In the uncertainty created by the COVID-19 pandemic, employers considering issues related to common law reasonable notice should consider whether and to what extent the pandemic will affect the notice period.
Last month on this blog, we discussed the November, 2020 decision in Mohammed v. Dexterra Integrated Facilities Management, 2020 BCSC 2008, in which the British Columbia Supreme Court commented on the potential relevance of the pandemic to an employee's duty to mitigate their damages following termination of employment. The recent decision of the Ontario Superior Court of Justice in Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998 considers this issue further. This decision also suggests that while an employee may have received Canadian Emergency Response Benefit ("CERB") payments following termination, employers should not necessarily expect these payments to be deducted from damages owed as a result of a wrongful dismissal.
The Iriotakis decision
Peter Iriotakis worked for Peninsula Employment Services Limited ("Peninsula") as a Business Development Manager. On March 25, 2020, Peninsula terminated Mr. Iriotakis' employment without cause. Mr. Iriotakis brought a claim for wrongful dismissal.
Because the termination provisions in Mr. Iriotakis' employment agreement did not comply with the minimum standards prescribed by Ontario employment standards legislation, they were unenforceable, and implied common law reasonable notice applied. In determining the appropriate period of notice, the motion judge considered various factors, including Mr. Iriotakis' age (56 at the time of termination); length of service for Peninsula (approximately 28 months); position (which, despite his title, did not involve managerial responsibilities); and experience and degree of specialization.
Remarking on the potential impact of the COVID-19 pandemic on Mr. Iriotakis' job search, the motion judge held (para. 19):
I was asked to make findings about the job market and the possible impact of Covid-19 on Mr. Iriotakis. I have little doubt that the pandemic has had some influence upon Mr. Iriotakis' job search and would have been reasonably expected to do so at the time his employment was terminated in late March 2020. However, it must also be borne in mind that 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 Mr. Iriotakis' employment was terminated. The principle of reasonable notice is not a guaranteed bridge to alternative employment in all cases however long it may take even if an assessment of the time reasonably anticipated to be necessary to secure alternative employment is a significant factor in its determination. I must be alert to the dangers of applying hindsight to the measuring of reasonable notice at the time when the decision was made to part ways with the plaintiff. [emphasis added]
The judge ultimately concluded that in considering the factors relevant to the appropriate notice period, "the plaintiff's age and the uncertainties in the job market at the time of termination both serve to tilt the period of reasonable notice away from the fairly short period of notice that his short period of service might otherwise indicate", but that "these factors do not apply to the exclusion of the others. A balanced approach is what is called for" (para. 22). Mr. Iriotakis was awarded three months' notice.
The COVID-19 pandemic also figured in Peninsula's argument that the CERB payments Mr. Iriotakis received after his termination should be deducted from his damages award. The motion judge declined to order this deduction, emphasizing that this was a fact-specific determination in the circumstances (para. 21):
[...] CERB cannot be considered in precisely the same light as Employment Insurance benefits when it comes to calculating damages for wrongful dismissal. CERB was an ad hoc programme and 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 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. On balance and on these facts, I am of the view that it would not be equitable to reduce Mr. Iriotakis' entitlements to damages from his former employer by the amount of CERB given his limited entitlements from the employer post-termination relative to his actual pre-termination earnings. I decline to do so.
Significance for employers
This decision shows that, in some cases, the COVID-19 pandemic may influence what is "reasonable" notice of termination. The motion judge in this decision appeared to view the uncertainties in the job market as partial justification for "tilting" the period of reasonable notice away from what otherwise might have been a shorter notice period. However, as the decision indicates, this will not always be the case. In fact, during the pandemic there have been a number of areas of very high demand, where employees have been able to mitigate their loss of employment very quickly.
Also, this decision does not foreclose the possibility of CERB payments being deducted from damages for wrongful dismissal. The judge's reasons suggest that an employer may face the burden of establishing that deducting CERB from damages would be fair, or equitable, on the facts of an individual case. However, employers will likely have good arguments for including CERB in mitigation income due to the facts that (a) but for the termination of employment, the employee would not have been eligible for CERB, and (b) many employees applying for EI benefits were placed on CERB by the government.
In summary, it is important for employers facing wrongful dismissal claims to adduce evidence regarding the availability of comparable work and in support of including CERB in mitigation income.
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