Employees who are terminated without cause are entitled to either notice or compensation from their employers. A variety of factors affect how much notice or compensation each individual may receive under their own unique set of circumstances. Some of these circumstances may be "exceptional" and warrant an amount of notice or compensation which goes above the typical maximum; e.g., the COVID-19 pandemic being possibly the most exceptional circumstance of them all.
Notice Period for Termination Without Cause
An employer is entitled to terminate an employee without cause provided that the employee is either given reasonable notice or given payment in lieu of reasonable notice. This is the "Notice Period:" an amount of time, or a level of compensation, to assist a dismissed employee find comparable work. At common law, the Notice Period is "reasonable notice," which varies with the circumstances of any particular case. (For a history of the development of the common law, see Machtinger v HOJ Industries Ltd).1 The Notice Period is also a statutory entitlement pursuant to the Employment Standards Act, 2000.2 The employment contract may specify an entitlement upon termination without cause, so long as entitlement is equal to or greater than the minimum standards in the Act. In other words, one cannot contract out of the Act.
In the event that a court must determine the Notice Period, it must engage in a balancing exercise. In Minott v O'Shanter Development Co, the Ontario Court of Appeal described how "determining the period of reasonable notice is an art, not a science. In each case, trial judges must weigh and balance a catalogue of relevant factors."3 These factors were outlined in 1960 by the Ontario High Court in Bardal v Globe & Mail Ltd as follows:
- the character of the employment,
- length of service,
- age, and
- availability of similar employment, having regard to the employee's experience, training and qualifications.4
Note: These Bardal factors are applicable only where an indefinite-term employee is dismissed without cause without an enforceable termination clause. For greater clarity, these factors are not applicable where (i) the employment is for a fixed term, (ii) the employment contract contains an enforceable termination clause, (iii) the employee is dismissed for just cause under the common law, or (iv) the employee has commenced a complaint at the Human Rights Tribunal of Ontario (HRTO) for discriminatory termination.
The Unofficial Ceiling of Twenty Four (24) Months
As a general rule, the unofficial 'ceiling' for a Notice Period is twenty-four (24) months. The Court of Appeal held in Lowndes v. Summit Ford Sales Ltd that while "there is no absolute upper limit or 'cap' on what constitutes reasonable notice, generally only exceptional circumstances will support a base notice period in excess of 24 months."5 It will be up to the employee to establish that their circumstances are exceptional.
Absent exceptional circumstances, the base Notice Period of twenty-four (24) months provides for a realistic maximum. Having certainty in this regard helps both employers and employees come to an agreement about the employee's entitlement in the event of a without-cause termination.
Ultimately, certainty provides for more confidence as to the outcome of a dispute about the entitlement. This certainty keeps litigation costs down.
'Exceptional Circumstances' Lengthening the Notice Period
The notion of 'exceptional circumstances' reduces the certainty of the Notice Period, but the factors are not unpredictable. The courts often look at the Bardal factors to determine what circumstances qualify as exceptional.
In 2016, in Keenan v Canac Kitchens Ltd, the Court of Appeal declined to overturn an award of twenty-six (26) months based on the employees' ages at the time of termination (63 and 61 years old), their length of service (32 and 25 years), and the character of their supervisory and representative positions; i.e., "for over a generation, they were [the employer]'s public face to the outside world."6
In 2021, in Currie v Nylene Canada Inc, the Ontario Superior Court of Justice also granted an award of twenty-six (26) months to an employee who had worked for the same employer for her entire working life, was approaching the end of her career, and that she would face pronounced difficulty transferring her highly specialized manufacturing skills to another employer.7
The general case remains to be that the unofficial upper ceiling of twenty-four (24) months is appropriate for most cases, but the court does reserve the right to extend the Notice Period when exceptional circumstances call for an exception to the general rule.
The 'Exceptional Circumstance' of COVID-19
On March 11th, 2020, the World Health Organization declared a pandemic due to Coronavirus disease ("COVID-19"): an infectious disease caused by a newly discovered coronavirus. On March 17th, 2020, the Ontario Government declared a state of emergency due to an outbreak of COVID-19. The pandemic is an unprecedented circumstance that the court has considered when calculating Notice Periods.
In the pre-pandemic era, in Michela v St Thomas of Villanova Catholic School, the Ontario Court of Appeal held that "an employer's financial circumstances are not relevant to the determination of reasonable notice in a particular case."8 In other words, the employee's entitlement to a Notice Period is not reduced just because times are financially dire for the employer (just as the employee would not be entitled to a larger Notice Period if the employer is enjoying prosperity).
However, the court has recognized COVID-19's negative effect on the labour market as grounds to lengthen the Notice Period. In Yee v Hudson's Bay Company, the court noted that it "should take into account the recent COVID pandemic and resulting in significantly increased difficulty in obtaining comparable employment."[9] For example, in Kraft v Firepower Financial Corp, the court awarded a terminated employee an award of ten (10) months after finding that the normal average award was nine (9) months; i.e., "one month more than the average for his circumstances during non-pandemic times."[10] Further, in Pavlov v The New Zealand and Australian Lamb Company Limited, the court not only awarded the employee an above-average award but also awarded a bonus on a pro-rata basis with reference to the bonuses paid to other employees during the same time frame.11
The court has yet to extend a Notice Period beyond the unofficial twenty-four (24) month ceiling due to COVID-19-but it would not be unfathomable.
Conclusion
Employees terminated without cause are entitled to a reasonable Notice Period which is generally limited to twenty-four (24) months. However, the courts have not imposed this limit as an un-crossable threshold, rather it reserves flexibility for itself to extend the Notice Period for circumstances that are exceptional. The Bardal factors which help to determine the Notice Period are also helpful to determine if any exceptional circumstances are present. With respect to the factor of 'availability of similar employment,' the courts have recognized the impact of the COVID-19 pandemic and have, accordingly, extended Notice Periods-but not (yet) beyond twenty-four (24) months.
Footnotes
1. 1992 CanLII 102 (SCC).
2. SO 2000, c 41.
3. 1999 CanLII 3686 (ON CA).
4. 1960 CanLII 294 (ON SC) at 145.
5. 2006 CanLII 14 (ON CA) at para 11, citing Baranowski v Binks Manufacturing Co, 2000 CanLII 22614 (ON SC) at para 277, citing Veer v Dover Corp. (Canada) Ltd, 1997 CanLII 12429 (ON SC).
6. 2016 ONCA 79 (CanLII) at paras 30-34, cited by Dawe v The Equitable Life Insurance Company of Canada, 2019 ONCA 512 (CanLII) at para 32.
7. 2021 ONSC 1922 (CanLII) at para 84.
8. 2015 ONCA 801 (CanLII) at para 17.
9. 2021 ONSC 387 (CanLII) at para 20.
10. 2021 ONSC 4962 (CanLII) at para 22 [emphasis added].
11. 2021 ONSC 7362 (CanLII) at para 24.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
