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Economic difficulty of an Employer is no reason for shorter notice periods for employees.
Michela v. St. Thomas of Villanova Catholic School
A wrongfully dismissed employee is usually entitled to reasonable notice of their being fired. This begs the question: reasonable for whom? For example, is the amount of notice owed to a dismissed employee affected by the financial circumstances of the employer? This question is squarely addressed in Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801.
The plaintiff Michela was one of several teachers employed by a private school (“St. Thomas”). These teachers worked in a series of one-year contracts, renewed annually in June. Michela worked at St. Thomas for 11 years, and the other plaintiffs for 8 and 13 years. In May of 2013, St. Thomas informed them by letter that their contracts would not be renewed that year because enrollment for the coming academic year—and therefore the school’s revenue—was lower than expected. The plaintiffs sued for wrongful dismissal.
1. Entitlement to reasonable notice- How long had the plaintiffs been employed for? Did they have contracts of indefinite employment?
2. What should their respective notice periods be?
3. Should the employer’s financial position be taken into account in calculating the plaintiffs’ notice periods?
Length and Nature of Employment
The motion judge (the case was decided by summary judgment, not a trial) found that despite their ongoing series of one-year contracts, the plaintiffs were indefinite employees of the school. Therefore each had his or her entire length of service (i.e. 8, 11, or 13 years for each of the different plaintiffs) counted in the calculation of his or her notice period.
This finding was not disputed on appeal.
Length of Notice Period
The motion judge found that based on their age, length of service, and other factors, each plaintiff was entitled to 12 months’ pay in lieu of notice. This finding, was upheld on appeal.
Relevance of Employer’s Financial Position
However, the motion judge decided to reduce the plaintiffs’ “default” notice period from 12 to 6 months. Notice periods are assessed using a set of factors. One of them is the “character of the employment.” According to the motion judge’s reasons,
The teachers must be taken to have understood the circumstances of their employer…they worked there understanding its circumstances. This cannot be ignored in assessing what is reasonable notice. It is an aspect of the “character of the employment” as referred to in Bardal v. Globe & Mail Ltd.
This was the aspect of the decision that the teachers challenged in the Court of Appeal.
The Court of Appeal held that “character of employment,”
…is concerned with the circumstances of the wrongfully dismissed employee. It is not concerned with the circumstances of the employer. An employer’s financial circumstances may well be the reason [emphasis in original] for terminating a contract of employment—the event that gives rise to the employee’s right reasonable notice. But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they neither justify a reduction in the notice period in bad times nor an increase when times are good.
The Court found that the motion judge committed an error of law (an error about the legal rules to be applied to a particular set of facts) by including the employer’s financial circumstances in the “character of employment” factor. Therefore, the Court modified the motion judge’s decision and restored the plaintiffs’ notice period to 12 months.
The Court of Appeal for Ontario has now been totally clear the financial hardship of an employer does not reduce its obligation to provide adequate notice or pay in lieu to dismissed employees. If you have questions about your employment situation, call Monkhouse Law today for a free consultation.