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UP, UP, AND AWAY: What’s new with Notice periods?

Written by on August 22, 2016. Posted in Labour & Employment

Unfortunately for employers, there is a fair bit new with notice periods and not in a welcome direction. While 24 months has typically been viewed as the upper end of reasonable notice periods, there have been a number of decisions recently which have challenged that assumption.

In Markoulakis v. SNC-Lavalin Inc.[1], the court awarded a reasonable notice period of 27 months. The Plaintiff was a 65 year old Civil Engineer, with 40.66 years of service. His employment was terminated due to shortage of work. He had only ever worked for the employer.

Similarly, in Maasland v. City of Toronto [2], the court awarded a 26 month notice period in a constructive dismissal scenario. The Plaintiff in this case was 57 years of age and testified that she intended to retire at age 61. She had a length of employment of 25 years and held a management position in her role as Divisional IT manager. The court also found that she was a specialist and highly experienced and qualified in an already specialized field. The court also noted, whether it took it into account or not, that she always received positive performance reviews.

As referenced in my paper dealing with dependent contractors, the Ontario Court of Appeal also awarded an exceptional notice period in a dependent contractor scenario in Keenan v. Canac Kitchens Ltd.[3] The court found that a married couple, despite Canac Kitchen’s position, were not independent contractors, but rather dependent contractors and therefore entitled to reasonable notice of their termination. The court took into account the husband’s age of 63 and his length of employment of 32 years and the wife’s age of 61 and her length of employment of 25 years, in finding that they were both entitled to 26 months of notice of their terminations.

In addition to rising notice periods, fixed term contracts gained some unfortunate attention this year as well. In Howard v. Benson Group Inc. (The Benson Group Inc.) [4], the Ontario Court of Appeal made a significant finding in a case where a fixed term contract had not yet expired. The employer had hired the employee on a 5 year term, but did provide for an early termination prior to the expiry of the term clause which read, “Employment may be terminated at any time by the Employer and any amounts paid to the Employee shall be in accordance with the Employment Standards Act of Ontario”. The employee was terminated 23 months into the employment agreement, with 37 months to go. The court found that the early termination clause was overly vague and therefore void and struck the clause from the contract. The lower court simply assessed a reasonable notice period based on the 23 months of service, subject to mitigation earnings.

On appeal, the Ontario Court of Appeal agreed that the early termination clause was unenforceable, but found that without it, the employer had no right to terminate the contract before the expiry of the 5 year fixed term contract and by doing so, was liable for the 37 months remaining, regardless of whether the Plaintiff mitigated or not. This was a $200,000 lesson for the employer.

Confusion also set in over the last year in regards to whether the economic conditions of the employer can factor into the determination of reasonable notice periods of dismissed employees. In Gristey v. Emke Schaab Climatecare Inc. [5], the Ontario Superior Court of Justice did take into account the steady decline in the company’s business in determining that the employer was entitled to pay less pay in lieu of notice. In this case, the employer terminated 9 employees due to no work being available. The trial judge noted that given the Plaintiff’s age (52), length of employment (12 years) and position (general labourer), he would have found a notice period of 12 months.  However, in factoring in economic conditions, the trial judge opted to decrease that notice period to 8 months and explained that, “this is a recognition that…had Mr. Gristey’s employment not been terminated, he would have likely worked less hours during the notice period.  Thus, it would not be fair to the Defendant to apply the full twelve-month notice period.”

However, the Ontario Court of Appeal rejected this argument in Michela v. St. Thomas of Villanova Catholic School[6], finding that “an employer’s poor economic circumstances do not justify a reduction of the notice period to which an employee is otherwise entitled”.

Paquette v. Terago Network[7] dealt with how a reasonable notice period that has not yet expired gets dealt with by the courts. In this case, the Ontario trial judge found the appropriate notice period for the Plaintiff to be 17 months (with 14 years of employment, age of 49 and Director of IT) but only 6 months of that period had elapsed by the time of trial. The judge ordered the employer to pay the full 17 months to the employee and found that “if he earns mitigation income, he will have to simply account for it or be liable for breach of trust”.

As the above shows, notice periods are complex and a bit of a moving target. Proper contractual drafting can avoid some of these situations altogether.

 


[1] 2015 ONSC 1081 (CanLII)

[2] 2015 ONSC 7598 (CanLII)

[3] 2016 ONCA 79

[4] 2016 ONCA 256 (CanLII)

[5] 2014 ONSC 1798 (CanLII)

[6] 2015 ONCA 801 (CanLII)

[7] 2015 ONSC 4189 (CanLII)