Employment Contracts And The Right To Reasonable Notice
Getting fired can be one of the most stressful things that can happen to someone. We don’t like to think about it but even the best employees can be let go when employers’ decide their staffing needs change. We might assume that we will receive reasonable notice but often can be unpleasantly surprised when we find out what our rights are.
Employment relationships are a form of contract, although at one time many jobs were offered on a “handshake”, with the terms of the contract implied through the recognition of general principles developed through cases decided by the courts.
A key concept that has developed in the case law is the right to “reasonable notice” when a job relationship is terminated without cause in a non-unionized workplace (this does not apply to situations where there is “just cause”, i.e. performance or misconduct issues that are serious enough to justify immediate termination without any rights to notice/termination pay).
Usually in a without cause termination an employer can provide “Pay in lieu of Notice” (often referred to as Notice Pay) or “Working Notice”. Working Notice means that the employer gives advance notice that your position is about to be terminated. In this scenario the employee continues to work through the notice period. Once the notice period is over the employment ends with no further obligations from the employer. An employer should be accommodating during this period to the employees efforts to find alternate employment, attend interviews, etc.
The more typical option exercised by employers is “Pay in lieu of Notice”. In this scenario the employee is not required to work through the notice period. Whether an employee is provided with working notice or pay in lieu, the notice period will be the same, and it is up to the employer which option they chose to exercise. The question always arises – How much Notice Pay am I entitled to?
There is no standard formulation to calculating proper notice pay. Courts will look at a number of factors including length of service, seniority, salary level, type of position and the availability of alternate employment, as well as, other factors. Reasonable notice could be as little as one week and as much as twenty-four months salary or more. The purpose of “reasonable notice” is to give a terminated employee a financial cushion for the time they need to find a new job. Minimum notice periods are prescribed by law in Ontario’s Employment Standards Act, but the amount of notice that a court can give under the principle of “reasonable notice” has been invariably much higher, and lawyers often advised clients to sue rather than pursue enforcement of minimum entitlements with the Ministry of Labour.
Today, written employment contracts are becoming the norm for employment relationships, even for entry level positions. These contracts are always written by the employer and quite often they tend to draft the contract to include terms restricting notice pay to the minimums allowed under the Employment Standards Act. A new employee, excited to be hired for the job may sign such a contract without anticipating what would happen if they were let go at some point in the future. Several years later they may be surprised to receive a “pink slip”, and a right to only minimal “notice pay”.
Unfortunately, courts have started to enforce these clauses to the detriment of an unsuspecting employee who may not give full consideration to the termination provisions in their contract before signing on the dotted line of the employment agreement. This means that employees are now being left to deal with the inequity that results in a long-term employee being let go with little financial cushion to carry them through the time necessary to find a new job, simply because they failed to give proper consideration to the termination provision which minimized the notice pay required under the contract.
The Ontario Court of Appeal has grappled with this issue, and have made it clear that although such limited notice provisions can be enforceable, they must provide at least what is payable under the Employment Standards Act including salary, benefits, commissions etc. Any defect in the termination clause of the contract will render that provision entirely void and the employee can pursue their common law right to reasonable notice pay that will likely be much higher.
Whether you are an employee or an employer, if you are about to engage in hiring or termination it’s always a good idea to review the contract with a qualified lawyer to ensure you are taking steps to protect your rights.
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