Written by Michael J Weiler

Canadian employers continue to downsize in light of the collapse of the commodities market.  Anglo-American announced earlier this week that it will terminate 85,000 employees worldwide due to poor economic circumstances.  1500 employees work for Anglo-American in Canada.  So one would think maybe in these extraordinarily difficult times employers would catch a break in court in wrongful dismissal cases resulting from bona fide downsizing.  Unfortunately, a recent Ontario Court of Appeal decision reaffirms that courts will not reduce notice periods when the terminations result from serious economic problems.

In Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801 the employer terminated 3 teachers because a lower than anticipated enrollment at the school would have likely resulted in a $300,000 shortfall in revenue.  The employer tried to limit its exposure in the wrongful dismissal actions by the 3 teachers in two ways.  First, the employees were subject to a series of one-year fixed-term contracts and therefore the school argued that, as the employees were subject to fixed-term contracts, no further notice was required. Secondly, it argued that if the teachers were entitled to reasonable notice, the notice periods should be reduced due to the financial circumstances of the school.

The trial judge found that the teachers were employed for indefinite periods and therefore the fixed-term contracts did not apply to limit the common law notice for each teacher.  This finding was not appealed.  The trial judge also held that the reasons for the termination should result in reduced periods of notice.

On appeal the court overturned the trial judge’s decision to reduce the notice stating:

[17]…….[The court] is not concerned with the circumstances of the employer. An employer’s financial circumstances may well be the reason for terminating a contract of employment – the event that gives rise to the employee’s right to reasonable notice. But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.

[22]    It is important to emphasize, then, that an employer’s poor economic circumstances do not justify a reduction of the notice period to which an employee is otherwise entitled having regard to the Bardal factors. See Anderson v. Haakon Industries (Canada) Ltd. (1987), 48 D.L.R. (4th) 235 (B.C.C.A.), at pp. 238-41 (Lambert J.A.), pp. 243-44 (Wallace J.A.); Farquhar v. Butler Bros. Supplies Ltd. (1988), 23 B.C.L.R. (2d) 89 (C.A.), at pp. 92-93; and Sifton v. Wheaton Pontiac Buick GMC (Nanaimo) Ltd., 2010 BCCA 541, 12 B.C.L.R. (5th) 90, at paras. 34-35, 47-50.

[23]       Thus, even assuming that the respondent was suffering financial difficulties when it dismissed the appellants, the motion judge erred in concluding that the period of notice to which the appellants were entitled should be reduced as a result. That conclusion is neither required by the case law nor consistent with the nature and purpose of an employee’s right to notice.

As noted this reflects the law in BC.

For employers in BC, there is even more bad news as our courts go one step further and find that economic circumstances may be relevant in favour of employees to increase the notice period.  In Hunter v Northwood Pulp 62 BCLR 367; 7 CCEL 260 at the height of the forest industry recession Mr. Hunter was terminated due to economic reasons.  He was 36 years old and had a responsible management position “although at the lowest rung” and earned $36,000 per year.  He made 200 job inquiries and sent out 180 resumes.  The trial judge awarded 8 months which is a very high award given the 4 Bardal factors.  In upholding the trial judge’s decision to award 8 months’ notice the Court of Appeal stated:

(1) The lack of available employment opportunities resulting from a depressed economy is a factor to be taken into account.

(2) The economic factor must not be given undue emphasis.