News & Updates
Feeling the Heat: New Reasonable Notice of Termination Qualifier Used by Courts
August 07, 2015
As summer gets a little hotter, employers may begin to feel the heat; firing employees in the summer may require an increase in the reasonable notice period.
Feeling the Heat: New Reasonable Notice Qualifier Used by the Court
In the recent case of Fraser v. CanerectorInc., the Ontario Superior Court of Justice ruled to increase the period of reasonable notice owed to an employee by 50% based on the time of year that his termination occurred. This decision marks a novel addition to the question of reasonable notice. In these hot summer months, employers might be feeling the heat if they are considering making any staff changes.
While it has long been clear that reasonable notice is to be determined on a case-by-case basis, until now this consideration heavily relied on the factors laid out in Bardal v. Globe & Mail Ltd. Traditionally, these factors have included the age of the employee, the position which he/she had held at the company, the length of his/her employment and his/her compensation prior to termination. Post-Fraser, however, it now seems that “time of year” can be added to this list.
Reasonable Notice increased by 50%
In this case, Mr. Fraser was a 46 year old man who had been working as a senior executive for a company for a period of 34 months with a salary of $205,000 per year plus benefits. He was dismissed in June 2014. The court held that due to the fact that he was dismissed in the summer, a time in which it would likely be more difficult to secure new employment, his reasonable notice period should be substantially increased. The Court noted that, using the typical factors for determining reasonable notice, Mr. Fraser would only have been entitled to a notice period of 3 months. However, with the additional consideration of the timing of the termination, it concluded that the proper term of reasonable notice was an extended 4.5 months.
Illuminating his reasoning, Justice Dunphy explained that because Mr. Fraser had been fired in June, it was “quite foreseeable that hiring decisions at his level might have needed to be delayed somewhat due to the summer months in order to account for vacation schedules of key decision-makers.” In other words, had Mr, Fraser been terminated during the winter, he would not have experienced the negative impact of a slow summer while searching for a new position.
The Court did not explicitly discuss if the “time of termination” would have a similar effect on non-management and clerical positions, but a key component of this decision was the suggestion that the persons who would likely hire Mr. Fraser would be unavailable during the summer months. This suggests that the “seasonal factor” will be of greater consideration when considering the termination of a senior, executive, or management employee.
What about mitigation efforts?
Notably, although Mr. Fraser was able to secure new employment in a period of only 10 weeks, the Court still considered the impact of the termination timing in its decision. As such, there has now been a clear signal that any factors affecting a person’s ability to secure new and/or similar employment should be considered and reflected in the determination of reasonable notice, notwithstanding successful mitigation efforts.
Thinking of firing a senior employee this summer? Think again.
With case-by-case determinations, determining reasonable notice remains a fluid issue. The “rule of thumb” approach to reasonable notice of one month per year of service has been repeatedly rejected by the courts, and this case underscores how subjective this determination can be.
In the termination context, the first line of defence is always a properly drafted employment agreement with valid and enforceable termination provisions; however, absent such an agreement, employers must assess their exposure and potential reasonable notice damages. With the Fraser decision now in play, employers may want to carefully consider the timing in which they choose let certain employees go, as warmer weather may mean increased notice requirements, and as such, increased liability for employee compensation.
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Prepared with the assistance of Danielle Levine, Summer Student
Cassandra Da Reis a Corporate and Commercial Leasing Lawyerat Dale & Lessmann LLP, Toronto, Ontario, Canada, a full service business law firm. To speak to Cassandra please call416-369-7843or send an email message to her atcdare@dalelessmann.com
Tags: Employment
