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Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
Canada | Publication | June 15, 2023
As of February 1, 2024, federally regulated private sector employees will have greater termination entitlements when terminated without cause. As of that date, changes to the Canada Labour Code will come into effect, expanding the amount of working notice (or pay in lieu) an employer must provide to an employee on a termination without cause.
Currently, employers must give an employee with at least three months of service two weeks of notice or pay in lieu (or some combination thereof) for without-cause termination.
Under a revised section 230, employers must provide notice or pay in lieu equivalent to:
As before, any combination of notice or wages in lieu of notice is permitted as long as the notice periods are equivalent to at least the number of weeks described above.
These changes to mandatory termination notice do not alter an employee’s additional entitlement to severance pay under section 235 of the Code. Employees who have completed 12 consecutive months of continuous employment are entitled to severance pay, in addition to termination notice or pay in lieu, for the greater of:
In addition, as of February 1, 2024, employers will be required to provide a written statement to terminated employees listing their vacation benefits, wages, severance pay, and any other benefits and pay arising from their employment as of the date of the statement. The statement must be given to:
Although these new expanded termination entitlements appear significant, their application is relatively limited because of other employee rights that must be considered, namely:
As a result, generally speaking, the new expanded notice entitlements will not impact most permissible “without cause” terminations. For example:
The expanded termination notice entitlements will apply only to employees who do not qualify for “unjust dismissal” or greater contractual rights.
Diarize Changes and Educate Personnel
Employers should diarize these changes and ensure that human resources professionals and managers are educated on the changes. In addition, any internal systems for calculating notice should be updated to ensure that proper notice is provided once the new provisions come into place.
Time to Review Employment Contracts
In addition, before February 1, 2024, federally regulated employers in common law jurisdictions should review their employment contracts to ensure compliance with these expanded termination notice entitlements.
On a valid without-cause termination, employees in those jurisdictions are entitled to common law reasonable notice of termination in addition to statutory notice under the Code. Common law notice may be limited by a termination clause, but only if that clause complies with the Code. A termination clause giving employees less than statutory notice is unenforceable.
For example, if an existing employment contract states that the employee is entitled to two weeks of notice upon termination, as of February 1, 2024, that contract will no longer comply with the Code, and its termination clause may be unenforceable. Employers should consult with counsel to revise such provisions for Code compliance.
This issue does not arise for federally regulated employers in Quebec where contracts cannot limit an employee’s termination entitlements provided by the Civil Code of Quebec.
The authors would like to thank Brandon Pierre, summer student, for help in preparing this legal update.
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