How do courts treat notice periods for terminated employees during the pandemic?

The COVID-19 pandemic has had a significant impact on workplaces across the world. Here in Canada, employers have had to adapt at record speeds to changing regulations and adjust their workforces as demand for their products or services fluctuated drastically. As a result, many employers have been forced to reduce headcount and implement without-cause terminations.

At this time last year many wondered how the unprecedented economic circumstances created by the pandemic would affect reasonable notice periods awarded to employees terminated during the pandemic. A year on, and as cases of terminated employees have made their way through the court system, it seems the answer is clear: the pandemic may be a factor to consider in determining reasonable notice, but not to the exclusion of others and only to the extent that it existed as a factor at the time of the termination.

This update considers the extent to which the COVID-19 pandemic has affected decision-makers in determining appropriate reasonable notice periods in the context of wrongful dismissals.

Notice periods may be longer for employees terminated during the pandemic

In Canada, an employee is entitled to reasonable notice of termination unless otherwise stipulated in a valid employment contract. The appropriate duration of a reasonable notice depends on all the circumstances, including but not limited to the employee’s age, length of service, the nature of the position and the availability of similar employment.  

Prior to the pandemic, courts were already clear that “economic factors” in the market or in a particular sector or industry that make it difficult for a terminated employee to find another position may justify a longer notice period. On this basis, many employees, and more specifically their counsel, have argued the pandemic has created an economic reality that justifies imposing a lengthier notice period.  

While there has yet to be a clear statement from a court that the pandemic justifies an increased notice period, some decisions have suggested a willingness to consider it as a factor tending to lengthen notice periods. Courts have not, however, yet used COVID-19 to justify imposing notice periods that are disproportionately long or otherwise outside of the range of reasonableness.

In Iriotakis v Peninsula Employment Services Limited, in assessing the appropriate notice period, the Superior Court of Ontario noted the pandemic was likely to have a negative impact on the plaintiff’s job search and concluded that the parties ought to have reasonably expected it to have such an impact when his employment was terminated in late March 2020. However, while COVID-19 was a factor in assessing the notice period, the court did not consider it to the exclusion of all others, instead calling for a balanced approach that considered all relevant factors. 

While it seems clear courts are willing to consider the pandemic as a factor in assessing reasonable notice periods, they will only do so when justified based on the circumstances of the case. In particular, courts have refused to consider the pandemic as a factor in determining a reasonable notice period where the termination occurred before the pandemic itself.

In Yee v Hudson’s Bay Company, the Ontario Superior Court considered the case of a management employee terminated in August of 2019, prior to the pandemic. The plaintiff argued the economic conditions caused by the pandemic made it more difficult to find a new job and therefore justified the imposition of a lengthier notice period. The court refused to do so, ultimately holding the appropriate notice period is to be determined based on the circumstances that existed at the time of termination.  

The Ontario Superior Court reached a similar decision in Nahum v Honeycomb Hospitality Inc., where the court did not give weight to the pandemic since the employee was terminated before its onset. While the pandemic was likely to have affected the employee’s job search (and hence his mitigation efforts), as a factor that could not have been anticipated at the time of termination, the court did not use it in its analysis of reasonable notice. 

Thus, the economic downturn caused by the pandemic will only be considered in assessing reasonable notice periods where it was within the reasonable contemplation of the parties at the time of termination. Otherwise, it may only be considered for assessing mitigation efforts, as courts have concluded that the pandemic is a factor that is likely to make finding a job more difficult.  

Take-aways 

• The COVID-19 pandemic is likely to affect, and even lengthen, notice periods awarded to employees terminated during the pandemic. The pandemic will not, however, be considered to the exclusion of other factors nor is it likely to justify imposing a disproportionately lengthy notice period.
• The case law to date indicates that the pandemic is not likely to be considered as a factor in assessing the notice period of employees whose employment was terminated prior to the pandemic.  In such cases, the pandemic may be considered as a factor in assessing the reasonableness of an employee’s mitigation efforts.