Economic Conditions of Employer is Irrelevant When Determining Reasonable Notice

In Michela v St Thomas Villanova Catholic School       ( 2015 ONCA 801) the Ontario Court of Appeal held that “An employer’s financial circumstances may well be the reason for terminating a contract of employment – the event that gives rise to the employee’s right to reasonable notice. But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.”

This case decisively ends the debate over the last 20 years as to the proper meaning to be drawn from a previous  case entitled Bohemier v Storwal International ( 1982 ) 40 O.R. (2d) 264 ( H.C.) . Here is what the Court said about that issue.

“[18] The confusion in this area stems from Bohemier v. Storwal International Inc. (1982), 40 O.R. (2d) 264 (H.C.), cited by the motion judge, at para. 91, to support the proposition that “[u]ncertainty, especially where an employee knows that there are financial concerns, can be a factor in reducing the length of notice that might otherwise be reasonable…” The motion judge quoted the following passage found at p. 268 of Bohemier:

An employee may be dismissed either on reasonable notice or by payment in lieu of notice. The latter alternative is almost invariably selected because, for obvious reasons, it is not helpful to a business to continue to employ a person who has received notice of dismissal. Payment in lieu of notice involves a cost to the employer for which there is no corresponding production or benefit. In my view, there is a need to preserve the ability of an employer to function in an unfavourable economic climate. He must, if he finds it necessary, be able to reduce his work force at a reasonable cost.

[19] However, the key sentence in Bohemier – not quoted by the motion judge – follows on from the passage quoted above, at p. 268:

It seems to me that when employment is unavailable due to general economic conditions, there has to be some limit on the period of notice to be given to discharged employees even if they are unable to secure similar employment within the notice period. [Emphasis added.]

[20] Bohemier does not hold, and this court has never held, that an employer’s financial difficulties justify a reduction in the notice period. It does no more than to hold that difficulty in securing replacement employment should not have the effect of increasing the notice period unreasonably. That is what this court should be taken to have meant when, in its brief endorsement in Bohemier, it said that the lower court judge was right to “tak[e] into account economic factors when considering the case for each of the parties”: (1983), 44 O.R. (2d) 361, at p. 362, leave to appeal to SCC refused, [1984] S.C.C.A. No. 343.

[21] Nevertheless, it is clear that Bohemier has caused some confusion in wrongful dismissal litigation. Most recently, it was relied on in Gristey v. Emke Schaab Climatecare Inc., 2014 ONSC 1798, 2014 C.L.L.C. 210-028, in reducing an employee’s notice period by one-third as a result of the relatively poor state of the market and the financial health of the employer.

[22] It is important to emphasize, then, that an employer’s poor economic circumstances do not justify a reduction of the notice period to which an employee is otherwise entitled having regard to the Bardal factors. See Anderson v. Haakon Industries (Canada) Ltd. (1987), 48 D.L.R. (4th) 235 (B.C.C.A.), at pp. 238-41 (Lambert J.A.), pp. 243-44 (Wallace J.A.); Farquhar v. Butler Bros. Supplies Ltd. (1988), 23 B.C.L.R. (2d) 89 (C.A.), at pp. 92-93; and Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd., 2010 BCCA 541, 12 B.C.L.R. (5th) 90, at paras. 34-35, 47-50.”

Practitioners of employment law will be pleased that an otherwise uncertain area of the law( determining reasonable notice )  is now a little more certain.

569 thoughts on “Economic Conditions of Employer is Irrelevant When Determining Reasonable Notice”

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