How Will Courts Handle Wrongful Dismissal in Light of COVID-19?

Written on behalf of Peter McSherry

Wrongful dismissal claims are based on an implied term that an employer must provide “reasonable notice” to a terminated employee in the absence of just cause. The law uses a fiction of pretending that each party asked themselves the question of “what would be fair if the employer terminated without cause?” upon the commencement of the employment relationship.

Many factors are used by the court to assess what constitutes fair notice. Age, history of employment and the position held on termination are the most frequently referenced considerations. These factors are said to lead to one fundamental issue, which is that the notice period should reflect how long it may take for this person to find comparable employment. Also a factor is the availability of alternate employment. The list of factors does not end here.

There are also unwritten policy constraints. For example, take a 60-year-old man or woman in an upper management position who is terminated after 30 years of service. One might expect that the chances of this person finding comparable employment are extremely modest. Keep in mind that Ontario has no mandatory age of retirement.

If one were to apply all these factors, the notice period would be gargantuan. The courts use this unwritten constraint to set the upper end of the notice period, which our Court of Appeal has determined to be two years, absent unusual factors.

Coronavirus and Fair Notice

The obvious question today is what will be the impact of the coronavirus upon the court’s assessment of fair notice? Given the volume of terminations due to loss of business and forced closures across the province, will courts impose the same standards on employers suffering massive financial losses? What about the expected increase in difficulty for employees looking for new jobs?

This is not the first time our courts have considered the impact of a recession on this issue. In the past, generally speaking, there have been adjustments in the employee’s favour to the notice period to reflect that increased difficulty that the employee would have in finding comparable employment.

Keep in mind that the theory of the claim is based on the question of “what would the parties have considered on the commencement of employment, had this issue been addressed?”.

You Say Stop and I Say Go

You can see the competing arguments. The employer will submit that surely it should not have to suffer the brunt of this unexpected issue. How can a judge base a notice assessment on an event which was completely unpredictable and out of the employer’s hands?

The employee will argue that it will be very difficult for them to find comparable employment in this job market and surely this is the fundamental purpose of the notice period. Past cases have always increased the notice period to account for general economic downturns. Why should this be any different?

There may be yet be a third alternative.

At one time the law in Ontario considered a “pause” on the notice period when a plaintiff became ill within the notice period. Take for example an employee who was entitled to 12 months’ notice. They then became ill at month 4 and remained ill for three months. Our Court of Appeal reasoned that this event would simply stop the clock on the notice period for these 3 months and then add on 3 more months at the end of the period.

Might this be used in the current situation? Might a court assess the shutdown period as a “pause” button?

The honest answer is no one really knows. It will likely take a Court of Appeal decision to set the law on this issue, which regrettably takes a trial decision and then an appeal to determine, which could easily take 2 years or more. Typically, no one wants to wait that long and many cases will settle with these competing arguments unresolved.

There is also the unlikely possibility that the Ontario government will legislate this matter. However, it very rarely interferes on this type of issue.

Federal Emergency Grant

There also remains the issue of what the impact of the emergency relief funds of $2,000 a month will have on wrongful dismissal claims. Should this sum reduce the claim? Employment Insurance funds do not offset these claims in normal circumstances, but the employee must generally repay EI benefits from a successful claim. Will this also be the case with the emergency funds?  We have the questions but, regrettably, not the answers. At least not yet. Keep in mind that the legislators will likely need to react to these complexities as they arise. The law may still be amended.

Upper End Issues

As mentioned above, Ontario law sets a cap of 2 years on the notice award. Might the current circumstances raise this cap? This would appear, at first blush, to be unlikely, but, again, we are all on shaky ground on this subject. This remains an outside possibility.

Employment Contract

All of the above presumes that there is no contract setting an agreed notice period or severance sum. There is a further issue on this topic based on the concept of frustration of contract. Stay tuned to this page for further review.

Get Advice

The common law is an adaptive process that adjusts to many moving parts of life and economic forces.  This issue is one example of such a dynamic force. The vivid changes of law by the Federal and Provincial governments will go hand in hand with the common law. As you can see, the legislators have been quick to act to the current situation, a key and vital factor.  We will continue to monitor and update the all news as it develops in this space. If you have questions about your employment or options upon termination, ontact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation.