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The Origins of the Requirement to Give “Reasonable Notice” to Terminate an Employment Contract

Ever wonder where the requirement to provide reasonable notice to terminate an employment contract comes from?  The answer might surprise you.

The answer has a lot of to do with historical leftovers from the bygone era of Master and Servant Law, and from a desire by judges to reserve for themselves tools to prevent workers from acting collectively through unions.   Here’s the Coles notes version–(Do students today even know what Coles notes are?)  My colleague Brian Etherington from Windsor Law has recounted the story in more detail in an article from 1990 in the McGill Law Journal (“The Enforcement of Harsh Termination Provisions in Personal Employment Contracts” (1990)35 McGill LJ 459).

The History of Reasonable Notice in Employment Law

A common concern in early employment contract law was ensuring agricultural employers had sufficient labour to complete the harvest.  Labour scarcity was of great concern to employers.  For that reason, an implied term developed wherby contracts of employment were presumed to last at least one year.  Consequently, employees who quit prior to the end of the contract were in breach of contract, and the sanction for many years (until 1875) for such a breach could include imprisonment.  This created a strong incentive for workers to complete their full contract term. 

On the other hand, a one year contract also encouraged employers to pay workers through the agricultural off season, so that those workers did not become a financial and social burden to their village or local ‘parish’, which would end up sustaining workers who lacked employment income.  With these concerns in mind–labour scarcity and poor relief–judges thought it reasonable to require one year contracts terminable only by providing the other party with notice of a length equal to the period remaining on the contract.  To this day, a fixed term contract is usually terminable only by giving notice equal to the remainder of the fixed period.

By the mid to late 19th century, the industrial workplace had become more prominent.  Large numbers of workers had left the farms for employment in industrial occupations.  The concerns about labour shortages at harvest time did not transfer to the industrial sector, yet judges continued to apply the presumption of yearly employment contracts terminable only by notice to industrial workplaces too.  Later, courts dropped the one year presumption in industrial employment contracts and began to treat the contracts as indefinite term, unless stated otherwise.  

But why did British/Canadian common law judges opt for an implied term requiring ‘reasonable notice’ to terminate an indefinite contract, whereas the Americans opted for ‘at will’ contracts that terminate and then renew every second? 

The answer is that British/Canadian employers did not want ‘at will’ contracts, because that would permit employees to walk

"Reasonable Notice" Created to Impede Strikes

out at any moment as a show of collective strength.  Indeed, British trade unions were encouraging workers to sign ‘minute contracts’, so that they could strike at any time without being in breach of their contract.  Employers, on the other hand, needed contracts to be longer and terminable only with notice in order to impede collective worker action.  Recall that breaching the notice provision could land an employee in prison for much of the 19th century.  But perhaps even more importantly, if a contract required an employee and employer to provide notice to terminate a contract, any attempt by a trade union to encourage workers to stop working (to strike) prior to the completion of the notice period would amount to a criminal or tortious conspiracy to induce a breach of contract (between employee and employer), thus allowing judges to intervene and declare a collective work stoppage unlawful, and union organizers unlawful conspirators.

Etherington summed out the origins of ‘reasonable notice’ as follows:  “…most employers did not want employment at will or minute contracts. They usually hired employees on weekly, biweekly, or monthly pay periods and the courts often implied reasonable notice periods which corresponded to the pay period.  The notion of at will terminability was not sought by employers, nor was it implied by courts in the face of silence, because the requirement for some period of reasonable notice, albeit in most cases a very short period for industrial workers, was vital in enabling employers to obtain judicial assistance to stem collective action by workers.

The ability of common law judges to ‘imply’ contract terms’ gave the judges a way to prevent strikes.  This requirement for both sides to provide reasonable notice to terminate the employment contract has survived in the common law to this day, even though we have long had extensive labour legislation that governs the rights of workers to unionize and engage in strikes.  The length of reasonable notice has expanded over the years, following criteria laid down in the famous 1960 decision in Bardal v. Globe and Mail.

Nonunion employees who today suddenly walk off the job in protest are still in violation of the notice requirements of their employment contract, and although we don’t throw employees in jail anymore, those workers could lose their job and be ordered to pay damages to the employer. However, today, we usually think of the requirement to provide reasonable notice to terminate an employment contract as a court created employee benefit.  But this short history lesson suggests its early motivations were less about protecting workers from sudden unemployment, and mostly about protecting employers and quashing unions and collective bargaining.

Discussion

Does learning this history alter your opinion of the modern day requirement for reasonable notice to terminate an employment contract?

Do you think our governments should abolish the requirement for reasonable notice, given that the policy concerns that it was intended to address have mostly been usurped by legislation?

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2 Responses to The Origins of the Requirement to Give “Reasonable Notice” to Terminate an Employment Contract

  1. Rachel Arnow-Richman Reply

    October 9, 2012 at 3:59 pm

    Thanks for this summary. I think this is a nice example of how sometimes legal developments that “favor” workers are a counter-intuitive result of pro-business policies, as well as of how societal developments change the way that legal rules affect people. As a related example of the latter, consider American employment at will. This was considered to be a “liberating” doctrine that permitted employees the flexibility to leave whenever they wished — the opposite of Canadian reasonable notice. We would hardly call employment at will a pro-worker doctrine today, but that is its (supposed) historical justification (a view, I should add, that has been aptly critiqued by Prof. Jay Feinman.)

  2. Doorey Reply

    October 9, 2012 at 4:32 pm

    Thanks Rachel. Another example, at least in Canada, are our first labour relations statutes. My students usually assume that these statutes were intended to ‘give’ workers a lawful right to unionize and strike, when their main purpose was to control and restrict collective action by channeling it into very narrow windows of time. I look forward to reading your piece on the evolution of at will and notice in American employment law.

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