The Covid-19 pandemic has changed our economy. In many industries, it has made it more difficult to find work and also more difficult for businesses to afford termination packages when letting employees go. The relevance of these facts to how courts will determine what terminated employees are entitled to has, so far, been unclear.
When an employment relationship is not governed by a written contract – with valid termination provisions – a terminated employee’s entitlements on termination without cause will be determined by the common law and what is called reasonable notice.
Courts determine reasonable notice by looking at the following factors:
- Length of service
- Character of employment
- Age of the employee
- Availability of similar employment
Notice that “the employer’s ability to pay” is not a normal consideration when determining an employee’s entitlement to a common law termination package.
Courts considering the impact of economic downturns on notice periods in the past have generally found that employees terminated in poor economic conditions will be entitled to longer periods of reasonable notice.
A Ruling on the Impact of Covid-19 on Notice Periods
In late January, the Ontario Superior Court released a decision, Yee v Hudson’s Bay Company, 2021 ONSC 387, following a virtual trial, of Melvin Yee, a 62-year-old terminated from Hudson’s Bay Company. Mr. Yee was terminated in August 2019 but had difficulty finding new employment due to the pandemic. His evidence was that he had sent out 90 + job applications since his termination. Mr. Yee remained unemployed at the time of the trial. His claim was for an 18-month notice period. Also notable, was that Mr. Yee was a high-earning employee, with total compensation of approximately $190,000 per year. He worked for Hudson’s Bay for 11.5 years.
While no doubt Mr. Yee may have been hampered in his search efforts by COVID-19, the trial judge declined to take this into consideration, relying on the Ontario Court of Appeal’s decision in Holland v Hostopia.com Inc., which states: “Notice is to be determined by the circumstances existing at the time of termination and not by the amount of time that it takes the employee to find employment”.
Because Mr. Yee was terminated before the pandemic, the judge ruled the pandemic would have no impact on his notice entitlement.
This ruling suggests that employees terminated during the pandemic will be entitled to have their notice period increased due to the pandemic circumstances that existed at the time of their terminations.
In the end, Mr. Yee was awarded 16 months of notice.
This first glimpse into how the pandemic will influence notice periods suggests that for terminations happening during the pandemic notice periods will be higher than they might otherwise have been. At least in industries that have been negatively impacted.
One way for employers to ensure that they have certainty about termination entitlements – and avoid litigation – is by having valid employment contracts. Employment law does change fast so we suggest having your employment contracts reviewed frequently to ensure they are still up to date.
If you’re facing a tough termination decision or think it’s time to get your contracts reviewed, get in touch for a consultation.