Common Law Reasonable Notice vs. Statutory Notice
In a non-unionized workplace an employer can end an employment relationship with an employee for any reason on a “without cause” basis, so long as the termination is not contrary to any contract or law such as, for instance, the Human Rights Code or the Occupational Health and Safety Act.
In every employment contract, whether verbal or written, it is implied that the employer will provide reasonable notice of termination when the termination is without cause. This can be working notice, or pay in lieu of notice. Reasonable notice consists of both statutory notice and common law notice.
The Ontario Employment Standards Act, 2000 sets out the minimum period of reasonable notice to which an employee is entitled upon termination without cause. This is often referred to as “notice” or “termination pay” and is based on an employee’s length of service. A separate concept, often confused with notice or termination pay, is severance pay. Depending on the size of an employer’s payroll and the individual employee’s length of service, severance pay may be owed in addition to termination pay.
The legislated minimums, however, may not represent the whole of an employee’s entitlement. Without a valid and enforceable termination clause in a written employment contract which specifically limits an employee’s entitlement to the minimums prescribed by the ESA, an employee will instead be entitled to what is colloquially referred to as “common law reasonable notice.” The underlying purpose of common law reasonable notice is to provide the employee with time (or pay in lieu of time) to secure similar employment.
Common law notice is assessed by considering the employee’s length of service, availability of equivalent employment, relevant education, training, experience, age, and any other personal characteristics or circumstances a trier of fact may deem relevant. Where entitlement is established, common law reasonable notice is inclusive of – and often considerably greater than – an employee’s statutory minimum entitlements.
While the case law indicates that there is no upper limit on the appropriate period of reasonable notice, notice in excess of 24 months is only warranted in exceptional cases. Additionally, it is rare for an employee to be awarded less than 3 months’ notice by a court.
Of course, employees have a duty to mitigate their damages by seeking alternative employment.
Recent case law has demonstrated that it is now, more than ever, important to have legally binding termination clauses so as to avoid a court finding the termination clause is not valid and awarding the terminated employee common law reasonable notice instead of the contracted statutory notice.
Thank you to our legal partner, Filion Wakely, Thorup, Angeletti LLP, for an informative Webinar Wednesday to our Members on December 4th. If you have any questions on the content of this article or the webinar, please contact the ASSOCIUM GAIN team.