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Brito v. Canac Kitchens: Is it Time to Punish Employers Who Low-Ball Notice Periods?

 

Brito v. Canac Kitchens, decided by my favorite employment law judge, Justice Echlin,  raises an issue that I have harped about several times before.  Here’s the scene for my employment law students. An employment contract requires the employer to pay “reasonable notice” of termination, which is usually considerably more than the statutory minimum notice found in employment standards legislation.  Remember, all the ESA says is that an employer cannot give less than the amount of notice listed.  It does not say that the minimum in the ESA replaces a higher contractual amount of notice.  Yet many employers act is if they are only required to give the minimum notice in the ESA.   When an employer gives an employee only statutory notice, they are complying with the ESA, but they are in breach of the employment contract.

Now back to Brito v. Canac.  The employee had 24 years’ service, and one day the employer fires him without cause and gives him only the minimum he is entitled to under the statute (8 weeks’ notice).  According to Justice Echlin, the employer’s counsel, “conceded a notice period of less than 16 months in argument, although Canac at no time advanced any compensation to Mr. Luis Romero Olguin, beyond the statutory minimums.  Later, he modified his alternate notice period submissions to 16 to 19 months.” So, the recap, the employer admits the contract required it to provide between 16 – 19 months’ notice, yet it gave the employer only 8 weeks notice!

I have complained before about this practice.  For example, in Pritchard v. Stuffed Animal House, the employer gave the employee 16 week’s notice even though it told the judge that it knew the contract term (“reasonable notice”) required somewhere between 10 and 14 months.   Do you think that it is wrong for employers to deliberately provide employees with far less notice than contractually required in the expectation that the employee will not sue?

Employers, and the lawyers advising them, often treat the contractual notice period not as legal requirement, but as a negotiable benchmark that they will only have to comply with if a judge orders it.  The problem is that the employment relationship is one based on subordination, so when employers deliberately breach the contract knowing that the employee won’t likely sue, they are abusing their position of power.  As the Supreme Court has noted many times, it is the job of judges to ensure that employees are not not taken advantage of at the point of dismissal, given how important work is to a person’s self-worth and identity, and considering their vulnerability (see, for example, Machtinger v. HOJ Industries).

Justice Echlin seems to agree with that assessment.  In Brito, he found that the “reasonable notice” was 22 months.  A twist in this case was that the employee became seriously ill during that notice period and probably would have been unable to work.  Instead, he would have been covered by the employer’s insurance policy.  So Echlin orders the employer to pay the employee what he would have received from insurance during the period of the notice.   And then Echlin orders an additional $15,000 in “ancillary damages” having regard to “Canac’s cavalier, harsh, malicious, reckless, outrageous and high-handed treatment” of the employee.  He says also that he might have ordered additional Honda v. Keays damages, but that head of damages wasn’t fully pleaded.

Clearly, Echlin was offended by the way the employer hung a long-term employee who was in treatment for cancer out to dry.  We saw a different judge come down hard recently on another employer who was similarly harsh with a cancer-stricken employee in Steve’s Music Store. But pay attention to the legal wrong:  it was simply that Canac elected to pay minimum statutory notice when it knew it was contractually required to pay much more than that (“reasonable notice”).

I like this approach very much.  I think all employers who give only statutory notice when they are required to provide “reasonable notice” under the contract should be dinged with some additional damage award. Courts need to change the culture of non-compliance that permeates the treatment of contractual notice.

Employer counsel will no doubt argue that such an rule would be unworkable because the amount of “reasonable notice” is uncertain.  Fair enough.  So the rule should be that the employer must make a good faith assessment of what a “reasonable range” of reasonable notice would be for an employee, and then provide notice in that range.  If a judge finds that the employer did not engage in that thought process, but instead low-balled the employee, ancillary damages should be ordered to compensate the employee for the unnecessary stress of having to fight what they were plainly and legally entitled to.

