Are wrongful dismissal damages dependent on the state of the economy?

Feb 12, 2016

By Melanie Reist, Lawyer

As Canadian headlines continue to speak of a deteriorating economic climate employers and employees are wrestling with how this will impact our workplaces. In the case of Michela and St. Thomas of Villa Nova Catholic School the Ontario Court of Appeal heard of an employer’s declining financial situation which lead to the dismissal of three employees.   The question it had to decide was whether an employer’s financial circumstances are a relevant consideration in determining the period of reasonable notice to which a wrongfully dismissed employee is entitled.  A judge hearing the motion for summary judgment in the wrongful dismissal action said yes and awarded 6 months’ notice for long term employees, when the employees were seeking 12 months.

The employees were teachers in a private school who were employed through a series of one-year contracts.  As a result of declining enrollment at the school the employees’ contracts were not renewed at the conclusion of the school year.

The calculation of the notice period is a fact specific exercise.  The relevant factors are set out in the case of Bardal v. The Globe and Mail Limited. The “Bardal” factors focus on the circumstances of the employee, namely: the character of their employment, their length of service, their age, and the availability of other similar employment, having regard to their experience, training, and qualifications.

The motion judge emphasized the “character of the employment” in determining that the 12-month notice period sought by the employees should be reduced to 6.  In doing so he referred to the nature of the private school not being able to provide the security offered by larger more established and better funded institutions.  In stating that, he suggested that the teachers must be taken to have understood the circumstances of their employer and in particular, the declining enrollment and financial impact this had on the employer.  In reducing the notice period to 6 months the motions judge stated the employer’s size and financial circumstances was an aspect of the “character of the employment”. The Court of Appeal did not agree and emphasised that the character of the employment is concerned with the circumstances of the wrongfully dismissed employee and not the circumstances of the employer.  While an employer’s financial circumstances may well be the reason for terminating a contract of employment, they are not relevant to the determination of reasonable notice, and in particular do not justify a reduction in the notice period in bad times, nor an increase when times are good.

The character of the employment refers to the nature of the position that has been held by the employee – the level of responsibility, expertise, and so on.  Historically, courts have drawn the distinction between management and non-management employees in determining notice, and have assumed that the former may require more time to find similar employment then the latter.  It is interesting to note that while the Court of Appeal highlighted this well-known principle of law, it went on to state “this court has questioned the validity of this assumption and suggested that the character of the employment is ‘a factor of declining relative importance’”.  The court of appeal went on to increase the period of reasonable notice for each of the employees to 12 months.

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