COVID-19…The “Knockout”

Determining “Reasonable” Notice During a Global Pandemic Who Gets Hit Hardest…Employer or Employee?

Over the last 11 months, employers have been forced to find ways to survive in the face of significant business disruption caused by COVID-19.

Many employees have been placed on temporary layoff and so many others have been terminated outright…with more to come.

As wrongful dismissal cases work their way through the litigation process an important question has emerged.

How will our court assess “reasonable” notice/severance for employees terminated during a global pandemic?

A Primer

A non-unionized employee, terminated without “just cause” (gross misconduct), is entitled to “reasonable” notice or severance on termination in the absence of a valid employment contract dictating otherwise.

The assessment of “reasonable” notice/severance is more “art” than “science”.

A court would determine what notice/severance is “reasonable” based upon various factors including age, length of service and position.  The period of notice/severance is intended to provide a “safety net” to assist the employee’s transition to other employment. 

Simply put, to a maximum of approximately 24, months, the employee’s entitlement to notice or severance increases with age, service and an assessment of the position held.

What impact will COVID-19 have on the assessment of “reasonable” notice/severance under common law rules?

The Arguments

In one corner, employers will argue that the devastating financial hit caused by COVID-19 should serve to moderate or even reduce an employee’s right to notice or severance.

In the other corner, employees will argue that the devastating financial hit caused by COVID-19 should serve to increase, perhaps significantly, an employer’s obligation to provide notice or severance.

Both arguments seem reasonable and can be rationalized.

For employers, the additional financial burden associated with an enhanced notice/severance liability could be the left jab that ends the fight.

For employees, facing a protracted and difficult job search exacerbated by COVID-19, a reduced notice/severance entitlement could be the body blow that ends the fight.

Who Wins?  The Knockout

Until COVID-19 related wrongful dismissal cases work their way through the lengthy litigation process, it is unclear who will win this heavyweight fight.

Existing case law is in conflict regarding the impact an economic downturn will have on the assessment of “reasonable” notice/severance.  Moreover, we have never faced a global pandemic in this context.

Some courts have awarded enhanced or increased notice/severance to employees recognizing that it is more difficult to find new employment in a difficult economy (Paquette v. TeraGo Networks, 2015 ONCA 4189).  Yet other courts have held that economic conditions, generally speaking, should not serve to enhance or increase the notice/severance period (Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801).

While the answer to this important question remains unclear, there are key points for employers to consider regarding the termination of employees during a global pandemic:

  • it is unlikely that our courts will use COVID-19 to reduce notice/severance awards in favour of the employer
  • at best, our courts would treat COVID-19 as a neutral factor
  • at worst, economic conditions will serve to increase notice/severance awards when the terminated employee has made reasonable efforts to secure new employment without success
  • importantly, for employees terminated pre COVID-19, the economic impact of the global pandemic should not be treated as a factor to increase notice/severance.  Why?  Because the right to notice/severance is to be determined based upon the circumstances existing at the time of termination and not after (Yee v. Hudson’s Bay Company 2021 ONSC 307)
  • this is yet another reason for employer’s to utilize or update employment contracts as a tool to avoid the uncertainty asserted associated with an employer’s right to “reasonable” notice/severance on termination

In summary, the winner of this fight remains unknown.  However, the issue will be heavily litigated and answers will become clear over the next few months.

Disclaimer: Information made available in this article is provided for general information purposes only and is provided without representation for its accuracy or completeness. It is not legal advice and should not be relied upon. You should not take any action or fail to take any action based on the information set out in this article or on this website.  Consult a lawyer at Sullivan Mahoney LLP and seek professional legal advice tailored to your unique situation.