By Derek Knoechel and Lindsey Taylor
One of the principle features of Canadian employment law that strikes many U.S. employers as unique is the concept of an employee’s common law right to reasonable notice of termination when an employee is fired without cause.
Compliance with the minimum statutory requirements for notice, termination pay, and/or severance pay contained in employment standards legislation across the country generally isn’t sufficient to extinguish an employer’s obligations to provide reasonable notice. That’s because the courts have repeatedly held that minimum standards aren’t “reasonable.”
Of course, an employer may limit the amount of notice by entering into a written contract that expressly deals with the issue. But this week’s entry isn’t aimed at the employers who are fortunate enough to be able to rely on enforceable termination clauses. It’s directed toward those less fortunate.
Employers who lack the certainty of an enforceable termination clause are stuck with the challenge of trying to predict the amount of notice that will satisfy the test of “reasonableness.” Determining reasonable notice in a given case is more of an art than a science.
The list of factors to consider is not closed. The original factors of character of employment, length of service, age of the employee, and the availability of similar employment (having regard to the experience, training, and qualifications of the employee) have expanded over time to include several other factors. And commonly held rules of thumb, such as “one month notice per year of service” have been rejected as too simplistic.
The lack of predictability is even worse in cases of short-service employees –- those who have been employed for three years or less. Notice awards for these employees are all over the map. This uncertainty has the tendency to prolong disputes over notice, as the employer and employee often can’t agree on the appropriate range within which to negotiate.
Recently, the British Columbia Court of Appeal, in Saalfeld v. Absolute Software Corporation, weighed in on the issue of notice periods for short-service employees. In doing so, the court may have reintroduced an element of predictability for these types of cases.
The court reaffirmed the use of an objective approach in which notice awards in prior decisions are used to establish a range of reasonableness and then adjustments for factual differences are made within the range. This, in itself, wasn’t particularly striking. More significant was the court’s application of this approach to a short-service employee.
The plaintiff was a 35-year-old employee who had worked for the employer for nine months. She was a software salesperson with a shared quarterly sales target of $650,000 in a market new to the employer. At trial, she was awarded five months notice. Her entitlement under employment standards legislation had been only one week.
The Court of Appeal:
- Expressly rejected the notion that there was a six-month floor of notice. This is a welcome development, to be sure.
- Saw little support for the notion that five to six months was the norm for short-service employees in their 30s or early 40s. A negative rule of thumb perhaps, but useful nonetheless.
- Said that the normal range of notice in the province for a nine-month employee, when adjusted for age, length of service, and job responsibility was in fact two to three months.
Of course, this pronouncement was qualified by the fact that the two- to three-month range could be extended by other factors. In this case, the availability of similar employment had been limited, warranting a modest extension. While the five months awarded at trial was at the very high end of an acceptable range it wasn’t beyond the range of reasonableness so as to justify intervention by the Court of Appeal.
Notwithstanding that the Court of Appeal didn’t change the trial judge’s assessment of reasonable notice, the court’s pronouncements for short-service employees are welcome developments. They will have a definite impact on cases in British Columbia and may affect courts’ decisions across the country. While appeal court decisions are only binding within their home province, they are often persuasive and can have significant influence in other Canadian provinces.