Does Short Service Mean Short Shrift?
If you’re an employer in a common law province in Canada, you might be familiar with the concept of “common law reasonable notice” and the factors that courts consider when awarding such notice. This blog canvasses trends regarding common law notice periods, with particular attention to employees with short service.
“Reasonable Notice”
If a non-unionized employee either (i) does not have an employment agreement, or (ii) has an employment agreement, but it does not have a valid and enforceable termination provision, the employee is entitled to reasonable notice under the common law when terminated without cause. In 1960, the Ontario High Court of Justice set out the key factors a court must consider when determining an employee’s reasonable notice period[i]. The factors, known as the “Bardal factors” are as follows:
Character of employment[ii];
Length of service;
Age; and
Availability of similar employment, having regard to the experience, training, and qualifications of the employee.
The weight given to each factor, as well as other relevant factors that have evolved over the years, will depend on the circumstances of each case.
Recent Trends in Notice Periods for Short Service Employees
A common misconception is that employees are entitled to one month per year of service upon the termination of their employment. First, courts have generally established an informal cap on notice entitlements at 24 months, absent any exceptional circumstances that would increase them. More importantly, however, judges in Ontario have held that courts should not apply any “rule of thumb” that would attribute so many weeks or months of notice per year of service as a starting point when determining a reasonable notice period. Courts have held that doing so gives more weight to the “length of service” Bardal factor than the other factors when each case must be assessed on its particular facts.[iii]
Despite the caution by courts not to apply the rule of thumb above, oftentimes, judges end up awarding reasonable notice periods that roughly equate to one month per year of service or more. So, employers might think that this translates into shorter notice periods for employees with short service, right? Wrong. Over the last few years, many cases have demonstrated that there is a trend in Ontario for short-service employees receiving notice that goes beyond the rule of thumb, and that short service will not always mean a short notice period.
Grimaldi v. CF+D Custom Fireplace Design Inc., 2023 ONSC 6708 [“Grimaldi”]
The Superior Court released its decision in Grimaldi on December 1, 2023. In this case, a 50-year-old employee was terminated without cause four months and 23 days after his employment began. The employee was in a senior-level position, reported directly to the owner, had multiple reports, and was the highest paid employee of the employer. Even with his short tenure of employment and no finding of inducement, the Superior Court awarded the employee five months and two weeks’ notice—a notice period that surpassed the employee’s period of employment.
Below is a snapshot of some other notice periods that have been awarded to short-service employees in the last few years:
Gracias v. Dr. David Walt Dentistry[iv]: In 2022, the Court awarded three months’ notice to a 39-year-old dental hygienist whose employment was terminated after five and a half months of employment.
George v. Laurentian Bank Securities Inc.[v]: In 2020, the Court awarded two months’ notice to a 58-year-old employee with almost four and a half months of service.
Van Wyngaarden v. Thumper Massager Inc.[vi]: In 2017, the Court awarded four months’ notice to a 59-year-old employee with almost six months of service.
Nogueira v. Second Cup[vii]: In 2017, the Court also awarded four months’ notice to a 47-year-old manager who was terminated after eight and a half months of employment.
Takeaways
Despite the cases above, employers should remember that courts will assess each case based on its specific circumstances. To limit the risk of common law notice, below are key takeaways for employers to consider as we enter a new year:
Updated employment agreements with termination language – Absent a strategic business decision to omit a limitation, every new hire should have an employment agreement containing an enforceable termination provision. For current employees with outdated employment agreements or no agreement at all, consider using a promotion as an opportunity to provide the employee with a new agreement, or provide consideration for employees to enter into new agreements, where practicable.
Additional contractual language ousting inducement arguments – Include a probationary clause in employment agreements to confirm that the first three months of employment is considered a trial period, and the company will assess performance accordingly. Additionally, include a representation and warranty that acknowledges employees are not receiving any credit for prior employment and that they have not been induced to join the employer. Adding these types of clauses, as well as a probationary period, to your employment agreements helps to rebut potential arguments of inducement, which is a factor that can increase common law notice periods for short service employees.
Proper recruitment and onboarding processes – Take time when recruiting candidates and focus on providing fulsome onboarding and support for new employees to minimize the likelihood of early terminations.
While short term employees may feel as though they’re receiving short shrift if they’re let go early into their employment, implementing the above recommendations will minimize the employers’ obligations to them when they seek outsized severance packages.
[i] Bardal v. Globe & Mail Ltd., [1960] O.J. No. 149.
[ii] Given the Ontario Court of Appeal’s decision in Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469, this factor is of declining importance.
[iii] Love v. Acuity Investment Management Inc., 2011 ONCA 130; Beatty v. Best Theratronics Ltd., 2015 ONCA 247; Gracias v. Dr. David Walt Dentistry, 2022 ONSC 2967 [“Gracias”].
[iv] See Gracias above.
[v] 2020 ONSC 5415.
[vi] 2017 ONSC 3909.
[vii] 2017 CarswellOnt 6315.
