Does the Financial Health of an Employer Affect the Quantum of Reasonable Notice?

January 12th, 2016 by

In a recent decision, the Ontario Court of Appeal was called on to decide whether the economic health of a employer was a factor properly considered in determining the amount of reasonable notice that a dismissed employee was due. Was it, as the employer argued, a fact that required some attention by a court? Or was it as the aggrieved employee argued, irrelevant? Through a well-reasoned judgment, the Court came down firmly on the side of the latter.

In Michela, the Respondent employer was a school board who employed the three appellant teachers on a series of one year contracts. The employees had worked varying lengths of time, ranging for eight to thirteen years. In mid-2013, the three received emails from their employer informing them that their contracts would not be renewed due to decreased enrolment. Subsequent to the lapse of their contracts, the three sued for wrongful dismissal, and all parties agreed to resolve the matter by summary judgment.

On motion, the judge rejected the argument that as they were on fixed contracts, the teachers were entitled to no notice. The judge found that the teachers were employed for an indefinite period and entitled to reasonable notice. He determined that twelve months was a reasonable duration. However, he reduced the notice period to six months, finding:

that the notice period proposed is too long. I point out that, if notice for 12 months is reasonable, the School will have to pay the same amount for these teachers as if they had remained on staff for the year that was upcoming. Assuming that the other two teachers who were terminated maintained the same rights, it is not difficult to see that the School would be unable to reduce its prospective deficit by terminating staff it did not need. The law does not ignore the dilemma of the employer. The teachers should be taken to understand this aspect of their employment and, in this case, were made aware of the concern. In this situation, I reduce the claim for notice by half, to six months.

The teachers appealed. On appeal, the court reiterated that the determination of a notice period is fact-specific exercise and that the factors to be considered are those outlined in the seminal case of Bardal v Globe and Mail, one of which is the ‘character of the employment.’ Reviewing the nature of this factor, the Court held that it refers to the nature of the position that the employee held, as non-management employees are generally assumed to require longer notice periods to find alternate work. Thus, the Court held, the motions judge erred when he considered that ‘character of the employment’ allowed him to consider the financial health of the employer when determining a reasonable period of notice. The Court of Appeal reiterated that ‘character of employment’ as well as the other Bardal factors relate to the employee and not the employer. In the result, the Court allowed the appeal and fixed the period of notice at twelve months, the term the motions judge would have imposed absent his erroneous reasoning.

If you have a question about the employer-employee relationship or are involved in employment law litigation, contact the experienced employment law team at Devry Smith Frank LLP.

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