We’ve written about terminations in several of our blog posts throughout the years. Some of our employer readers (and clients) may recall scrambling to update their employment contracts following the 2020 release of Waksdale v. Swegon North America Inc. (2020 ONCA 391). Still, many employers who are seeking to terminate their indefinite-term employees on a without cause basis believe that as long as they provide their employees with 2 weeks of notice, or the period of notice set out in the Employment Standards Act, 2000, they are off the hook. More often than not, this notice period is legally insufficient. So, what is the applicable notice period?
To determine the answer to this question, courts will turn to three sources:
(1) the applicable statute (in Ontario, this is the Employment Standards Act, 2000);
(2) the employment contract (if any); and
(3) the common law.
(1) Employment Standards Act, 2000 (the “ESA”)
The ESA sets out the minimum period of notice that an employee is entitled to on termination. The statutory length of notice is entirely dependent on the employee’s length of service. The Ministry of Labour has published a handy chart to assist with determining an employee’s minimum entitlements to notice under the ESA. Remember, this statute takes precedence – no employer or employee can ever contract out of it. Should an employer seek to terminate an indefinite-term employee on a without cause basis, this is the bare minimum that an employer would have to provide to the employee. Note that an employer may be on the hook for more than the amount set out in the ESA, as discussed below.
(2) Employment Contract
Courts will look at whether the employee has a written employment contract. If the employee does not, courts will then proceed with a common law analysis (see “(3) Common Law” below).
If the employee does have a written employment contract, the termination provisions need to be reviewed to determine an employee’s entitlements to notice on a termination without cause. Numerous employers believe that if the without cause termination provision simply states that an employee is entitled to the notice period set out in the ESA, the employer is legally obligated to pay only that amount.
Unfortunately, just because a provision makes sense in plain English, this does not necessarily mean that it is enforceable in court. Drafting enforceable termination language, whatever the provision provides for on termination, can be quite an art. This is why it is a good idea for employers to use employment contracts prepared by an employment lawyer. If the termination provisions are found to be unenforceable, courts will determine an employee’s notice entitlements on the basis of the common law.
(3) Common Law
If an indefinite-term employee does not have an employment contract or has an employment contract with an invalid termination provision, the employee will normally be entitled to common law/reasonable notice on a termination without cause. Calculation of this period is based on caselaw (or judge-made law). In assessing the common law notice period of an employee, courts will consider factors such as the employee’s age, length of service, character of employment, and availability of similar employment – the “Bardal factors”, taken from Bardal v. Globe & Mail Ltd. (1960 CarswellOnt 144 (Ont. H.C.). What courts are ultimately attempting to do by analyzing these factors, is determine the amount of time it will take an employee to find comparable employment by looking at cases of employees in similar circumstances.
Employment terminations in Canada, unlike in the U.S., can often be expensive and tricky. It is important to keep in mind that the rules are different for terminations on a with cause basis or for employees on a fixed-term contracts.
If you need help terminating employees or preparing employment contracts with valid termination provisions, take a look at our newest DIY toolkit – The Workplace Law Bundle – which includes templates and guides for employment contracts, termination letters and releases. Or if you need one-on-one advice from a lawyer, please get in touch for a consultation.
