Employers would be well-advised to include enforceable termination clauses in written employment agreements
Question: What are the most important factors for determining an employee’s common law reasonable notice entitlement upon termination of employment, where their employment agreement does not contain an enforceable termination clause?
Answer: "There are four primary factors for determining the common law reasonable notice entitlement of an employee who is not subject to an enforceable termination clause, known as the Bardal factors, which include:
- the employee’s age
- the employee’s length of service
- the character of the employee’s employment
- the availability of comparable employment.
The Bardal factors are intended help courts approximate how long it should reasonably take any given employee to secure comparable employment after their dismissal, which is largely what determines how much reasonable notice they are entitled to.
Canadian courts have interpreted the Bardal factors as follows:
- The greater an employee’s age and length of service at the time of their dismissal, the more reasonable notice they will generally be entitled to.
- Where an employee’s position is managerial, specialized, and/or requires greater qualifications, the character of their employment will weigh in favour of a larger reasonable notice entitlement.
- Where there are fewer comparable jobs available at the time of the employee’s dismissal, they will be entitled to a greater amount of reasonable notice.
Notably, where an economic downturn limits the availability of comparable employment, employees are typically entitled to more reasonable notice than they otherwise would be. In the context of the COVID-19 pandemic, Canadian courts have awarded employees more reasonable notice where they provided evidence that the pandemic reduced the availability of jobs comparable to the ones that they lost.
The character of the job is more important than the job title in calculating the notice period, say two employment lawyers.
It is important to note that the Bardal factors are not an exhaustive list of the factors that may be relevant to determining common law reasonable notice entitlements, and other circumstances can impact such entitlements. For example, where an employer induced an employee to leave secure employment and then subsequently dismissed them, this will generally lead to an increased reasonable notice entitlement.
Overall, reasonable notice entitlements are typically far greater than employees’ statutory termination entitlements under employment standards legislation, although statutory entitlements vary between Canadian jurisdictions. Reasonable notice entitlements are described in terms of months of notice or pay in lieu of notice, and generally range from two to 24 months’ notice.
While Canadian courts rarely award employees less than two months’ reasonable notice, there is technically no minimum amount of reasonable notice to which employees will be entitled regardless of the circumstances. Similarly, Canadian courts can and do award employees more than 24 months’ reasonable notice in exceptional circumstances.
It is important to note that only a court can ultimately determine how much reasonable notice to which an employee is entitled, the weight given to any of the Bardal factors can vary from case to case, and there is no specific formula for determining common law reasonable notice entitlements. That said, experienced employment lawyers can provide relatively accurate estimates of employees’ reasonable notice entitlements by examining case law and identifying precedents involving similarly situated employees.
There is no official ‘rule of thumb’ for reasonable notice periods, says another employment lawyer.
Takeaways for employers
There are certain circumstances where employers should seek legal advice regarding an employee’s likely reasonable notice entitlement. One is where an employer is contemplating whether to dismiss an employee and their employment agreement does not contain an enforceable termination clause contracting out of their entitlement to reasonable notice. This is because the employee’s likely reasonable notice entitlement represents the employer’s exposure to liability if it dismisses the employee and they claim wrongful dismissal, such that this should be assessed in advance.
Another is where an employer has already terminated an employee’s employment in such circumstances, and the employee has claimed wrongful dismissal or has threatened to do so. This is because it will often be in an employer’s best interest to settle the matter to avoid the time and expense of litigation, and the employee’s likely reasonable notice entitlement will serve as the basis for settlement negotiations.
Given the complexity of determining common law reasonable notice entitlements, and how substantial these entitlements can be, employers would be well advised to include enforceable termination clauses in written employment agreements with all employees. Such clauses can be used to make employees’ termination entitlements predictable and can be established as low as the minimums set out in employment standards legislation. Termination clauses thereby greatly reduce employers’ exposures where it becomes necessary to end employment relationships and reduce the prospect of negotiating entitlements post termination.
Laura Williams is the founder and principal of Williams HR Law, a human resources law firm in Markham, Ont. serving employers exclusively. She can be reached at (905) 205-0496 or [email protected]