So, in Brito, if the employer had given the employee 14-16 month’s notice, as they conceded was in the range of expected outcomes, they would not be dinged with ancillary damages, even though the judge ruled that 22 months was the proper notice.

What do you all think of that?

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5 Responses to Brito v. Canac Kitchens: Is it Time to Punish Employers Who Low-Ball Notice Periods?

  1. Maria Alkis Reply

    June 23, 2011 at 1:59 pm

    I am utterly frustrated that employees-especially those experiencing health problems-receive such unfair treatment,and to make matters worse,our legal systems is not change the way employers are conducting unethical contractual notice. If the employer had given the employee 14-16 month’s notice, they should still be charged because 22months has been ruled as the proper notice. No exceptions should be allowed-22 months is the fair notice.

  2. Angus Duff Reply

    June 24, 2011 at 1:12 pm

    It’s time to amend ESA with reasonable notice requirements.

    It seems to me that there are two crical issues here, both of which could be addressed by amending ESA to stipulate reasonable notice requirements. Firstly, because of the ambiguity associated with the concept of “reasonable notice”, and the existance of ESA, it is no surprise that employers use ESA as a low-cost termination strategy. Also, since most terminated employees lack the ability to take legal action against former employers (out of concern that they will tarnish their reputation making it harder to get another job, because they lack the financial resources, and because they lack the tenacity to carry out these suits which take years to resolve) the vast majority of terminated employees do not pursue legal action against their employer, which under the system as it stands today is the only way to get access to a “reasonable notice” settlement.

    The primary argument against including resonable notice in ESA is that such notice is situation specific, as in the cases mentioned. While a formula will not capture such specifics, there is not doubt that it could be developed in such a way to better support workers than exists currently.

    For example, the formula might be:
    4 weeks per year of service up to 5 years,
    3 weeks per year of service for years 6 to 10,
    2 weeks per years of service for years 11 to 15, and
    1 week per year of service for all years over 15.

    Under this formula a person with 24 years of service would be 54 weeks. When you add this to the current provisions in ESA, the result is in line with the “fair notice” in the Brito v. Canac case.

    This is just an example to show that a simple formula that provides effective protection for workers could be easilly developed, providing real protection for workers without the need for timeconsuming and costly court cases.

  3. Ryan Reply

    June 24, 2011 at 10:28 pm

    ‘Ancillary damages’, meet Ontario Court of Appeal; Ontario Court of Appeal, meet ‘Ancillary damages’.

  4. Dennis Buchanan Reply

    June 29, 2011 at 7:10 pm

    I’m afraid Ryan might be right. It looks like punitive damages to me, to which the appellate Courts have applied an extremely high standard in employment cases. Now that Wallace is gone and we’ve moved to the Fidler approach for aggravated damages, I personally think it’s time that we start treating the employer’s breach of its good faith duties the same way that we treat an insurer’s breach of its good faith duties. But I’m not all that hopeful that this will happen at this point.

    This case has actually attracted a lot of media attention – I first read about it in the Sun in April – for its $200,000 award resulting from the failure to continue disability benefits, whereas the employee had to undergo cancer treatments that started during the notice period. To me, it isn’t such a surprising result, but I think it’s helpful for employers to understand the risks they’re running when terminating benefits sans-release.

    But, on these particular facts, the appeal might be difficult for Canac: “Yes, we terminated his benefits…no, we didn’t really think that we were contractually entitled to do so…yes, we acknowledge that he was diagnosed with cancer during the period we should have been providing benefits…but we still don’t think that there’s anything *blameworthy* about our actions!”

    “Efficient breach” sounds pretty cold when in the same breath as “cancer”.

    They say that bad facts make bad law. Perhaps, every once in a while, truly tragic facts can shake up existing bad law.

  5. Dennis Buchanan Reply

    February 6, 2012 at 2:41 pm

    http://www.ontariocourts.on.ca/decisions/2012/2012ONCA0061.htm

    The ancillary damages were struck down…but only because they weren’t pleaded. No analysis of whether or not they would have been appropriate otherwise.

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