Canadian Employment Law Today

April 8, 2020

Focuses on human resources law from a business perspective, featuring news and cases from the courts, in-depth articles on legal trends and insights from top employment lawyers across Canada.

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with Colin G. M. Gibson Ask an Expert HARRIS AND COMPANY VANCOUVER 2 | April 8, 2020 April 8, 2020 Canadian HR Reporter, 2020 Have a question for our experts? Email Answer: At common law, an employee who is dismissed without cause and without receiving reasonable working notice has been "wrong- fully dismissed." What is wrongful about the dismissal is not the termination of employment but rather the employer's failure to comply with its implied common law obligation to provide reasonable working notice of dismissal. It is well established that, at common law, an employee who is seeking damages for wrongful dismissal has an obligation to take reasonable steps to mitigate their damages by searching for similar employment and ac- cepting such employment if it is available. If a dismissed employee finds new employment during the notice period, the damages the em- ployer is required to pay will be reduced by the amount of loss the employee avoided in the earnings from their new employment. If an employer can demonstrate that the employee was offered other reasonable employment or could have found such employment if they had made reasonable efforts, the employee's damages will be reduced accordingly. How- ever, an employer cannot merely demonstrate that an employee made no efforts to mitigate their loss. To succeed with a mitigation de- fence, the employer needs to show that the employee would have been successful in find- ing comparable employment if a reasonable job search had been conducted. Statutory severance compensation is not usually subject to any deduction for mitigation earnings. Also, severance compensation that is required by the express terms of an employee's employment agreement may not be subject to a mitigation deduction, depending on the terms of the agreement. In most situations, an employer can avoid its obligation to provide severance compensation by giving an employee the appropriate amount of working notice of dismissal. It is often good practice to give the employee a positive letter of reference and provide a reasonable amount of time off during the working notice period to at- tend job interviews. If the employee finds a new job and quits during the working notice period, this can create a win-win scenario and reduce the employer's monetary liability. The issue here, however, is whether an em- ployer can require an employee to conduct a reasonable job search during the working notice period. This is a potentially challeng- Mitigation obligations during working notice Question: If an employee is dismissed but asked to work out their notice period, is it reasonable to expect them to look for new work to potentially reduce the notice period? Termination pay and severance pay Question: What is the difference between termination pay and severance pay, and are they both required when dismissing an employee? Answer: Employers may be required to pay "termination pay" and/or "severance pay" to non-union employees who are dismissed with- out cause. This obligation may arise from the language of an employee's written employment contract. But, in most cases, a requirement to provide termination pay or severance pay will come from the applicable employment stan- dards legislation. When an employer dismisses an employee without cause, it has two obligations to the employee. First, the employer must provide the amount of working notice of dismissal or severance/termination compensation that is re- quired by the relevant employment standards statute. Second, the employer must provide the amount of notice or compensation that is re- quired by the employee's employment contract. If there is no employment contract with an en- forceable termination provision, then the com- mon law makes it an implied term of the em- ployment relationship that the employer must provide the employee with reasonable working notice of dismissal. The minimum requirements an employer must comply with when it terminates an em- ployment relationship without cause are found in employment standards legislation. Normal- ly, the statutory provisions give the employer the option of providing working notice of dis- missal or some form of compensation in lieu of such notice, or a combination that adds up to the statutory entitlement. The nature and amount of compensation an employer is required to provide on termination and the way that compensation is described in the legislation varies between jurisdictions. In British Columbia, for example, the Em- ployment Standards Act contains an indi- vidual termination provision that requires an employer that dismisses an employee without cause to provide a lump-sum payment equal to a certain number of weeks of wages as "com- pensation for length of service." The amount of compensation owed depends on the em- ployee's length of continuous service. Such compensation involves pay only and does not require the employer to continue benefits, and an employer can discharge its obligation to provide compensation by giving working notice of dismissal instead. Under the group termination provisions in the B.C. act, an em- ployer that terminates the employment of 50 or more employees at a single location within a two-month period must provide additional working notice — or "termination pay" — to the affected employees. The number of weeks of group termination notice or termination pay depends on the number of employees who are terminated, not on any individual employee's length of service. Again, there is no obligation to continue benefits in a group ter- mination situation in B.C. In Ontario, the Employment Standards Act, 2000 requires an employer to provide "termi- nation pay" to an employee who is dismissed without cause and is not given working no- tice. Individual termination pay is a prescribed number of weeks based on the employee's length of service, and it includes an obligation to continue benefits for the same period. Ad- ditional termination pay (or working notice of dismissal) is required in a "mass termination" situation, where the employer terminates 50 or more employees in a four-week period. An Ontario employer may have an addition- al requirement to provide "severance pay" to an employee who is terminated. Employees in On- tario who have completed five years of service will qualify for this extra severance pay if either the employer has severed the employment of at least 50 employees within six months because of a partial or total closure of the business, or the employer's annual payroll in Ontario is at least $2.5 million. Employees will be entitled to severance pay for each year of service, up to a maximum of 26 weeks. An Ontario employer cannot reduce or eliminate its obligation to pro- vide severance pay by giving working notice of termination instead. An employer that wishes to terminate a non- union employee without cause should always consult the employment standards legislation in its jurisdiction carefully, to determine the specific minimum statutory requirements that will apply to the dismissal. DUTY TO MITIGATE on page 7 »

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