By: Greg A. Carr
With a few specific exceptions, an employer has an absolute right to terminate an employee at any time. There do not need to be performance issues, disciplinary issues, or any other justification for the termination. Notwithstanding, the law protects employees by requiring an employer to provide the employee with reasonable notice of their termination, or alternatively, paying them an amount of money in lieu of receiving reasonable notice.
So what is reasonable notice? Reasonable notice is governed by two different regimes – (1) the Employment Standards Act, 2000 (“ESA”) and (2) the common law (judge-made law).
The Employment Standards Act
Pursuant to the ESA, an employee who has been employed for at least 3 months, is entitled to reasonable notice of:
- one (1) week, if they have been employed for less than a year;
- two (2) weeks, if they have been employed for more than 1 year, but less than 3 years;
- one (1) week per year of service if they have been employed for more than 3 years, to a maximum of eight (8) weeks’ notice.
In addition, an employee may be entitled to “severance pay”, if they have been employed for more than 5 years, and their employer has a payroll exceeding $2.5 million. In such circumstances, in addition to the notice requirements above, the employee is entitled to one additional week’s pay per year of service (to a maximum of 26 weeks). For example, an employee who is terminated by an employer with a payroll exceeding $2.5 million, who has been employed for 10 years, would be entitled to reasonable notice (or pay in lieu) of 8 weeks, and an additional 10 weeks’ severance pay.
The common law
Where the ESA does not apply, an employee is entitled to reasonable notice at common law. In determining reasonable notice at common law, courts will consider a number of factors, including the employee’s age, education, role they held, and likelihood of re-employability in that or a similar position. Based on the factors to be considered, the notice period may vary greatly depending on the case, and the ultimate notice period is informed by what judges have found to be a reasonable notice period in similar cases in the past. While a number of factors are involved, the guiding principle at common law is a notice period of 1 month per year of service.
How do I know if it’s the ESA or common law that applies?
Whether it is the ESA or the common law that establishes the reasonable notice period will be determined by the termination provisions of an employment contract. The common law will apply unless the employee has entered into a legally enforceable employment contract limiting the employee to “ESA minimums” upon termination.
Even where an employment contract purports to limit an employee’s entitlement to ESA minimums, the clause may not be enforceable. There is likely no issue in employment law more often litigated than the enforceability and applicability of a termination clause. Courts have established strict requirements which must be contained in a termination clause, such as providing for reasonable notice and the continuation of benefits. Where the clause does not comply with the requirements established by the courts, or runs afoul of the ESA, the clause will be unenforceable and the common law notice period will apply.
What is the employee entitled to during the notice period?
While there are some exceptions, generally speaking, an employee is entitled to their entire remuneration package throughout the notice period. This includes not only wages and health benefits, but can include pension contributions, RRSP matching, bonuses, company cell phone reimbursement, company vehicle reimbursement, and any other benefits that arise out of employment.
Please note that this article is for information purposes only and is not intended and should not be relied on as legal advice. If you have any questions about your rights as an employer or employee about this, or any other employment matter, please contact Greg A. Carr at Giffen LLP, and we would be happy to meet with you to discuss your matter and determine how we can best assist you moving forward.