Are an Employer’s Financial Circumstances Relevant in the Calculation of Reasonable Notice?

Written on behalf of Peter McSherry

In Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801 [Michela], the Ontario Court of Appeal addressed an employment law question which has become increasingly important in tough economic times: are an employer’s financial circumstances a relevant consideration in determining the period of reasonable notice? Writing for a unanimous Court, the Honourable Justice Grant Huscroft concluded that an employer’s financial difficulties do not justify a reduction of the notice period to which an employee is otherwise entitled.

The case before the Court of Appeal in Michela involved the dismissal of three school teachers by their private school employer. In response, the teachers commenced an action for wrongful dismissal. At a motion for summary judgment of this matter, the motions judge reduced the twelve month notice period proposed by the plaintiffs based on the defendant school’s financial deficit. On appeal, the teachers argued that the motions judge erred in law by relying on the respondent’s economic difficulties to reduce the notice period.

At the outset of his decision, the Honourable Justice Grant Huscroft reviewed the nature and purpose of reasonable notice in employment law. As Huscroft reiterated, although employees may be dismissed without cause, employers are required to provide reasonable notice of an intention to terminate an indefinite employment contract. This reasonable notice allows an employee a reasonable period of time to find replacement work. Accordingly, damages awarded to an employee in lieu of reasonable notice are designed to compensate employees for the amount of wages and benefits that they would have earned had they been permitted to serve out the notice period. The calculation of the reasonable notice period is a fact-specific exercise which considers a number of relevant factors as set out in Bardal v. Globe & Mail Ltd. (1960), 24 DLR (2d) 140 (Ont. H.C.), including: the circumstances of the employee, the character of employment, the length of service and the availability of other similar employment.

Turning to the case before it, the Court of Appeal held that the motions judge erred in treating an employer’s financial difficulties as part of the “character of employment”  analysis. The Honourable Justice Grant Huscroft emphasized that the calculation of a reasonable notice period focuses on the circumstances of the employee and not the employer. As such, consideration of the character of employment in the calculation of reasonable notice refers to the nature of the position that was held by the employee and not the financial difficulties of the employer. The Court of Appeal emphasized that an employer’s dire financial straits do not justify a reduction of the notice period to which an employer would otherwise have been entitled.

To find out more about wrongful dismissal and reasonable notice entitlements, contact employment lawyer Peter McSherry online or at 519-821-5465.

To read the full decision, click here.