Proceed with caution
By Erin Porter
Working notice is frequently viewed by employers as a way to save on termination costs, particularly for mass termination. However, as is often the case when one thinks they are getting a bargain, if not carefully considered, it could end up costing more in the long run.
Working notice periods were recently examined by the Court of Appeal in Wood v. CTS of Canada Co., 2018 ONCA 758 (CanLII). Here, CTS of Canada Co. (CTS), provided its employees written notice that its plant would close in 11 months and all employees would be terminated as a result. The termination date for most employees was extended for an additional 13 weeks, as is permitted under the Employment Standards Act, 2000 S.O. 2000, c. 41 (the ESA). Despite the lengthy notice provided, a group of employees brought a class action against CTS, alleging that the notice was invalid. The employees were not unionized, had no written contract of employment and were therefore entitled to common law notice.
The ESA imposes several obligations on an employer in mass terminations. When between 50 and 200 employees are terminated within a four-week period, the employer must provide eight weeks’ notice. Notice is triggered by completing a Form 1 that is then posted in the workplace and sent to the ESA director. Although CTS provided more common law notice to its employees than the ESA required, it conceded that it committed a technical breach given it did not serve and post the Form 1 until 12 days into the eight-week statutory notice period. At dispute between the parties was the impact of this breach.
The Motion’s Court Judge determined that the Form 1 had to be served on the ESA director at the same time that CTS gave notice to its employees, a decision which had the effect of nullifying almost all of the common law working notice provided. The Court of Appeal overturned this decision and determined that the Form 1 only had to be served and posted at the beginning of the statutory notice period. CTS conceded, and the Court of Appeal agreed, that the statutory notice was not effective until it was served on the ESA director – given the clear language in the ESA – and that employees were therefore entitled to an additional 12 days pay in lieu of notice.
The employees also argued that CTS should not be given credit for the weeks of working notice where they worked overtime hours, whether by consent or not, in excess of the allowances in the ESA. CTS had ramped up production prior to the plant closure to stockpile parts. This resulted in many employees working more than the permissible 48 hours a week. The Court of Appeal upheld the conclusion that the primary objective of reasonable notice is to provide the dismissed employee with an opportunity to obtain alternate employment. Exceptional workplace demands that negatively affect an employee’s ability to seek alternate work may disentitle an employer to credit for the working notice period.
Given that employees cannot contract out of their statutory entitlements, an employee’s agreement to work overtime in violation of the ESA cannot be viewed as consensual. Employees were entitled to additional pay in lieu of notice for any weeks that they worked more than 48 hours regardless of whether they agreed to work the extra time. If CTS had obtained written agreement with employees under section 17.1 of the ESA, and the agreement was approved in course by the ESA director, the Court indicated that the result would have been different.
The Court of Appeal also upheld the determination that employees who were offered temporary work more than 13 weeks after the initial termination date did not receive proper notice. Notice must be clear, unambiguous and include a final termination date in order to be valid. Although CTS had provided the few remaining employees with various letters extending their notice period, it was unclear until the very last letter what the actual termination date would be. As a result, all of the common law working notice, except for the six weeks provided for in the last letter, was invalidated.
The principles in this case demonstrate that employers must be certain that they are providing employees with “reasonable” notice. In the context of working notice, reasonable means, among other things, that employees must be afforded an opportunity to find alternate employment. Employers cannot require employees to work overtime hours in excess of what is permitted under the ESA and expect to meet the definition of reasonable. Furthermore, employers must be very careful when crafting working notice. The statutory obligations imposed can have significant consequences if they are not followed, including the employer not receiving credit for any of the working notice provided.
Erin Porter is a partner at Fasken.