Canada: Three Takeaways On Assessing Reasonable Notice During The Pandemic

The COVID-19 pandemic has introduced many new uncertainties for both employers and employees. One of these uncertainties is how the current economic recession and high unemployment rate will impact the length of reasonable notice an employer must give an employee before terminating the employment relationship. Is an employer obligated to give more notice to compensate for the difficulty the employee will face when trying to find a new job during a pandemic? If so, how much? And should CERB payments be taken into account? Employment lawyers and HR professionals across the country have wrestled with these issues since the beginning of the pandemic.

Now, almost a year later, two Ontario Superior Court decisions have shed some light on these questions: Yee v. Hudson's Bay Company and Iriotakis v. Peninsula Employment Services Limited.¹ There are three takeaways from these cases: (1) reasonable notice is assessed at the time of termination, (2) the pandemic might justify a longer period of reasonable notice, and (3) CERB does not offset the length of reasonable notice.

Takeaway 1: Reasonable notice is assessed at the time of termination

This takeaway is not new. However, applying this principle to the COVID-19 pandemic has interesting challenges. Justice Dow in Yee v. Hudson's Bay Company cited past decisions to reiterate that the length of reasonable notice is assessed based on the circumstances at the time of an employee's termination. Since Mr. Yee was terminated in August of 2019, prior to the onset of the pandemic, Justice Dow declined to increase the reasonable notice period to account for the difficulty of finding work during the pandemic.²

Mr. Yee was still unemployed at the time of his trial in December of 2020. Despite the fact that he had looked for work during the pandemic and was unsuccessful, the court found it clear that "terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect on finding comparable employment" [emphasis added].³

What is not clear from the decision is whether there is a fixed date to use as the "onset" date of the pandemic. For Ontario employees, the date Ontario declared a state of emergency - March 17, 2020, might be regarded as that threshold date.

Takeaway 2: The pandemic might justify a longer period of reasonable notice

But it's not guaranteed. The employee in the second case, Iriotakis, was terminated after the beginning of the pandemic. Mr. Iriotakis was terminated from his position as a Business Development Manager on March 25, 2020, roughly one week after the province of Ontario declared a state of emergency. Mr. Iriotakis worked for this employer for 2 years.

Justice Dunphy acknowledged that the pandemic had some influence on Mr. Iriotakis' job search.⁴ Although this factor seems to move the needle towards more notice, it was not clear how much of an impact this factor had. Justice Dunphy emphasized that the impact of the pandemic on the economy and on the job market was highly speculative and uncertain in degree and duration at the time Mr. Iriotakis was terminated.⁵ The court cautioned against applying the benefit of hindsight in assessing reasonable notice and emphasized the importance of assessing reasonable notice at the time of termination.⁶

Implicit in both cases is an acknowledgment that COVID-19 could impact the amount of reasonable notice if, at the time of termination, it is clear the pandemic had an impact on the availability of similar employment. Given Justice Dunphy's cautionary language, termination after the onset of the pandemic does not necessarily equate with an increase to the reasonable notice award. It seems the employee may need to demonstrate there was an impact on the job market at the time of termination.

Perhaps this hurdle is easier to overcome for employees in certain industries than others. Some industries such as accommodation and food services, retail trade, and information, culture and recreation have experienced larger decreases in employment rates than in other industries.⁷ Other industries such as construction, health care and social assistance have experienced an increase in employment rates as of January 2021.⁸ Future courts may distinguish between employees based on these differences in employment rates.

Takeaway 3: CERB does not offset the employer's obligation to give reasonable notice

In Iriotakis, the court declined to offset the amount of reasonable notice the employee was entitled to by the amount of CERB payments the employee received. The court distinguished CERB from EI benefits because CERB was an ad hoc programme and neither the employer nor employee "paid into the program or 'earned' an entitlement over time beyond their general status as taxpayers of Canada".⁹ Justice Dunphy emphasized that in this particular case it would be inequitable to reduce the employee's reasonable notice entitlements. This decision does not close the door for future courts deciding on different facts to allow such an offset.

Data insights from past reasonable notice cases

Currently, few decisions directly discuss the impact of COVID-19 on reasonable notice. Even the existing decisions have been cautious to avoid equating the pandemic with a higher amount of reasonable notice.

To better predict how the impact of COVID-19 on reasonable notice will unfold, practitioners and HR professionals can look to decisions from past recessions. Past decisions have demonstrated that economic factors such as a downturn in the economy or in a particular sector of the economy may justify a longer notice period given that an employee may have difficulty finding similar employment.¹⁰

Blue J's machine learning algorithm has determined that, on aggregate, when poor economic conditions exist in a particular industry or nationally due to a recession, courts have tended to increase the length of reasonable notice by approximately 2.8 weeks.

However, there are numerous factors that impact reasonable notice. The factors are also intertwined such that they can impact one another. Calculating reasonable notice during an economic downturn is not as simple as adding an extra 2 or 3 weeks as a "rule of thumb approach". There remains no static formula for calculating notice periods.

Tools harnessing artificial intelligence, like the ones Blue J develop, are able to provide a much more dynamic and nuanced analysis because they are trained on hundreds of previous decisions.

On average, the Blue J's predictions are within 8% of the actual notice period awarded in a case. Blue J applied its machine learning algorithm to the above two cases and correctly predicted the length of notice awarded in Iriotakis and predicted within 5% of the award in Yee.

Footnotes

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.