The Ontario Court of Appeal was recently asked to consider whether an employer’s financial circumstances are relevant in a wrongful dismissal action. Do financially-challenged employers get to provide less reasonable notice to their wrongfully dismissed employees? The answer is no, according to the Ontario Court of Appeal.

Michela v. St. Thomas of Villanova Catholic School was a wrongful dismissal case involving three employees who were given insufficient notice that their teaching positions would be terminated. At trial, the employer had provided evidence to show that it was going through financial difficulties, meaning that the dismissals were required for budgetary reasons.

The trial court accepted that the employees had been wrongfully dismissed by the employer, and the trial court accepted that the employees would ordinarily be entitled to 12 months of notice. However, the trial court cut each of the employees’ wrongful dismissal awards in half, from 12 months to 6 months of reasonable notice each, to address the employer’s financial difficulties. Considering the employer’s financial difficulties, the trial court stated that “the law does not ignore the dilemma of the employer.”

The employees appealed to the Ontario Court of Appeal. They argued that an employer’s financial circumstances may be the reason that employees are wrongfully dismissed, but an employer’s financial circumstances do not justify a reduction in the reasonable notice period. The employees argued that the trial judge’s decision to reduce their reasonable notice period from 12 months to 6 months was an error.

Reasonable notice is all about the employee

The Ontario Court of Appeal agreed with the employees, stating that it was an error to consider the employer’s financial difficulties when determining the reasonable notice period. Reasonable notice is all about the employee, not the employer. The Court of Appeal stated clearly that “an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case.”

As a result, the employees were successful on the appeal. The Court of Appeal increased the employees’ wrongful dismissal damages from 6 months of reasonable notice back up to 12 months of reasonable notice.

What we learned from Michela

The Ontario Court of Appeal’s decision in Michela is in line with what the BC Court of Appeal has stated for decades. A 1987 decision from the BC Court of Appeal, Anderson v. Haakon Industries (Canada) Ltd., held that it is the obligation of an employer to give reasonable notice to its employees, regardless of the employer’s financial difficulties, and “that obligation will not be reduced to reflect the adverse financial condition of the employer.” However, several recent trial court decisions across Canada had seemed to question that principle. The Michela decision should help put an end to those cases, and helps to clarify that the law has not changed. This decision should provide greater clarity to both employees and employers. A wrongfully dismissed employee is owed reasonable notice, and the length of reasonable notice does not change because of the employer’s financial circumstances.

 brendan harvey - wrongful dismissal vancouverAbout the Author

Brendan Harvey graduated from the University of Manitoba with his Juris Doctor degree and is called to the bars of British Columbia and Manitoba.  He represents employees and employers and has had cases in all levels of court in Manitoba.