Ontario court calls for proof of hardship caused by pandemic to extend reasonable notice period
We recently wrote about the decisions of the Ontario Superior Court of Justice in Yee v Hudson’s Bay Company as well as in Iriotakis v Peninsula Employment Services Limited, both of which addressed the impact of the COVID-19 pandemic on reasonable notice periods at common law.
To recap, in Yee, the court suggested that the COVID-19 pandemic could impact the length of the reasonable notice period, but only where the dismissal occurred during the pandemic. In Iriotakis, the court found that while the pandemic likely would have some impact on notice periods, it would be only one of many factors reviewed by the court when assessing reasonable notice ─ as the court indicated: “[a] balanced approach is what is called for.”
We now have yet another decision from the court on this issue, this time suggesting that an employee who is dismissed during the pandemic is not entitled to a longer notice period by default. Rather, the onus will be on the employee to prove that their ability to find new employment was negatively impacted by COVID-19.
In Marazzato v Dell Canada Inc., the employee was dismissed without cause from his employment with the company on March 4, 2020. Thereafter, he sued the company for wrongful dismissal, and brought a motion for summary judgment, seeking pay in lieu equal to 20 months.
The employee was 59 years old at the time of dismissal and had accrued 14 years of service with the company. He was employed in the position of senior manager director sales and was entitled to receive a substantial compensation package, resulting in total income of $464,580 in 2017, $466,502 in 2018, and $465,695 in 2019.
In addition to these factors, the employee argued that the notice period should be extended due to the COVID-19 pandemic as a result of the “extra difficulty” he would undoubtedly experience in finding and obtaining a new position. Notably, the employee was still unemployed when the motion was heard in December 2020. The company argued that the appropriate notice period was 16 months.
Decision of the court
The court agreed that the employee’s age, relatively long service and senior position all supported a longer notice period. However, the court expressly declined to make a determination that the pandemic impacted the employee’s ability to secure new employment, noting that “no evidence of same was presented” and that “it would not be appropriate to speculate... without evidence.”
Interestingly, the court noted that while the pandemic may have negatively impacted many, it was possible that certain individuals may have actually benefited from the circumstances created by COVID-19. In this case, the court noted that the employee’s skill set was in the computer business, an industry which may have grown during the COVID-19 pandemic due to the greater use of and reliance on computers. In fact, the court found that the only evidence before it in this regard was the strong financial performance of the company, as reflected in its increased share price.
The court found that the appropriate notice period in the circumstances was 18 months and awarded the employee damages reflecting his base salary, bonus, RRSP matching, the value of his benefits and LTD premiums, and monthly car allowance over the notice period. He was not granted damages for loss of his long-term incentive or restricted stock units, as the court found this entitlement was subject to an agreement which was unambiguously separate and apart from the employment relationship.
Finally, as the notice period continued beyond the date of judgment, the court imposed a trust in favour of the employer to account for any income that might be earned by the employee during the 18-month notice period.
The decision in Marazzato will come as a relief to many employers concerned about extended notice periods during the pandemic, in circumstances where they themselves may be experiencing significant financial hardship.
It also sends an important message to employees not to expect a “windfall” based only on the timing of their dismissal. That being said, there are undoubtedly employees who will have no difficulty demonstrating that COVID-19 has negatively impacted their ability to secure new employment, and employers need to be prepared for the enhanced entitlements that may arise as a result.
As we have said before, the best way for employers to limit their potential liability on dismissal is to ensure they have enforceable employment agreements and policies in place which clearly and unambiguously set out an employee’s entitlements. Conversely, employees must understand and appreciate the significant impact such documents can have on their entitlements, and should always seek legal advice prior to signing.