Introduction
In Canada, employment is a legal contract. The collective agreement in unionized workplaces represents the ultimate comprehensive contract between employer and employer. It sets out the rights and obligations between the parties, including how employment-related disputes are to be resolved.
The concept of a contract makes intuitive sense because both employer and employee voluntarily agree upon obligations which they must fulfill. Individual (non-unionized) employment contracts may be oral or written, or a bit of both. Often, they incorporate terms by reference from employment manuals and legislation from the taxation, human rights, minimum standards and occupational health and safety fields. There are about two to three times as many workers who enter into individual contracts of employment as there are unionized workers.
As separation is to marriage, termination is not something employers and employees like to discuss at hiring. Individual employment contracts can be of fixed-term duration such as a summer job or time-sensitive projects. However, by far, most workers start and continue to work indefinitely until one party – employer or employee – quits the other. Contract law implies a term that either party can terminate that contract by giving reasonable notice.
Employees can quit their jobs and they should give their employers reasonable notice of quitting so the employer can find replacement workers. Employers may terminate their employees on reasonable notice – this serves as a period for them to find another job. The notice model is viewed as fair to both parties. By contrast, non-unionized workers in the United States are not viewed as being in a contract, but rather a mere relationship that exists at the will of both parties. If one party wants out, one can quit. This brings the relationship to an immediate end. Notably, this “at will” approach, while highly responsive, simple and efficient, provides no security or protection for workers.
While the Canadian notice model for indefinite employment appears more compassionate, it suffers a major flaw: what notice is reasonable in each worker’s different circumstances? Employers, employees and judges might all have assorted perspectives on reasonable notice. This uncertainty leads to extensive, costly litigation.
This article describes a solution to this uncertainty problem in reasonable notice, at least as it relates to employers dismissing their employees. We start with distinguishing between minimum and reasonable notice of employment termination.
Minimum versus Reasonable Notice
Every jurisdiction in Canada has enacted legislation which operates as the floor for minimum employment terms. These legislated minimum “standards” protect workers from the excesses of the marketplace and cover all aspects of work: hours of work; how earnings must be paid; minimum wages; holidays; layoffs and recalls; hiring children; breaks during and between shifts; maternity, parental, reservist and compassionate leaves; overtime; vacation and terminating employment.
All employers must comply with these minimum standards. And for termination, these standards are indeed minimal. Section 53 of the Alberta legislation is a good example:
56 To terminate employment an employer must give an employee written termination notice of at least
(a) one week, if the employee has been employed by the employer for more than 3 months but less than 2 years,
(b) 2 weeks, if the employee has been employed by the employer for 2 years or more but less than 4 years,
(c) 4 weeks, if the employee has been employed by the employer for 4 years or more but less than 6 years,
(d) 5 weeks, if the employee has been employed by the employer for 6 years or more but less than 8 years,
(e) 6 weeks, if the employee has been employed by the employer for 8 years or more but less than 10 years, or
(f) 8 weeks, if the employee has been employed by the employer for 10 years or more.
These standards were enacted in 1996 and are currently under review by the Alberta government.
..few employers choose to take the specific step of contracting out of reasonable notice and limiting employees to minimum notice. Reasonable notice is a common law standard, set by judges over decades and implied into employment contracts. They are more generous than minimum standards. For example, reasonable notice grants approximately one month for every year worked up to a few years of notice. It considers factors beyond length of service such as employee expectations, employer promises made, and the employee’s age and managerial responsibility.
To contract out of implied reasonable notice, the employer may do so expressly in the employment contract or in a subsequent addendum to it that is otherwise enforceable. However, few employers choose to take the specific step of contracting out of reasonable notice and limiting employees to minimum notice. When non-cause termination occurs at a later point, reasonable notice must be estimated and provided.
Machtinger
In 1992, the Supreme Court of Canada, in Machtinger v. HOJ Industries Ltd http://canlii.ca/t/1fsd2 stated:
I would characterize the common law principle of termination only on reasonable notice as a presumption, rebuttable if the contract of employment clearly specifies some other period of notice, whether expressly or impliedly.
. . . an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the Act . . . Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice.
Reasonable notice is a common law standard, set by judges over decades and implied into employment contracts. They are more generous than minimum standards. Several Ontario cases involved clauses that demonstrated how to rebut the presumption of reasonable notice: Simpson v Global Warranty, http://canlii.ca/t/g64bh; Roden v Toronto Humane Society, http://canlii.ca/t/1lmtb; Oudin v Le Centre Francophone de Toronto, http://canlii.ca/t/gltc6.
Yet, some judges remain sympathetic to employees who were limited to minimum notice. In the words of the Oudin court, judges should not “engage in searching for a means to avoid the parties’ commitments.” For example, notice “in accordance with” minimum notice legislation was determined inadequate to limit notice to minimum standards: Kosowan v Concept Electric, http://canlii.ca/t/1qslp.
The Nutting Case
This very recent Alberta case, Nutting v Franklin Templeton Investments Corp, http://canlii.ca/t/gvsrk, confirms that well-drafted clauses will rebut the presumption of reasonable notice and provide the certainty of minimum notice.
Mr. Nutting worked for less than 2½ years before he was dismissed without cause by the employer. His employment contract contained the following provision:
While the Canadian notice model for indefinite employment appears more compassionate, it suffers a major flaw: what notice is reasonable in each worker’s different circumstances? Additionally, your employment may be terminated at any time without cause upon the provision by [the employer] of the minimum notice of termination, or pay in lieu of notice, benefits and, if applicable, severance pay prescribed by applicable employment standards legislation in the province in which you are employed. The provision of such notice or pay in lieu of notice, benefits and severance pay constitutes full and final satisfaction of all rights or entitlements which you may have arising from or related to the termination of your employment (including notice, pay in lieu of notice, severance pay, etc.), whether pursuant to contract, common law, statute or otherwise.
The employer paid Nutting for the minimum standard of two weeks which is what the minimum notice legislation accorded to him. Nutting sued for reasonable notice instead, which would attract up to three months of pay.
The Queen’s Bench Master, on summary judgment, dismissed Nutting’s claim. The clause in the employment contract was clear and unambiguous, which limited Nutting to two weeks of pay, the minimum notice required by the Alberta Employment Standards Code, http://canlii.ca/t/52bwr.
Conclusion
Employers are largely in control of employment contracts. They can avoid expensive and intractable lawsuits about what is reasonable notice in every case by inserting clear limitation clauses in these contracts which prescribe that the applicable notice period shall be as set out in minimum employment standards legislation or any other lawful period of notice. The language should also reinforce the parties’ intention that the minimum notice replaces any other notice requirement that may have otherwise been implied. One cannot agree below minimum standards.
The employee might wish to bargain and stipulate quitting notice in the same way. As separation is to marriage, termination is not something employers and employees like to discuss at hiring. Nevertheless, all employment ends, often without cause. Ideally, this notice limitation should be discussed and inserted when the contract is made. When the termination occurs, the party giving the notice can choose to confer more generous notice, but will be under no legal obligation to do so.
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