The Law and Ethics of Notice of Termination

In the Star Saturday, there was a short and basic discussion of what employees should do when they are dismissed and are offered a severance package by their employer.  This should be a review for my employment law students.  The key points about dismissal law in Canada can be generally summarized as follows:

1.    In a non-union workplace, employers can usually fire someone for any reason (or no reason) at all, provided they provide the employee with notice that they are terminating the contract.  Note though  that some reasons for dismissal may violate a statute.  For example, the reason for dismissal must not relate to protected grounds in the Human Rights Code and the employer can’t fire someone for organizing a union because the Labour Relations Act prohibits that. A nonunion employer can also dismiss an employee with no notice if the employee had committed a serious breach of the contract (‘summary dismissal’).

2.    In a unionized environment, the employer must usually have ‘just cause’ to dismiss someone–in other words, a good reason.  That requirement is found in the language of the collective agreement.  That is a key benefit to employees of being unionized that is paid for by through union dues.  Union dues will also usually cover the cost of the employees’ professional representation if the dismissal is disputed.  A unionized employer cannot dismiss someone by simply giving them notice.

3.   In determining how much notice is required to dismiss a non-union employee, an employer must consider three things:  (1) the contract; (2) the Employment Standards Act; and (3) common law ‘reasonable notice’.

A.  A contract may include a term that says how much notice is required to terminate the contract.  That would usually be enforceable if it provides at least as much notice as required by the ESA (see Machtinger about what happens if the term provides less than the ESA.  Sometimes a notice term that is grossly unfair will not be enforced by a court.

B.  Section 54 (and section 58 in the case of mass layoffs) of the Ontario ESA requires employers to give employees notice of termination.  The amount of notice required is described in Section 57. An employer also (in addition to paying notice pay) has to pay ‘severance pay‘ to an employee with at least 5 years’ service, if the employer has an annual payroll of $2.5 million or more, or is dismissing 50 or more employees in a six month period because it is discontinuing all or part of the business.  That requirement is in Section 64.

C. The ESA sets out the ‘minimum’ amount of notice required.  The common law implied term requiring ‘reasonable notice’ of termination often will require more notice than the ESA, sometimes considerably more.   The court decides how much notice is reasonable by applying a set of criteria, the most important of which are length of service and type of job. Here is a nice summary of the factors usually considered prepared by the law firm Fasken Martineau. The summary is a a bit dated now, for example, it does not include the case Honda v. Keays, but it gives you the basic idea of how it works.

4.   An employee cannot file both an ESA complaint for statutory notice and severance and a wrongful dismissal action for ‘reasonable notice’.  In other words, the employer cannot be made to defend two legal actions dealing with the same dismissal.  That requirement for the employee to choose is in Section 97.

Although most people are entitled to more ‘reasonable notice’ under the common law than is required in statutory notice under the ESA, in fact, many employees are only given their ESA minimum notice or slightly more than that.  That is because most people cannot afford to hire a lawyer to sue their employer in court to recover the great contractual ‘reasonable notice’.  Filing an ESA complaint for notice and severance pay is easier, quicker, and cheaper than pursuing a lawsuit for wrongful dismissal.  An employee can simply fill out an on-line form to file an ESA complaint.  Here is the form.

Some lawyers–such as Howard Levitt, who writes columns in the National Post–even advise employers to pay less than ‘reasonable notice’, knowing that the employees probably won’t sue. In this article, Levitt noted:  ”Generally, if an employee is provided 80% of what a court would award, it makes little economic sense to sue”.  Therefore, according to Levitt, employers should “offer severance at the low end of the range or just below.”

If Levitt is encouraging employers to provide less than ‘reasonable notice’, then he is advising employers to breach the employment contract, isn’t he?  For you lawyers and HR managers, do you think it is unethical to offer/give employees less notice than your lawyers believe a court would find is reasonable?