In a recent decision of the Ontario Superior Court of Justice, Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998 (Peninsula Employment), the court considered factors unique to the COVID-19 pandemic in calculating the common law reasonable notice to which the employee was entitled.

Background

In 2017, the parties entered into an employment agreement for the role of Business Development Manager.  Despite the employee’s title, he did not manage subordinates.  In March 2020, the employee was dismissed without cause, one week after Ontario declared a state of emergency due to COVID-19.  At the time, the employee was 56 years old, and had been employed for 28 months with a base salary of $60,000, plus commission.  In 2019, his last full year of employment, the employee’s total compensation was $145,186.  Upon his dismissal, the employee was paid four weeks’ base salary plus benefits. 

Decision

The primary issue before the court was the length of the common law reasonable notice period to which the employee was entitled.  The court considered the following two factors unique to the COVID-19 pandemic:

1. Whether the impact of the pandemic on the job market should be considered; and

2. Whether the employee’s reasonable notice entitlement should be reduced by the amount of the Canada Emergency Response Benefit (CERB) he received. 

Impact of COVID-19

The court refused to take the impact of the COVID-19 pandemic on the job market into consideration, emphasizing that reasonable notice is measured at the time the decision to terminate employment is made rather than in hindsight.  The court noted that when the employee was terminated:

…the impact of the pandemic on the economy in general and on the job market, in particular, was highly speculative and uncertain both as to degree and to duration at the time [the employee’s] employment was terminated. The principle of reasonable notice is not a guaranteed bridge to alternative employment in all cases however long it may take even if an assessment of the time reasonably anticipated to be necessary to secure alternative employment is a significant factor in its determination. I must be alert to the dangers of applying hindsight to the measuring of reasonable notice at the time when the decision was made to part ways with the plaintiff. (para. 19)

Impact of the CERB

In addition, the court gave the following reasons for declining to reduce the employee’s entitlement to damages in lieu of reasonable notice by the amount of CERB he received: (i) CERB could not be considered in the same way that employment insurance benefits are considered in the context of the calculation of damages for wrongful dismissal because, “CERB was an ad hoc programme and neither employer nor employee can be said to have paid into the program or ‘earned’ an entitlement over time beyond their general status as taxpayers of Canada;” and (ii) the $2,000 CERB benefit was “considerably below the base salary previously earned by the [employee] to say nothing of his lost commission income.”

The court decided the employee’s common law reasonable notice period should be three months, which in its view represented, “a reasonable balancing of the relative brevity of the plaintiff’s service, a consideration of his age and a consideration of his prospects.” (para. 23)

Bottom Line for Employers

As noted by the court, reasonable notice is determined at the time that employment is terminated.  The court refused to consider the impact of COVID-19 in determining the period of reasonable notice to which the employee was entitled because, at the time of termination, the pandemic was in an early stage and its future impact on the economy and the job market was unknown.  In this regard, the court’s reasoning is encouraging for employers, although it remains to be seen whether other courts will follow this approach.  Future outcomes may depend on whether the impact of the pandemic can be ascertained with any degree of certainty at any point in time in light of real world realities, including the advent of several COVID-19 variants, the issue of whether vaccines will be effective against all variants, and potential hesitations about reopening economies too early in the face of a possible “third wave.”

The court’s reasons for declining to reduce the entitlement to damages in lieu of reasonable notice by the amount of CERB received leave questions for employers.  Notably, the court did not say that an employee’s receipt of CERB will never reduce an employee’s entitlement to damages.  Rather, the court stated that it would not make a reduction in this particular case because the CERB benefit was considerably below the employee’s base salary.  It is unclear whether courts will continue to follow this distinction, or state definitively that in all cases an employee’s entitlement to damages either will or will not be reduced by the amount of CERB received.