The COVID BUMP: Will Wrongfully Dismissed Employees Score “Coronavirus Damages”?

Michela v St. Thomas of Villanova Catholic School may give parties a glimpse into the Court’s position

While Canadians focus on flattening the curve of new cases of Coronavirus (COVID-19) cases, wrongful dismissal plaintiffs and their counsel are hoping for a “bump” of sorts. The millions of Canadians now unemployed probably as a result of the COVID-19 global pandemic declared by the World Health Organization on March 11, 2020 and subsequent recession are hopeful that judges award additional notice period damages.

During this time, employers are terminating their workers’ employment at an alarming rate. According to Statistics Canada, the unemployment rate has risen from 7.8% in March, to 13% in April, 2020. While job loss may be inevitable, employers must ensure that they adhere to Federal or Provincial employment standards legislation as well as the common law, where applicable. Otherwise, employers will risk exposure to potential damages for breach of statute and wrongful dismissal.

The common law (or judge-made law) presumes that employees hired for an indefinite period are entitled to reasonable notice of the termination of their employment by their employer. Notice periods are given in order for the employee to continue to obtain their pay while attempting to find alternative employment. As the Court stated in Lin v Ontario Teachers’ Pension Plan, 2016 ONCA 619 (CanLII).

At its foundation, reasonable notice is the period of time it should reasonably take the terminated employee to find comparable employment.

Commonly, employers will provide “pay in lieu of notice,” where the former employee will receive a lump sum compensation of their pay, or a salary continuation, as if they continued working normally.

When an employee commences a dispute over a notice period, today’s judges still follow the 1960s case of Bardal v Globe & Mail Ltd., 1960 CanLII 294 (ON SC) The Bardalfactors are considered by the Court to determine the length of time of a reasonable notice period. They include:  

  1. Age of the employee;
  2. Length of service;
  3. Character of the employment; and
  4. Availability or job market of similar employment taking into consideration of the experience, training and qualifications of the employee.

This list is not exhaustive. A broad range of other factors, such as health issues, manner of dismissal and language comprehension, can also be considered.

Each wrongfully dismissed employee’s circumstances are particular, and the appropriate notice period will be determined on a subjective basis rather than an objective one. In Paquette v TeraGo Networks Inc., 2015 ONSC 4189 (CanLII), rev’d on other grounds 2016 ONCA 618 (CanLII), the Court stated: “The determination of a reasonable notice period is a principled art and not a mathematical science.”

Notice Period in Times of COVID-19

During these extraordinary times of COVID-19, neither employees nor employers are immune from the pandemic’s impact. Dismissed employees will struggle to find alternate employment, much less comparable employment.  Standard notice periods may be insufficient to bridge an employee to a new position.

Both employers and employees will most likely be in a position of financial difficulty, and it is presently unclear as to which party will bear the burden. Will employers be ordered to “bump up” employee notice periods in order to ensure that employees receive pay during a prolonged period of unemployment? Or will employees have to make do with the notice period given to them by their financially-strapped employers?

Employers may take the position that no notice period should be awarded based on the concept known as frustration of contract in common law and pursuant to the statutory exception in Termination and Severance of Employment, O Reg 288/01 s 2.

Though judges and decision makers may not have case law dealing specifically with termination of employment during a global pandemic to which they can refer, jurisprudence of a similar nature is insightful. Cases in which employers were in financial distress and have had to fire staff may be analogous.

One of the leading cases which addressed this situation is Michela v St. Thomas of Villanova Catholic School, 2015 ONCA 801 (CanLII). In that decision,the Ontario Court of Appeal addressed the question of whether an employer’s financial circumstances are relevant in determining a wrongfully dismissed employee’s reasonable notice period entitlement, and stated:

It is important to emphasize, then, that an employer’s poor economic circumstances do not justify a reduction of the notice period to which an employee is otherwise entitled having regard to the Bardal factors.

