custom, if it exists, applies to all employees equally;
- Whether the employee ever received termination pay from another employer in the same industry; and
- Whether the employer, or its competitors, ever paid termination pay to similar employees.
- Whether that custom is reasonable?
Here, the courts assess whether they should enforce the custom. In this regard, every case on point so far agrees the custom is reasonable enough to enforce, citing the realities of the industry and the legislature’s own recognition that construction employees should not be entitled to minimum notice.
- What is reasonable notice in light of all the circumstances, including custom; can there be no notice?
In other words, if a custom is proven, it, importantly, simply becomes a factor to be taken into account, with the usual factors, in determining what is reasonable notice in the particular circumstances. Thus, custom in the industry not to pay termination pay does not displace the duty to give notice, but that it is simply a factor in assessing the reasonable notice period.
However, the Court of Appeal decision in Scapillati, 1999 CanLII 1473 (ONCA), did make clear that in certain circumstances, it is reasonable to give no notice whatsoever. There, applying the usual factors, plus the custom of the construction industry, the court held that the construction employee, a carpenter who worked for the employer for just nine months (he had previous tenure with the employer which the court disregarded) before his ultimate termination, could be terminated without any notice. Based on the length of service of the employee, the court in Scapillati (ONCA) distinguished itself from an earlier court in British Columbia, Krewenchuk v. Lewis Construction Ltd., 1985 CanLII 679 (BC SC), that awarded 12 months’ notice to a construction employee who had 23 years’ seniority. There, the Supreme Court of British Columbia did not recognize a custom not to provide “long term” construction employees notice, but it did recognize a custom not to pay “short term” construction employees notice.
Thus, Scapillati (ONCA), where a nine-month employee was entitled to a common law notice period of nil, stands for the proposition that short term construction employees are not entitled to notice (a non-construction employee would have received 1–3 months). At the same time, Scapillati implies that long-term service employees may be entitled to common law notice, minus a few months for the realities of the industry. However, there is no case from Ontario where the custom was found and applied to a long-term employee.
Short term construction employees in the construction industry are not likely owed any reasonable notice. However, long-term construction employees probably are, set off by a reasonable number of months to account for industry realities.
Interestingly, as well, Scapillati stands for the exact opposite of the theory that a poor economic climate increases the notice period. Scapillati implies that the worse the economic situation is for the construction employer, the less notice it must provide.