As we settle into 2022, it is an apt time to review some significant employment law decisions from last year. The decisions below demonstrate how employment law is continuously evolving, even in areas of the law thought to be well developed, such as length of reasonable notice and statutory severance pay.
The decisions also highlight that termination provisions and employer conduct at the time of termination continue to be significant areas of liability for employers and should be handled with the expert advice of an employment lawyer.
Nahum v. Honeycomb Hospitality Inc., 2021 ONSC 1455 (CanLII)
This summary judgment motion from the Ontario Superior Court of Justice involved an employee who was five months pregnant when she was terminated without cause after 4.5 months of employment. The sole issue was the reasonable notice period, including the impact, if any, that the plaintiff’s pregnancy had on its calculation. The plaintiff argued she was entitled to eight months’ notice, while the employer claimed a two-month notice period was more than adequate.
In finding that the plaintiff was entitled to five months’ notice, the motions judge said that the plaintiff was far enough along in her pregnancy that it would be unreasonable to expect her to obtain new employment in the two months proposed by the employer.
A noteworthy aspect is that the plaintiff did not lead any evidence around the impact of pregnancy on her employability. The motions judge reiterated what other courts have concluded: objectively, pregnant people face additional challenges when looking for work and when something is so generally accepted, it is open to a judge to take judicial notice of this generally accepted fact without evidence.
However, the motions judge stated that “pregnancy should not function to automatically lengthen the notice period in every case.” This case is an important reminder that the Bardal factors — the character of employment, length of service, age and availability of similar employment — for determining the length of common law reasonable notice are not exhaustive. Courts continue to consider all the relevant factors at the time of an employee’s termination when assessing reasonable notice.
While pregnancy should not function to automatically lengthen the notice period in every case, it is crucial to assess the length of pregnancy at the time of termination, what the employee’s role is, and, of course, if terminating the employee may give rise to other legal challenges, such as a human rights complaint.
This summary judgement motion was recently upheld on appeal at the Divisional Court.
Hawkes v. Max Aicher, 2021 ONSC 4290 (CanLII)
In Hawkes v. Max Aicher, the applicant brought an application to the Divisional Court for judicial review of an Ontario Labour Relations Board (OLRB) decision determining that he was not entitled to statutory severance pay from his German-headquartered former employer under s. 64 of the Ontario Employment Standards Act, 2000 (ESA).
This section requires an employer to pay statutory severance pay if the employee worked for five years or more and the employer has a payroll of $2.5 million or more. The OLRB determined that although the employer’s global payroll far exceeded $2.5 million, it was not obligated to pay statutory severance pay because its Ontario payroll was under the threshold amount.
When judicially reviewing a specialist tribunal such as the OLRB, the standard of review is one of reasonableness and a high degree of deference must be given by the reviewing court to the specialist tribunal. However, upon review of the OLRB’s decision, the Divisional Court found the OLRB’s reasoning to be “illogical” and its analysis “flawed.” The court ruled that there could be only one single interpretation of s. 64 wherein the calculation of an employer’s payroll is not restricted to its Ontario payroll. An employer’s payroll outside of Ontario, including outside of Canada, must be included when calculating an employer’s payroll for the purpose of determining entitlement to statutory severance pay.
The court also noted that instead of extending the protections of the ESA to as many employees as possible while remaining true to the words of the ESA, the OLRB favoured an interpretation that directly undermined that purpose. Instead of narrowly interpreting the payroll exemption and limiting it to truly small enterprises, the OLRB interpreted it broadly, allowing some large national or multinational corporations to avoid paying severance pay to long-service employees.
Readers may recall that the Ontario Superior Court came to a similar decision in Paquette v. Quadraspec Inc., 2014 ONCS 2431 (CanLII). Although the Paquette decision was called into question after it was released, this Divisional Court decision has seemingly closed the door on the debate and Ontario employers should be aware that they need to take into account the payroll of their entireoperation when determining whether statutory severance pay must be provided.
Perretta v. Rand A Technology Corporation, 2021 ONSC 2111 (CanLII)
Lastly, this Superior Court of Justice decision reminds employers to comply with their contractual obligations to pay termination entitlements or risk losing the right to rely upon the contract.
The plaintiff worked as a sales representative for the employer for more than five years when she was terminated without cause. The employment contract stated that the employer could terminate the plaintiff’s employment without cause by providing two weeks’ notice or pay in lieu of notice plus the benefits and severance pay required by the ESA. However, upon termination, the employer refused to pay the agreed-upon two weeks’ pay unless she signed a full and final release, which was presented as a component of an “Enhanced Severance” offer.
As a result of these actions, the plaintiff argued that the employer repudiated the contract and that she was entitled to damages for wrongful dismissal at common law without the limitation imposed by the contractual termination provision. The plaintiff also submitted that the termination provisions in the employment contract were unenforceable because they contravened the ESA.
The employer acknowledged it made a mistake in asking the plaintiff to sign the release and apologized but argued it should still be allowed to limit the plaintiff’s entitlements on termination to those set out in the employment contract.
The court explained that the test for repudiation is based on an objective assessment of the purported breaching party’s intention and the surrounding circumstances. The court was satisfied that a reasonable person assessing the employer’s conduct would conclude that by demanding that the plaintiff execute a release and comply with the terms of an “Enhanced Severance” offer as preconditions to receiving the two weeks’ pay to which the plaintiff was contractually entitled, the employer no longer intended to be bound by the employment contract. Consequently, the court found that the plaintiff was entitled to common law reasonable notice because the employer’s repudiation of the contract meant that the contract was no longer effective.
The court also commented on the enforceability of the “just cause” provision of the employment contract. The court held that even if the employer had not repudiated the contract, it would have found the termination provisions in the contract unenforceable because the termination for cause provision violated the ESA.
The provision stated that the plaintiff’s employment could be terminated without notice, pay in lieu, severance pay, or other liability for just cause and then listed eleven categories of just cause. Three of the listed categories did not comply with the ESA’s higher standard of “wilful misconduct, disobedience or wilful neglect of duty” to disentitle the plaintiff to statutory notice, pay in lieu of notice and severance pay (the “Offending Categories”).
The employer argued that the termination for cause provision did not violate the ESA because it contained language within the provision stating that a termination for cause was “subject to the ESA”. The employer also argued that the termination for cause provision could be “saved” by a general provision found in the contract which stated as follows:
If any provision of this Agreement provides a right or benefit that is less than the corresponding minimum right or benefit under the ESA that provision will be deemed to provide the corresponding minimum right or benefit under the ESA.
The court rejected both of the employer’s arguments. With respect to the first argument, the court found that the provision was ambiguous and that the inclusion of the Offending Categories flew in the face of compliance with the ESA. When a termination provision is ambiguous, it must be read in a manner that provides the highest benefit to the employee. Therefore, the court found that the termination for cause provision violated the ESA, rendering all of the termination provisions unenforceable. With respect to the second argument, the court stated that saving provisions are meant to safeguard against changes to the ESA made after the contract is concluded, not to correct a blatant breach of the ESA made within the termination provision.This case stands as a reminder that employers must comply with the termination provisions that they draft if they want to enforce those provisions later. Apologizing for breaching those provisions will not assist and saving clauses are meant to address future changes to the ESA, not blatant breaches of the ESA within the contract.