Notice Periods in Difficult Economic Circumstances

In many decisions, both pre-and post-Michela, the Court has asserted that a poor economy may increase a plaintiff’s reasonable notice period entitlement. For example:

Case Name Position Tenure Salary Age Notice Period Judge’s Reasons
Deacon v MacMillan Bloedel Ltd., 1982 CarswellOnt 717   Manager 9 years, 11 months 38 7 months “Another factor, one upon which I place reliance, is that this man was laid off from his employment in a period of economic downturn, which surely made it more difficult to obtain alternate employment. In times other than hard economic times, I would say that a person in the position of Mr. Deacon, and in the circumstances herein, should have received a notice of six months, but the economic factor, in my view, justifiably adds a period of one month.”
McBride v W. P. London & Associates Ltd., 1984 CanLII 1903 (ON SC) Senior Drafts-man 8 years 51 4 months “I accept the evidence of the plaintiff that because of the state of the economy during the period October, 1982 to February, 1984, it was ‘nigh impossible for a senior draftsman to find employment’. Indeed, it was only after the plaintiff took an eight-week computer drafting course that he found employment as a draftsman again.”
Lim v Delrina (Canada) Corp., 1995 CanLII 7271 (ON SC) Corporate Controller 6 months $50,000 42 5 months “…I conclude that the following factors are to be considered when ascertaining an appropriate notice period: (1) The depressed economic conditions of the employer. (2) The lack of available employment opportunities due to depressed economic conditions in a particular industry. (3) That factors 1 and 2 can be considered so as to increase notice but not to decrease it. (4) That economic factors are not to be given undue influence.” “…I find that, given the well known depressed economic conditions of the time, particularly as it affected the plaintiff’s profession, an additional 1/3 (one month) should be added to the notice period.” [Emphasis added]
Leduc v Canadian Erectors Ltd., 1996 CanLII 8132 (ON SC)   Project Engineer 6 years $55,800 34 7 months “In the case at bar, the plaintiff, Compton and Dion were of one voice in describing the economic conditions in their industry; generally, as being slow, if not depressed, in 1994. That was the economic climate to be weathered by the plaintiff when his employment was terminated on July 7, 1994 (and the defendant knew it at the time). That was why it took nine months of diligent effort by the plaintiff to secure new employment. Accordingly, I find this to be an appropriate case for the period of notice to be enlarged beyond what otherwise might be appropriate.”
Castelino v Richard Ellis (Canada) Inc, [1997] OJ No 6268   Vice President of Property Management 3 years $77,000 52 8 months “With respect to the availability of similar employment, having regard to the experience, training and qualifications of the employee, I find that this factor also favours the plaintiff somewhat. The evidence is clear that his termination came at a very difficult time in the real estate industry. There was clearly a recession. There were many bankruptcies and receiverships, and the environment was highly competitive. The defendant suggests that this meant that there were lots of jobs available, but equally, I accept the plaintiff’s evidence that there were a lot of people chasing those jobs as a result of the turmoil in the market. The situation was highly competitive and it was a rather difficult climate in which to find employment.”
Sifton v Wheaton Pontiac Buick GMC (Nanaimo) Ltd., 2010 BCSC 353  Shop Manager 16 years $78,000 51 14 months “…that unfavourable economic circumstances may serve to extend the reasonable period of notice if, as a result, the employee is unlikely to find equivalent employment readily and his or her loss is thereby increased, but they will not serve to reduce the reasonable period of notice.”
Zoldowski v Strongco Corporation, 2015 ONSC 5485   Parts Administr-ator 17 years $48,000 39 14 months As part of this determination the court may consider the economic climate the employee is put into when terminated.  If there is an economic downturn, then that may make it more difficult to find a job and may justify a longer notice period…”
Nielsen v Sheridan Chevrolet Cadillac Ltd., 2016 ONSC 1843 Service Advisor 1 year $56,000 27 28 weeks “… in determining reasonable notice, economic circumstances of an employer are not a proper consideration in determining the length of notice to which an employee is entitled upon termination…”
Hampton Securities Limited v Dean, 2018 ONSC 101 (CanLII), aff’d 2018 ONCA 901 (CanLII), leave to appeal dismissed 2019 CanLII 45256 (SCC) Broker 1 year  $117,000 6 months I find that the ordinary notice period for someone in Ms. Dean’s position would be three to four months. I would tend towards the higher end of that scale given the depressed circumstances in the securities industry at the time of termination and fix the initial notice at four months. I extend the notice period by a further two months to compensate her for the additional time it would take to find employment given Hampton’s unjustified allegations of unauthorized trading in the NOT.”

While the court points to economic factors as impacting the reasonable notice period, unlike Laforme J in Lim, judges do not often specify how much of an impact a particular factor had on the determination of the length of the reasonable notice period. As such, it is difficult to pinpoint a substantial increase in the notice periods awarded as a result of economic or financial challenges. Even the precedent in Lim is somewhat unclear – could it be followed to increase notice periods by one month or one third? In the case of a long notice period an increase by one third could amount to several additional months.

Although these decisions and Michela elucidate the Court’s position to date, the global pandemic in which we find ourselves, which is not localized to one region or industry, may render a different decision from the Court.