Are fired employees expected to look for new jobs in their sleep?

Mass terminations and overtime make for a confusing notice period

BY Kelsey Orth 12 Oct. 2018

As you may know, the Employment Standards Act, 2000 (“ESA”) has specific provisions governing an employee’s minimum entitlements upon termination of employment. Lesser-known, however, are the particular aspects of the ESA related to “mass terminations” – when significant downsizing or a windup of operations occurs, the employer may be subject to some additional or different requirements. Recently, the Court of Appeal had reason to examine the effect of those provisions – and, pertinent to all employers, the idea of notice under the ESAgenerally – in Wood v. CTS of Canada Co..

In Wood, the employer was closing its Streetsville plant, which triggered the employer’s mass termination obligations under section 58 of the ESA. Essentially, in the event of an ESA-qualified “mass termination” (termination of employment for 50 or more employees within a 4-week period) all affected employees become entitled to at least 8 weeks’ notice of termination. Concomitantly, the employer must provide Notice to the Director of Employment Standards. Accordingly, on April 17, 2014, CTS of Canada Co. (“CTS”) gave notice to its employees that their employment would terminate on March 27, 2015, a date that was subsequently extended to June 26, 2015; CTS did not give notice to the Director until May 12, 2015 (when the mandatory 8-week notice period was already 12 days old).

While several employees signed Releases in favour of CTS, 74 employees brought a class action lawsuit against their employer, and a motion for summary judgment was held to determine the common issues. The motion decision prompted an appeal from CTS on 3 key issues:

The motion judge’s determination that CTS should have filed its Notice to the Director at the same time it advised employees of the end of their employment in April, 2-14 (invalidating the 13 months of notice prior to May, 12, 2015);
The determination that CTS would not get credit for notice in any week in which the subject employee worked overtime contrary to the ESA or in which they were forced to work overtime that “had a significant adverse effect on the ability of the employee to look for new employment”; and
For 5 employees who worked beyond their original separation date CTS was only able to count credit for common-law working notice from the date of the letter(s) providing them with notice of their actual termination date.

In respect of the mass termination provisions of the ESA specifically, the Court of Appeal found that CTS was only required to file its Notice to the Director within the minimum time period (8 weeks); consequently, having filed 12 days late all affected employees were entitled to an additional 12 days’ pay in lieu of notice, but not the entire 8-week amount (nor to some greater common-law amount).

However, it is with respect to issues 2 and 3 where all employers should take note. In agreeing with the motion judge in respect of Issue #2, the Court of Appeal specifically recognized that in order for working notice to be effective, it has to allow the employee reasonable time to actually look for alternative employment – a quality of opportunity that cannot exist where the employee is either:

forced to work overtime, as was the case with 18 key employees at CTS; or
where the overtime they work contravened the ESA – even if, as was the case in Wood, it is by consent or at the request of the employee looking to make money.

With regard to Issue #3, the court of Appeal relied upon Section 6 of Regulation 288/01 which provides that, as long as the employee does not work more than 13 weeks from the original date of termination, the provision of such “temporary work” does not affect the original termination date specified in the notice of termination, or serve to extend the employee’s period of employment. This was significant here because CTS purported to make several extensions, and the Court of Appeal only granted them credit for working notice from the date of the last letter (which did not provide the required minimum notice). We note also that, although not addressed in this decision, the separate treatment of the employees who received multiple extensions took them out of the context of the mass termination, meaning that their respective entitlements would be assessed individually.

Accordingly, any employer contemplating providing working notice prior to an effective termination date would do well to remember these principles, and of course seek advice as to not only ESA but also any potential common-law obligations it might have. As always, the team at CCPartners stands ready to assist with any termination of employment or ESA questions you may have.

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