How Is the COVID-19 Pandemic Affecting a Court’s Assessment of Severance?
At law, terminated employees are entitled to notice or compensation in lieu of notice, commonly referred to as “severance”. Unless the employee has signed an enforceable contract dictating the amount of notice or severance the employee will receive upon termination, employees are entitled to receive a “reasonable” amount of notice or severance. In determining what is “reasonable”, courts will weigh a number of factors, including the character of the employee’s employment, the length of their service, their age, and their prospects of re-employment.
There is no doubt that the COVID-19 pandemic has had a devastating impact on the job market and a terminated employee’s prospects of re-employment. So, how has the pandemic influenced a court’s assessment of an employee’s severance entitlements, if at all?
In the past, courts have held that an employer’s financial circumstances were not relevant in the assessment of a “reasonable” notice period (see e.g. Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801). However, we are starting to see some cases come out of the courts that are recognizing the unique impact COVID-19 has had on a terminated employee’s prospects of re-employment.
For example, in Yee v Hudson’s Bay Company, 2021 ONSC 387, a 62 year old Director with 11 years’ service was awarded 16 months’ severance. He was terminated on August 28, 2019, which meant that approximately half of his notice period overlapped with the pandemic. He argued the pandemic should increase his notice period because of the detrimental impact it had on his prospects of re-employment. While the court was not convinced with the employee’s argument because the termination had occurred prior to the pandemic, the court did note that terminations during the pandemic were to be treated differently than terminations before the pandemic. It held:
“It seems clear terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect on finding comparable employment” (para. 22).
This is the first time the Ontario Superior Court has indicated that terminations that occur during the pandemic could result in higher notice periods.
We have seen similar commentary coming out of other provinces as well. In Mohammed v. Dexterra Integrated Facilities Management, 2020 BCSC 2008, the court held:
“Notice must be reasonable in the individual circumstances of the case. It is determined as at the date of termination of employment […] Consequently, economic circumstances at the time of termination may be a factor […] Those arising post-termination, such as those from the COVID-19 pandemic, can be relevant to mitigation if they impact the availability of equivalent employment” (para. 27).
Similarly, in Hunsley v. Canadian Energy Services LP, 2020 ABQB 724, the court held:
“Adverse economic conditions tend to increase the notice period because they usually contribute directly to the estimated time required to find replacement employment. […] A depressed economy or sector tends to lengthen the notice.” (paras 26 – 27)
Therefore, while it remains to be seen how, and to what extent, Ontario courts will assess severance packages for employees who are terminated during the pandemic, there is some indication that it is a factor that could increase notice periods.
If you are an employee who was terminated during the pandemic and want to better understand what your severance entitlements are, contact a Turnpenney Milne LLP lawyer today.
Written by: Ozlem Yucel