Reasonable Notice

R. Mark Fletcher, LL.B

Grosman, Grosman & Gale LLP
© Leader Quest Inc. and R. Mark Fletcher

The employment relationship is coming to an end. What is reasonable notice and what do employers and employees need to know about providing notice?

One of the most fundamental legal principles in Canadian employment law is the employer’s obligation to provide an employee with reasonable notice or pay in lieu of reasonable notice of the termination of his or her employment where the employment contract is terminated by the employer on a without cause basis.  In cases where just cause exists, such as in cases of serious employee misconduct or wrongdoing, the employer may summarily terminate the employment relationship without reasonable notice or pay in lieu of notice.  However, the threshold for establishing just cause is very high, and, in the majority of cases, employers are required to provide employees with reasonable notice of termination.  This legal principle applies to most employment relationships, regardless of whether the employer is a for-profit or not-for-profit enterprise.  Accordingly, the employer’s obligation to provide reasonable notice of dismissal is at the heart of the employment relationship, whether or not the employment contract is in writing. 

Notwithstanding its centrality to the employment relationship, many employers and employees often fail to appreciate the significance of this legal obligation and do not understand how the principle operates in practice.  It is submitted that not- for-profit organizations can minimize their exposure to costly and time-consuming wrongful dismissal litigation by taking steps to both educate their executives and human resources professionals about this legal obligation and by instituting certain measures designed to limit the amount of the reasonable notice or pay in lieu of notice entitlement.  This article will briefly discuss the principle of reasonable notice obligation and suggest strategies for minimizing exposure to liability.

Why Are Employers Obligated To Provide Reasonable Notice?

Canadian courts have determined that the employment relationship is different from other forms of commercial relationships.  Employment law has evolved in a manner that recognizes that employment agreements are rarely the result of terms negotiated by parties of equal bargaining power and therefore various legal safeguards have been developed by the Courts and lawmakers to insulate and protect employees from this power imbalance.  Reasonable notice is one of these safeguards.  An employee is entitled to reasonable notice or pay in lieu of notice of his or her dismissal where the dismissal is on a without cause basis so that the employee has some advance time and income steam to allow the individual to search for alternate comparable employment.  It operates, in theory, as an economic safety net for the employee. 

How Is the Reasonable Notice Period Determined?

In Ontario, two sources of law assist in determining the period of reasonable notice to which the individual employee is entitled. 

1. Employment Standards Legislation

The first source is the applicable employment standards legislation.  In the case of most employees in Ontario, the Employment Standards Act, 2000 (“ESA”), which is a provincial statute that applies only to provincially regulated employees, will govern minimum entitlements.  Conversely, the Canada Labour Code (“CLC”) applies only to federally regulated employees such as bank employees or federal civil service employees.  The ESA and the CLC set out minimum employee entitlements to notice or pay in lieu of notice.  The entitlement is based on the individual employee’s length of service and, in certain cases, special notice and or severance provisions may apply to the employee depending on the payroll of the employer and or if the employee is part of a large group of employee terminations.  Many employers and employees mistakenly assume that the ESA or CLC exclusively govern entitlement to notice or pay in lieu of notice.  This is problematic since an employee’s entitlement to “reasonable” notice at common law is often greater than the minimum notice period protected by the applicable employment standards legislation. 

Employment lawyers often spend a good deal of their time explaining that the extent of an employees entitlement to reasonable notice goes, in many cases, above and beyond the statutory minimum entitlements as will become clear upon review of the second source of law.  Finally, it is also critical for employers to ensure that where a written contract of employment is made and a without cause termination clause dictates the reasonable notice period or pay in lieu of notice that it provide for notice or compensation equal to or greater than the minimum amounts required under the legislation.  The written termination provision and or the contract in its entirety may be found void and unenforceable if the contract provides the employee with less notice or compensation than the amount required by the employment standards legislation.  

