Court of Appeal overturns lower court's decision limiting notice entitlement for wrongfully dismissed employee
An Ontario employer’s tough financial circumstances shouldn’t be used as justification for reducing the notice to which dismissed employees are entitled, the Ontario Court of Appeal has ruled.
Domenica Michela, Sergio Gomes and Catherine Carnovale were teachers at St. Thomas of Villanova Catholic School, a private secondary school in LaSalle, Ont. They each worked on a series of one-year contracts — Gomes for 13 years with three leaves of absence, Michela for 11 years with one leave of absence, and Carnovale for eight years. Each one-year contract ended in June, at which point the school evaluated its requirements for the upcoming school year and extended new contracts to the teachers.
On May 31, 2013, the school sent the three teachers letters informing them their contracts would not be renewed because enrolment for the next academic year as expected to be lower. The letters also stated that if things changed before the end of the current school year — about one month later — they would be informed. Once the school year ended, the school sent additional termination letters to Michela and Carnovale dated June 27 and an email to Gomes on June 30 stating the school couldn’t offer him a position at that time.
The school provided no additional notice or pay in lieu of notice because it considered the three teachers to be on fixed-term contracts that ended. The teachers sued for wrongful dismissal.
The Ontario Superior Court of Justice, in a summary judgment motion, found the length of time the teachers had their contracts renewed on an annual basis meant they were not on fixed-term contracts and could be considered on indefinite employment. As a result, they were entitled to reasonable notice beginning from the end of June 2013 when the school provided them with termination notices at the end of the school year.
The teachers requested 12 months’ notice. However, though the court found 12 months could be a reasonable period of notice, if the school paid out that much salary in lieu of notice it would be equivalent to keeping them on staff for another school year and prevent it from reducing its deficit that came about from reduced student enrolment. The court found this would put the school in a “dilemma” and the teachers should have understood the character of their employment on year-to-year contracts was based on the school’s needs and budget. The court determined six months notice was appropriate.
Michela, Gomes and Carnovale appealed to the Ontario Court of Appeal, arguing the motion judge erred in law by presuming they could find similar employment within six months of their termination and taking into account the school’s financial difficulties as a factor in determining reasonable notice.
The Court of Appeal noted that reasonable notice is intended to allow employees a reasonable amount of time to find replacement work and wrongful dismissal damages are designed to compensate employees for losses incurred during the reasonable notice period. It also found the motion judge erred in considering the school’s financial situation as part of the character of the employment.
As a result, the appeal court found an employer’s financial situation had no bearing on the difficulty a dismissed employee may have finding another job — whether the financial situation is good or bad. Instead, the traditional Bardal factors — age, length of service, the job market, importance of the employee’s position — should only be considered.
“An employer’s financial circumstances may well be the reason for terminating a contract of employment — the event that gives rise to the employee’s right to reasonable notice,” said the Court of Appeal. “But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.”
The appeal court also noted that reducing the notice period to six months would take the teachers to the Christmas season, and there was no evidence showing teaching positions would be available at that time of year, particularly considering their contracts were renewed before each school year started in September.
