Employer’s Financial Problems Will Not Affect an Employee’s Reasonable Notice
January 5, 2016
The Court of Appeal for Ontario has now definitively addressed the issue of whether an employer’s financial circumstances are relevant to the assessment of an employee’s common law reasonable notice period.
In this case, three employee school teachers who were employed on a series of one-year contracts for thirteen, eleven and eight years respectively, appealed a summary judgment award made in their wrongful dismissal action after the motions judge reduced their reasonable notice period from twelve months to six months. The reduction was due to the respondent employer’s financial difficulties and the presumed availability of alternative teaching positions for the employees.
The motions judge rejected the employer’s argument that the three teachers were employed pursuant to fixed term contracts and held that they were entitled to reasonable notice commencing from the date they were specifically informed that there would be no positions offered to them for the following school year. However, the motions judge noted that if the teachers were given 12 months’ notice, the employer would be “unable to reduce its prospective deficit by terminating staff it did not need”. The motions judge also stated that “the law does not ignore the dilemma of the employer”.
In allowing the employees’ appeal, the Court of Appeal emphasized that damages for wrongful dismissal are designed to compensate employees for losses incurred during the period of reasonable notice and that the calculation thereof is fact-specific based upon the relevant factors set out in the Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), including the “character of employment”. The Court of Appeal found that the motions judge erred in finding that the “character of employment” included a consideration of an employer’s financial circumstances and clearly stated that “character of employment” referred to the nature of the employee’s position in terms of responsibility, expertise and similar elements, and not the position of the employer.
In doing so, the Court of Appeal clarified a passage quoted by the motions judge from the case of Bohemier v. Storwal International Inc. (1982), 40 O.R. (2d) 264 (H.C.); (1983), 44 O.R. (2d) 361 (C.A.); leave to appeal to SCC refused,  S.C.C.A. No. 343 and held that an employer’s financial position cannot be used to either increase or decrease the notice period. In allowing the employees’ appeal and increasing the reasonable notice period to twelve months, the Court of Appeal also found that having concluded that the employees took reasonable steps to mitigate their damages, the motions judge had no evidentiary basis for presuming the future availability of teaching positions and further, found no justification for the motions judge’s reduction of the partial indemnity costs sought on the motion by the employees.
In the event there was any doubt, this decision seems to have put a definitive “nail in the coffin” to the idea of an employer’s financial problems being visited upon a terminated employee. While an employer may have legitimate financial reasons for terminating staff, those reasons will not affect the assessment of reasonable notice by the Courts.