Canada: Ontario Court Clarifies Employers' Duties In Mass Termination Cases

Last Updated: September 26 2018
Article by Andrea York and Jennifer Cherniak (Student-at-Law)

The Court of Appeal for Ontario (Court of Appeal) recently clarified the timing for the delivery of statutory and common law notices in the context of business closures or restructurings resulting in mass termination.

On September 19, 2018, the Court of Appeal released its decision in Wood v. CTS of Canada Co. (Wood), an appeal arising from the closure of the Streetsville, Ontario manufacturing plant operated by CTS of Canada Co. (CTS). This resulted in a "mass termination" for purposes of the Employment Standards Act, 2000 (ESA) and was heard by the Ontario Superior Court of Justice (Superior Court) in 2017. For more information, please see our November 2017 Blakes Bulletin: Ontario Court Rules Working Notice Wrongly Applied in Mass Termination Class Action.

ONTARIO SUPERIOR COURT OF JUSTICE DECISION

The Superior Court ruled in favour of the employees. Justice J. Sproat's interpretation of the ESA was that any notice of termination is deemed not to have been delivered to the employees until the Ministry of Labour receives a Form 1 notice. The ESA requires that a Form 1 be delivered where there is a "mass termination" involving 50 or more employees.

The statutory notice period in Wood was eight weeks since there were more than 50 employees and fewer than 200 employees impacted in the mass termination. The employees in Wood were notified of the termination of their employment 14 months in advance. However, the employer did not deliver the Form 1 notice until several weeks prior to the termination date. The issue was the timing for delivery of that Form 1 when a much longer period of working notice period was provided. The employer's position was that the statutory notice period was at the end, not the beginning, of the working notice period. CTS wanted credit for the 14 months of working notice under common law reasonable notice principles.

Justice Sproat's decision voided the 14 months of working notice on the basis that the Form 1 was not delivered to the Ministry of Labour until near the end of the working notice period. Justice Sprout also found that CTS condoned and encouraged many of its employees to work overtime hours in excess of the ESA maximums during the working notice period to meet plant closure goals. He also found that CTS was not entitled to credit for working notice for any week in which a plaintiff not exempt from the ESA overtime provisions worked in excess of the ESA maximums.

CTS appealed that decision.

COURT OF APPEAL DECISION

The Court of Appeal allowed the appeal in part and held that:

  • A proper reading of section 58 of the ESA is that CTS was not required to give notice under section 58(1) when the employees first received working notice on April 17, 2014. The Court of Appeal ruled that the references to "the notice period required under this section" in sections 58(4) and 58(5) "must mean the statutorily-required eight-week notice period", not the common law notice period. In other words, employers are not required to submit the Form 1 on the first day of a 14-month working notice period; Form 1 merely needs to be submitted in accordance with the eight-week statutory minimum. Overturning the lower court decision on this point, under the common law, CTS was entitled to credit for the working notice provided in respect of a majority of the employees in the class.
  • Based on the court's interpretation of section 58, the eight-week minimum notice period was deemed not to have been given by CTS until May 12, 2015. Since CTS was 12 days late in serving and posting the Form 1 notice, class members were entitled to a further 12 days' pay in lieu of notice.
  • The Court of Appeal went on to find that the lower court correctly decided that in determining whether the employer is entitled to credit for working notice, it is relevant to consider the quality of the opportunity given to the employees to find new employment. While normal demands of employment can leave an employee with less time to look for alternate work, this does not warrant denying the employer credit for a portion of the period of working notice. However, the court noted that exceptional workplace demands placed on the employee during the notice period that negatively affect his or her ability to seek alternate work, if not consensual, may warrant disentitling an employer to credit for some, or all, of the period of working notice provided. Overtime worked in violation of the ESA constitutes an exceptional demand and cannot be considered "consensual." An employee's consent to work overtime in violation of the ESA is not effective as per section 5(1) of the ESA.
  • There was no windfall for the employees who worked the excessive overtime in having the benefit of the working notice without crediting CTS for giving that notice. Had CTS not "forced" the 18 key employees to work overtime, and had it simply complied with the overtime provisions of the ESA by obtaining the hourly paid employees' written agreement to work the additional hours and the director's approval, the result would have been different.
  • The Court of Appeal also determined that the lower court correctly decided that the working notice was not effective in the case of the five employees who worked more than 13 weeks beyond their original termination date. Section 6(1) of O. Reg. 288/01 (Regulation) under the ESA permits an employer to continue to provide temporary work to employees for up to 13 weeks after the termination date specified in the notice of termination given to an employee without giving a further notice of termination. However, the Regulation contemplates only a single period of temporary work that does not exceed 13 weeks. If temporary work exceeds that duration, fresh notice is required. Such notice must be clear, unambiguous, and must include the final termination date (see Di Tomaso v. Crown Metal Packaging Canada LP). As such, CTS was only entitled to credit for providing working notice to these five employees from the date of the final letter providing them with notice of their actual termination date.

KEY TAKEAWAYS FOR EMPLOYERS

When contemplating a business closure or restructuring that may result in a mass termination, in addition to notice and severance pay requirements, employers must be careful to comply with all of the statutory requirements for notifying employees and relevant government officials. Based on Wood, the minimum amount of time to provide Form 1 notice is the statutorily required notice period, which may be from 8 to 16 weeks in Ontario depending on the number of employees impacted. If less than the proper statutory notice is given, employees will be entitled to pay in lieu of notice for the balance of the minimum statutory notice period.

The affected employees appeared to have mitigated alleged losses by remaining employed during the working notice period. Nevertheless, given that the Court of Appeal agreed with the Superior Court's finding regarding the impact of excessive overtime hours, it appears that employers must also refrain from allowing employees to take on additional tasks or work substantial overtime hours, otherwise they risk invalidating a working notice period.

Employers must also be mindful of the fact that there is a 13-week limit on temporary work following the initial termination date set out in a notice of termination. If the temporary work period exceeds that 13 weeks, the employer must provide a fresh notice of termination that contains a clear and unambiguous final termination date.

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.

For permission to reprint articles, please contact the Blakes Marketing Department.

© 2018 Blake, Cassels & Graydon LLP.

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