Employers Must Consider Pandemic Impact When Calculating Severance

Written on behalf of Peter McSherry
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A Canadian court confirms that employees who are entitled to reasonable notice and are terminated during the pandemic may be entitled to extended notice periods.

The pandemic has been a difficult time for many businesses, entrepreneurs and employees. It can be a challenge to find a new role, keep your business going, or start a new one. Many businesses are struggling or even engaging in regular restructuring activities. Employees who have found their employment impacted may find that other employers in their industry are going through similar challenges, which can make finding alternate employment difficult.

We’ve previously written about how courts are beginning to decide cases where the pandemic and restrictions impacted the notice period. This principle appears to be more broadly accepted in other locations and even when the employee does not need specific evidence about how the pandemic impacted their employment. A recent Canadian court decision reflects another case where a judge considered this issue.

Employees dismissed without cause are entitled to reasonable notice

In Miller v. Luminultra Technologies Ltd., a court was again asked to consider how the pandemic impacts severance. While this case took place in New Brunswick, similar legal frameworks apply in Ontario.

Both provinces have the common law principle that dismissed employees are generally entitled to reasonable notice of their termination or pay in lieu. This means that when an employee is dismissed without cause and without a valid termination clause, they are entitled to reasonable notice. We’ve previously written about reasonable notice here.

Essentially, reasonable notice means the employee is entitled to compensation equivalent to the number of months that it could reasonably take to find alternate employment. The courts do not provide severance equal to the number of months it takes to find a job, rather they consider various factors to determine what is reasonable under the circumstances. The factors the court considers in determining the notice period includes:

  • The employee’s age;
  • The employee’s years of service;
  • The nature of the employee’s role, sometimes called the character of employment; and,
  • The availability of similar employment.

In Miller v. Luminultra Technologies Ltd., there was significant consensus on the primary facts at issue. Both sides agreed the employee had been dismissed without cause, was entitled to reasonable notice, and that the matter could be resolved through a summary hearing. Where the parties disagreed, was around reasonable notice.

There was no dispute on the employee’s age (56 years old), her years of service (approximately 6), or the nature of her role (strategic marketing manager). Where the parties disagreed was on the role of the availability of similar employment.

Availability of similar employment during the pandemic

The judge reviewed cases involving employees of similar roles, ages, and tenure with their employers, and found that the typical range was 6-12 months of severance under these circumstances with 8 months being the average. The judge then turned to the availability of similar employment.

While no evidence was led specifically on the job market in the local area, the judge did consider the employee’s mitigation efforts, that is her effort to find alternate employment:

The affidavit evidence of Ms. Miller reveals extensive efforts on her part to find new employment.  Ms. Miller applied for and was interviewed for numerous positions, all without success.  Ultimately, Ms. Miller decided to start her own business.

The judge had previously noted that the defendant had dropped their claim that the employee failed to mitigate.

The judge also considered the fact that the employee was dismissed in May of 2020 and reviewed other cases where employees had been dismissed early in the pandemic. In an excerpt from another case the judge was looking at during a similar time period, the judge found as follows: “[e]specially during the first half-year of the shutdown in response to the pandemic, there was uncertainty in the economy and the job market and fewer employers were looking to fill positions.”

Counsel made arguments that the pandemic is a “novel issue” and would be “making new law”. However, the court considered this and determined that it was consistent with the reasonable notice factors already found in Canadian law. The judge provided thoughtful reasons articulating this:

In my view, the pandemic and its impact on the labor market is merely an extension of one of the factors the Court is directed by Bardal to consider:  availability of alternative employment.  While there is no evidence in the Record of the specific impact of the pandemic on Ms. Miller or the job sector in which she was seeking employment, there can be little doubt that the pandemic and the shutdowns associated with it would have had some impact on Ms. Miller’s ability to find new employment.  I agree with the reasoning in Iriotakis that the pandemic is one of many factors to be considered when assessing reasonable notice. 

In taking into consideration the availability of employment at the time the employee was dismissed (May of 2020), the judge determined that a longer than average notice period was reasonable. Keeping in mind that the judge had previously determined the appropriate range was 6-12 months with 8 months being the average, the uncertainty in the job market at the time of dismissal warranted a notice period of 10 months.

Contact Peter A. McSherry Employment Lawyer in Guelph for advice on pandemic terminations

Peter A. McSherry Employment Lawyer assists employees and employers on termination, wrongful dismissal and severance issues. We regularly assist employees and provide guidance during a difficult time. For employers, we can help you understand your legal obligations and provide advice on managing the legal and reputational risk that occurs when making these difficult decisions that impact employment.

Contact us online or by phone at 519-821-5465 to schedule a consultation.