Employers who undertake reductions in force due to financial
difficulties should not count on employee notice periods being
reduced as a result of the financial troubles. This point was
recently emphasized by the Ontario Court of Appeal in the decision
of Michela v. St. Thomas of Villanova Catholic School.
Michela, Gomes and Carnovale were long-term teachers at St.
Thomas of Villanova Catholic School, with 11, 13 and 8 years of
service respectively. All worked under a series of one-year
contracts. In May of 2013, the employer advised each of them in
writing that they would not receive a contract renewal for the
coming year because enrolment was expected to be lower.
Subsequently, in June of 2013 each of them was provided with a
termination letter and advised that notice was not owed because
they were employed pursuant to fixed-term contracts.
The claims were dealt with by summary judgment, and the motions
judge determined that due to the succession of fixed-term
contracts, the employees were really indefinite term employees and
entitled to common law notice of termination. However in
determining that the reasonable notice period for each employee
should be 6 months rather than the 12 months which was claimed, the
judge made reference to the employer's poor financial
In overturning the decision, the Court of Appeal made reference to
the Bardal factors used to calculate reasonable notice at
common law: the employee's character of employment, length of
service, age, and availability of similar employment having regard
to experience, training and qualifications. The Court found that
the motions judge had mistakenly viewed "character of
employment" through the lens of the employer rather than the
employees, and stated that the financial position of the employer
does not factor into the calculation of reasonable notice. The
court confirmed that while an employer's financial position may
be the reason for a termination without cause, the financial
position of the employer does not justify a reduction in the notice
period in bad times nor an increase when times are good.
For employers considering reductions in force during difficult
times, it may be best to consider other options such as a temporary
layoffs, ensuring that proper termination provisions are in place
which provide only statutory minimums in the event of termination,
or the provision of working notice. While legal advice should be
sought in order to ensure the best plan of action, it is clear at
the very least that employers should not count on a reduced notice
period due to a difficult financial position.
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