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Ontario Superior Court Offers Further Guidance on the Impact of COVID-19 on Reasonable Notice Entitlements

A recent Ontario Superior Court decision, acts as a successor to the earlier Yee v Hudson’s Bay Company, 2021 ONSC 387 decision that we wrote about in January. This decision considers the impact that COVID-19 will have on the court’s assessment of reasonable notice, in a termination which occurred after the Pandemic had already commenced. 

Facts:

In this matter, the 56-year old plaintiff employee had been employed by the defendant employer as a Business Development Manager for just over two (2) years. However, on March 25, 2020 – only one week after the outbreak of COVID-19 necessitated a Ontario-wide state of emergency, the plaintiff was notified that his employment had been terminated by the defendant on a without cause basis.

Upon review, the court quickly determined that the plaintiff’s employment agreement did not contain a valid termination clause, thus necessitating a holistic analysis of the reasonable notice owing to him at common law based on his Bardal Factors. The plaintiff argued that he was owed “at least” six (6) months' notice, whereas the defendant submitted that notice in the range of two (2) to three (3) months was more reasonable.

The Impact of COVID-19 on Reasonable Notice:

In making their determination, the court offered their views on how the COVID-19 pandemic has impacted the job market. The court first recognized that “the uncertainties in the job market at the time of termination” did serve to tilt the period of reasonable notice away from the short-end. However, it cautioned that the court “must be alert to the dangers of applying hindsight to the measuring of reasonable notice” as “the impact of the pandemic on the economy in general and on the job market, in particular, was highly speculative and uncertain both as to degree and to duration at the time [the plaintiff’s] employment was terminated.” In assessing the plaintiff’s Bardal Factors, the court reaffirmed that “a balanced approach is what is called for.” Accordingly, the court refused to weigh the uncertain job market at the time of the plaintiff’s termination above his other factors.

Ultimately, the court determined that the plaintiff was entitled to three (3) months' notice – i.e. within the range of reasonable notice that the defendant had originally advocated for.

The Impact of CERB on Damages:

The court then turned their analysis towards the defendant’s argument that the damages award should be reduced by any Canada Emergency Response Benefit (“CERB”) payments received by the plaintiff. The court began by distinguishing CERB from Employment Insurance benefits, recognizing that “CERB was an ad hoc program that neither employer nor employee can be said to have paid into the program or earned an entitlement over time beyond their general status as taxpayers of Canada.”

The court ultimately concluded that it would be inequitable to reduce the plaintiff’s entitlement to damages given that “the level of benefit paid (approximately $2,000 per month) was considerably below the base salary previously earned by the plaintiff to say nothing of his lost commission income.” Accordingly, it declined to offset or deduct the CERB payments from the damages award owing to the plaintiff.

Key Takeaways:

In our view, this case offers two very interesting and important takeaways.

First, this decision offers a first step towards affirming the prediction made in our earlier blog, where we prognosticated that “if an employee was terminated during the COVID-19 Pandemic, this may have the effect of increasing their period of reasonable notice.” While not the boldest prediction – it is definitely interesting to see the court begin applying this reasoning in practice. It should be cautioned that the defendant in the instant matter was afforded significant deference due to the early and unpredictable stage of the Pandemic at the time of the termination. However, what remains uncertain is how the court will apply this same reasoning for terminations that occur at a later, more dire stage of the Pandemic. On the other hand, employers can find solace in the court’s application of a “balanced approach”, as this signals that it may remain hesitant in future cases, to weigh the Pandemic above other factors in their reasonable notice analysis.

Second, the court offered a rather open-ended decision regarding offsetting CERB payments. For instance, the court merely indicated that a reduction to his entitlement based “on these facts” would be inequitable due to the significant disparity between CERB and the plaintiff’s pre-termination income. This provides us with cautious optimism that the courts may be willing to deduct CERB payments in future cases when faced with a different set of factors.

With news and developments relating to the COVID-19 Pandemic occurring at a rapid pace – be sure to stay tuned to our Employers’ Edge Blog and Lawyers for Employers Podcast series. The team at CCPartners will continue to update our readers and listeners on all other pertinent developments regarding benefits and legislative changes related to COVID-19.