A COVID boost to reasonable notice

Courts have started to evaluate whether the pandemic should be factored into dismissed employees’ notice entitlement

A COVID boost to reasonable notice

In 2021, we have begun to see court rulings dealing with circumstances where employees were dismissed proximate to the onset of the COVID-19 pandemic. To the surprise of many, the pandemic has not (yet) resulted in substantially increased common law notice awards for dismissed employees. While this is a positive trend for employers, given that positive COVID-19 cases continue to remain steady in Canada, employers should not discount the impact that COVID-19 can have upon an employee’s termination entitlements going forward.

Common law reasonable notice

Common law reasonable notice is a legal concept and employee entitlement in Canada that generally applies to all non-unionized employees who are not subject to a fixed-term contract. Canadian employers have a legal obligation to provide employees with reasonable notice of termination of their employment. This notice may be provided through working notice — advance notice of an impending date that the employee’s employment will terminate — or by providing the employee with payment in lieu of notice.

Common law reasonable notice is determined by judges on a case-by-case basis based on established factors including length of service, age of the employee, character of employment and the employee’s prospects of re-employment. The purpose of common law notice is to provide an employee with a reasonable period to seek similar re-employment. Courts have recognized that an economic downturn and poor job market can make it more difficult for an employee to find work. This can result in a longer common law notice period when the employee can demonstrate to the court that the circumstances have impacted their prospects for re-employment.

Employers and employees can contract out of the requirement to provide common law reasonable notice by providing for a specific contractual termination entitlement — often referred to as a termination clause — so long as the termination clause complies with the minimum standards provided under the applicable employment standards legislation. However, if an employee is not subject to an enforceable termination clause in their employment agreement, the employee is entitled to common law reasonable notice upon termination.

The impact of COVID-19

In 2021, several decisions have weighed in on COVID-19’s impact on reasonable notice periods. Courts first weighed in on terminations that occurred prior to the onset of COVID-19 in March 2020 but where the pandemic has arguably impacted the employee’s job search efforts.

In Yee v. Hudson’s Bay Company, the first Ontario decision to address COVID-19 and reasonable notice, an employee who was dismissed prior to the onset of COVID-19 argued that the pandemic had impacted the job market and made it significantly more difficult to find a job. As a result, the employee argued he should be entitled to a correspondingly longer notice period. The court disagreed, holding that reasonable notice is to be determined by the circumstances existing at the time that the employee’s employment was terminated. Accordingly, because the employee had been dismissed prior to the onset of the pandemic, the employee’s reasonable notice entitlement was not extended despite the reality that the pandemic may have made it more difficult for the employee to find re-employment.

Subsequently, courts have considered what impact COVID-19 has had on common law notice periods where employees were dismissed following the onset of the pandemic in March 2020. Surprisingly to many, courts have not been willing to apply a “rubber-stamp” extension of reasonable notice awards on the basis that an employee was dismissed during the pandemic. Courts have considered the circumstances that existed at the time of dismissal, and specifically whether the pandemic has truly impacted the employment prospects of the employee at issue.

The case law also suggests that the impact of COVID-19 on reasonable notice awards will depend on the specific circumstances that existed at the time of termination. A 2021 Ontario decision, Iriotakis v. Peninsula Employment Services Ltd., did not give much weight to the pandemic in awarding a reasonable notice period to an employee who was dismissed in late March 2020. The court reasoned that during the early onset of the pandemic there was uncertainty as to the impact of COVID-19 on the economy and job market. Given that the impact that COVID-19 would have on the economy at the time was speculative and unconfirmed, the court did not find that COVID-19 was a factor that served to extend the notice period.

Another 2021 decision from Ontario, Marazzato v. Dell Canada Inc., involving an employee in the computer industry who was dismissed in March 2020, declined to consider COVID-19 as a factor lengthening an employee’s reasonable notice entitlement. In that case, the court relied on the employee’s failure to present any specific evidence of the pandemic’s impact on his ability to find a new position. The court also suggested that, although many employees may have experienced challenges finding new employment because of the pandemic, the job prospects of the employee in that case may have actually benefited from the pandemic because of the increased reliance on computers to work remotely.

What to expect going forward

While COVID-19 in some cases may lengthen some employees’ reasonable notice periods, the case law indicates that employees will be required to demonstrate objectively that the economic circumstances surrounding the pandemic at the specific time of dismissal had an impact on their own ability to re-employ in order to receive an extended reasonable notice period. Accordingly, COVID-19 may not significantly impact reasonable notice periods where it can be demonstrated by the employer that, at the time of termination, the job market had seen an improvement or COVID-19-related restrictions had been eased, resulting in more business activity and working opportunities in the relevant field.

Employees are continuing to rely on commonly used methods to demonstrate that the job market and economic conditions have harmed their ability to find new employment, such as producing evidence that they have unsuccessfully applied to job postings in their industry or demonstrating that there was lack of available positions following their dismissal. Given the courts’ emphasis on the economic circumstances that existed at the specific time of termination, employers facing wrongful dismissal litigation by former employees who were dismissed during the pandemic should consider producing evidence to demonstrate that COVID-19 did not negatively impact the re-employment prospects of the former employee in question. While the type of evidence to produce will vary with the circumstances of each case, employers might produce evidence to demonstrate the level of COVID-19-related restrictions at the time of termination and/or how the pandemic otherwise may have impacted the particular field of work.

More broadly, while the law has not trended toward longer notice periods to date, as a best practice, employers should account for the potential impact of COVID-19 when assessing potential liability for employee dismissals. Given that Canada appears to be entering a potential third wave of the virus, COVID-19 will likely be a factor to consider in assessing reasonable notice for terminations that occur throughout 2021 and even into 2022. Accordingly, employers should be prepared to account for a potential bump in notice periods where an employee’s dismissal occurs during a period where COVID-19 cases are high or their sector of the economy has been negatively impacted by the pandemic.

For more information, see:

  • Yee v. Hudson’s Bay Company, 2021 ONSC 387 (Ont. S.C.J.).
  • Iriotakis v. Peninsula Employment Services Limited., 2021 ONSC 998 (Ont. S.C.J.).
  • Marazzato v. Dell Canada Inc., 2021 ONSC 248 (Ont. S.C.J.).

Joel Smith is a lawyer with Williams HR Law in Markham, Ont., where he practises management-side labour, employment and human rights law. He can be reached at (905) 205-0496 ext. 224 or [email protected]

 

 

 

Seth Holland is an associate with Williams HR Law, where he practises management-side labour, employment and human rights law. He can be reached at (905) 205-0496 ext. 222 or [email protected]

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