Ontario case highlights need to pay attention to details in termination process
By Nadia Zaman and Stuart Rudner
Mass terminations have been in the news lately, with organizations restructuring or closing down entirely and thousands of employees losing their jobs.
In Ontario, a mass termination occurs when an employer terminates the employment of 50 or more employees within a four-week period. There are various factors to consider before actually dismissing employees. The Employment Standards Act, 2000 (ESA) provides minimum standards that employers and employees cannot contract out of.
When it comes to mass termination, special rules apply under the ESA, and the employer is required to do the following:
- Submit Form 1 (Notice of termination of employment) to the director of employment standards. Notice of mass termination is not considered to be effective until the director receives the Form 1.
- Post a copy of the Form 1 provided to the director in the workplace where it will come to the attention of the employees it affects on the first day of the notice period.
- Provide employees with notice, the amount of which will depend on the number of employees whose employment will be terminated: eight weeks’ notice for 50 to 199 employees, 12 weeks’ notice for 200 to 499 employees, and 16 weeks’ notice for 500 or more employees.
- Provide employees with statutory severance pay if they are entitled to it.
The Ontario Court of Appeal recently clarified employer obligations with respect to providing effective notice for mass termination. In Wood v CTS of Canada Co, 2018 ONCA 758 (Wood), the company advised a group of 77 employees, in a letter dated April 17, 2014, that their employment would be terminated on March 27, 2015. Later, the termination date was extended to June 28, 2015, for most of these employees. However, the company failed to file and post the Form 1 until May 12, 2015, less than eight weeks prior to the termination date.
A class action was brought on behalf of several employees against the company. The employees claimed that the notice period could not commence until the director received the Form 1.
The Superior Court of Justice found in favour of the severed employees and confirmed that the working notice provided prior to the delivery of Form 1 was ineffective. The court interpreted the ESA mass termination provisions as requiring the company to serve and post the Form 1 notice on the same day that it provided the initial notice to employees.
The Ontario Court of Appeal overturned the lower court’s analysis regarding the Form 1. The Court of Appeal held that an employer is only required to serve and post the Form 1 at the beginning of the statutory notice period. In doing so, the Court of Appeal reiterated the purpose of the ESA:
“The purpose of the ESA is to protect the interests of employees by requiring employers to comply with certain minimum standards… not to impose requirements on employers in excess of the statutory minimums.”
Here, eight weeks notice was statutorily required. Since the company failed to serve and post Form 1 at least eight weeks prior to the termination date, the employees were entitled to pay in lieu of notice for the balance of the statutory notice period.
In addition, both the lower court and the Court of Appeal found that parts of the working notice period should be invalidated since some employees worked excess overtime hours during the notice period, in violation of the ESA. The court found this notice was not “reasonable” as it violated the ESA and failed to consider the quality of the employees’ opportunity to find alternate employment.
Accordingly, the company was not entitled to credit for working notice for any week in which the overtime worked had a “significant adverse effect on the ability of the employee to look for new employment.”
The Court of Appeal also agreed with the lower court regarding the issue of the employer providing temporary work beyond the initial termination date. Under the ESA, employers are allowed to continue to provide temporary work to employees for a maximum of 13 weeks after the termination date set out in the termination notice, without giving further notice.
If an employee works beyond 13 weeks after the termination date, then the employer must provide a new written notice as if the previous notice had never been given. The period of temporary work will then be included in the employee’s period of employment.
In this case, five employees had worked more than 13 weeks beyond their original termination date. The Court of Appeal agreed with the lower court that these employees had only received working notice from the date on which they received notice of their final termination date. The employer had provided multiple extensions to the final termination date, which created uncertainty as to when their employment would be terminated. As such, the initial notice given was ineffective.
Employers should take this case as a lesson in the importance of fulfilling their statutory obligations and paying attention to the details in the termination process. Employers should also be careful in how they treat employees during their working notice periods (for example, avoid requiring substantial overtime hours), as notice may be rendered ineffective if employees are not given quality of opportunity to find alternate work or if there is uncertainty around the termination date.
Nadia Zaman is an associate lawyer at Rudner Law in Toronto.