2. Common Law

In cases where there is no written employment contract between the employer and employee stipulating the employee’s entitlement to reasonable notice or pay in lieu of notice or in cases where the contract provides for less notice than the minimum statutory notice entitlement, the second source of law that determines the range of an employee’s entitlement to reasonable notice is the common law.  The common law is judge made law or, legal precedent.  Employment lawyers and the Courts review previously decided wrongful dismissal cases, which are similar to the individual employee’s case to determine the “reasonable” notice period.  In this regard, the Courts and employment lawyers review the particular employee’s Bardal factors, named for the employee in the landmark decision of Chief Justice McCruer in Bardal v. The Globe and Mail Ltd. where the common law reasonable notice factors were first enshrined.  The main factors identified in Bardal  are as follows:

  1. Character of Employment (i.e. whether the employee was a manager or clerical);

  2. the employee’s length of service (the longer the period of service typically requires more notice);

  3. the employee’s age; (older employees typically receive more notice than younger employees)

  4. the availability of similar employment (having regard to the experience, training, and qualification of the employee.)

A wrongful dismissal action is essentially a breach of contract case wherein the former employee alleges that his or her employer has failed to provide him or her with reasonable or sufficient notice or pay in lieu of notice.  In determining whether the employer is liable and the extent of liability, the Court will review the individual employee’s Bardal factors to determine the employee’s reasonable notice period at common law.  An employer will be held liable for the extent of damages incurred by the employee over the period of reasonable notice.  Damages are typically based on the compensation that the employee would have earned had the employer provided reasonable notice of the employee’s dismissal.  This includes but is not necessarily limited to wages or salary, benefits, bonuses and certain other types of losses incurred by the employee. 

There is a common misconception that an employee who has been terminated on a without cause basis is entitled to a month’s salary per completed year of service.  In many cases, depending on the interplay of the Bardal factors, a long- term employee may be entitled to less than a month per year of service.  Conversely, there are many cases where an employee’s entitlement to reasonable notice exceeds one month per year of service. 

In addition, where the employer dismisses an employee in a bad faith manner, the Court may award an increased notice period separate and apart from an employee’s regular entitlement to reasonable notice at common law.  This is reserved for cases where the Court finds that the employer acted in a particularly egregious fashion such as terminating an employee’s employment for just cause without any compensation where just cause did not exist for the termination. 

The Employee’s Duty To Mitigate

The extent of an employer’s liability for damages is subject to the legal requirement that the employee take reasonable steps to mitigate his or her damages by seeking comparable alternative employment upon the termination of the employment relationship.  In most cases, any income earned by the employee from alternate employment or self-employment is deducted dollar for dollar from an employee’s entitlement to any damages.  The law does not permit a wrongfully dismissed employee to sit around and wait for his or her damage award.  The employee is required by law to take reasonable steps to limit his or her losses by requiring the employee to search for alternate employment. 


Recommendations For Limiting Liability

It is recommended that not-for-profit organizations adopt the practice of entering into written employment agreements with employees.  The written employment agreement should include a clear and legally enforceable termination provision which addresses employee entitlement to reasonable notice or compensation in lieu of reasonable notice where the relationship is terminated by the employer on a without basis.  Provided that the termination clause provides the employee with notice and or compensation that is equal to or greater than the statutory notice period, the common law notice period can be excluded by the express intention of the parties evidenced in the employment contract.  Accordingly, this practice will assist in minimizing the organization’s exposure to liability for wrongful dismissal.   

Conclusion

Not-for-profit employers need to maximize scarce resources and reduce operational costs.  Understanding the obligation to provide reasonable notice to employees prior to without cause dismissals is essential since failure to provide reasonable notice often results in costly wrongful dismissal litigation.  While this article canvasses the general concepts involved in the legal obligation to provide reasonable notice to employees, each case is unique and legal advice should be sought prior to any employee terminations and or the preparation of employment agreements.


This article may be reproduced for distribution as a learning tool for organizations in the not-for-profit sector provided attribution is made to R. Mark Fletcher, LL.B. of Grosman, Grosman & Gale LLP, Toronto; and to Leader Quest Inc.

This article contains material of general interest only and is not intended to provide legal advice or to replace a consultation with a legal professional on any particular matter. R. Mark Fletcher can be reached at mfletcher@grosman.com or 416-364-9599.