The purpose of common law notice is to give employees who are let go the time they need to find a new job. Depending on numerous factors, a judge can decide that this is several weeks, months, or even years.
In Canada, employers are generally required to give common law notice to employees if they have been terminated without cause and do not have an enforceable termination clause in their employment contract.
Terminations can already be a difficult area for employers to navigate, and ensuring you handle them in compliance with the law will help protect your business from wrongful dismissal claims. For these reasons, it is important that employers are educated on the difference between statutory law and common law, what constitutes common law notice, and when it is applicable.
What does “common law” mean?
While statutory law is law legislated by the government, common law is judge-made law that is created over years and years of decisions by the courts.
What is the history of common law?
Common law originated over 150 years ago in the British courts. In 1154, King Henry II introduced a unified system of laws which were meant to be common to all the subjects in his realm. To enforce these laws, Henry appointed judges who resolved disputes on an ad-hoc basis, which were recorded and later used to guide future decisions—also known as the rule of precedence.
Fast forward to the 1800s, and the concept of a one-year contract was introduced in the British Agricultural revolution, requiring a notice length equal to the period of the remaining contract. As the legal system has evolved over time, one-year contracts have been replaced with contracts with no end date. Today, most employees in Canada are employed under indefinite employment contracts.
In 1960, a groundbreaking case for determining criteria for common law notice was set out under the Ontario High Court of Justice in Bardal v. The Globe & Mail Ltd. The case established that each case needed to be addressed individually, with factors such as length of employment, the employee’s age, character of employment, and availability of similar employment in regards to the training and qualification of the employee.
What is common law notice?
If an employee is fired without cause in Ontario, there are two types of “notice” that apply to most provincially regulated employees—either the Employment Standards Act (ESA) or common law notice.
Common law notice, also known as “reasonable notice period” means that employees are entitled to receive notice or pay in lieu of notice if they are terminated. Depending on their case, employees can be entitled to notice under the ESA or notice under common law.
While the ESA only takes into account the length of time an employee has been employed, common law notice is designed to determine how long an employee, under their unique circumstances, will need to find their next job.
When is an employee entitled to common law notice?
It is implied that all Canadian employees are entitled to common law notice of termination of employment unless an employment contract has an enforceable termination clause. In the instance that the employee does not have an employment contract, has an employment contract without a termination clause, or has a contract with a termination clause that is unenforceable, they will be entitled to common law notice.
How long is common law notice?
In Canada, the maximum amount of common law notice is typically 24 months, and the minimum is usually no less than three months. However, the Courts have the discretion to increase past the 24-month threshold.
How do I determine how much notice is appropriate?
If your employee is entitled to common law notice, it needs to be determined how much notice would be appropriate. The Courts have established four main factors to determine how much notice is appropriate. Commonly referred to as the Bardal Factors, the Courts take into account:
- How long the employee has been employed (longer service typically means more notice);
- How old the employee is (higher age typically means more notice);
- How readily available similar employment is (If it is difficult for an employee to find a similar job, their notice period will likely increase); and
- Characteristics of employment (higher positions may increase the notice).
Other factors that may be taken into consideration include whether an employee was recruited to leave another job for their current one or an employee lacks education.
How is reasonable notice provided?
Employers can either give working notice or pay in lieu of notice. For example, if an employee is given four weeks of working notice, they will be required to continue working for four weeks, after which their employment will be terminated. Alternatively, if an employee is terminated immediately, they will be given four weeks’ pay in lieu of notice.
Is common law notice the same for employers across Canada?
Although each province slightly differs in statutory notice, each province relies on the Bardal Factors when determining a terminated employee’s reasonable notice period. It is important to check the employment standards legislation in the province you operate in or where your employee resides.
What about common law notice for federally-regulated employees?
If an employee is federally-regulated and has an enforceable termination clause, statutory notice applies under the Canada Labour Code. Under this legislation, if an employee has completed three consecutive months of continuous employment, you are required to give at least two weeks’ written notice of your intention to terminate them. In lieu of written notice, you must pay two weeks’ wages at the regular rate to the employee. If the employee’s termination clause is unenforceable, they may still sue at common law, taking into account the Bardal Factors.
Exceptions to this rule include an employee who:
- terminates their own employment;
- is dismissed for a just cause;
- is on a lay-off that does not constitute a termination of employment; or
- completes a contract that stipulates an end date.
Which types of employees are not entitled to common law notice?
Although most employees in Canada are entitled to common law notice, there are certain groups of employees who are not. This includes unionized employees, fixed-term contract employees, employees terminated “for cause” or wrongful dismissal, those with enforceable termination clauses, and employees who have signed releases.
Employees who are unionized cannot sue for wrongful dismissal, as their rights are governed by a collective bargaining agreement. That doesn’t mean they’re not still protected, they just have other government bodies protecting them, specifically under the Ontario Labour Relations Act, 1995.
Fixed-term contract employees
Common law notice is not available to employees who have a fixed-term contract. Instead, if an employee has been dismissed in breach of contract of a fixed-term contract, they are usually entitled to the balance of their term.
This amount can vastly differ, depending on how much time the employee has left in their contract. For example, an employee on a two-year contract who has been terminated after only one year will be owed one whole year’s pay, while one with only two months left will be entitled to a significantly lower amount.
Employers who use fixed-term contracts should be cautious that continuously renewing fixed-term contracts may be at risk of a judge determining that the employment is on an indefinite term. Thus, allowing the employee to receive the entitlement of reasonable notice.
Employees terminated “for cause” or wrongful dismissal
Employees terminated under wrongful dismissal or “for cause” are not entitled to common law notice. Some examples include:
- Breach of contract: If you violate any of the terms in your employee’s contract when you terminate an employee, it can be considered wrongful dismisssal. An example is terminating an employee only verbally instead of in writing
- Committing illegal acts: If you ask an employee to commit illegal acts, such as accepting cash payments to avoid taxes, employees have the right to refuse.
- Discrimination: Terminating an employee based on their age, gender, disability, religion, or sexual preference is considered wrongful dismissal.
- Harassment: If an employee was terminated or encouraged to quit for reporting a form of harassment (for example verbal or physical), they may have been wrongfully dismissed.
Employees with enforceable contracts or who have signed releases
Employment contracts with valid and enforceable termination clauses that limit the employee’s entitlement to only statutory notice are not entitled to common law notice. Moreover, employees who may have signed full and final releases are not allowed to seek notice under common law.
Do I have to contribute to the employee’s health benefits during the notice period?
Whether an employer must provide health benefits during the notice period differs by each province. It is important to check the employment standards legislation in the province you operate in or where your employee resides.
Under the ESA, employers in Ontario are required to continue all benefits during the notice period on termination of employment without cause. This includes all extended health and dental benefits that the employee had during their employment. In British Columbia, benefits typically terminate on the date of termination, unless extended by the employer.
As for common law, employers have an obligation to continue the health benefits plan during the entirety of the notice period.
Do you need help drafting a termination clause or calculating termination in your employment contracts?
Figuring out what an employee is entitled to regarding termination can be complicated. If you have any questions about your employee’s entitlements regarding termination, talk to one of our experts.
Over the years, our advisors have drafted numerous customized employment contracts, helping identify any potential issues with wording and policies. To learn more about how our HR outsourcing services can benefit your business, call an expert today at 1 (833) 312-5592.