Notice in Ontario: How Is it Calculated?

An employment relationship is governed by the rules of contract, whether or not the parties have a written employment agreement. Unless otherwise stipulated in the contract, it is assumed that the employment relationship is ongoing and permanent. This means that when an employer ends the employment relationship on a "not for cause" (i.e. no fault basis), there is a breach of contract. The remedy for this breach is to give employees appropriate notice of the upcoming termination. The amount of notice owed to each employee will vary depending on their particular circumstances.

Although the employer is required to give employees "working notice" of their impending termination, the reality is that most employers offer employees a severance package that includes pay in lieu of notice. However, you should be aware that the employer's obligation is continue all employee benefits (such as health, dental, pension, etc.) for the duration of the notice period, unless there is an enforceable clause in your employment contract that says otherwise.

The purpose of this blog post is to discuss notice periods in a "no fault" context. To be clear, where an employee is terminated for cause of wilful misconduct, they are not owed notice. This is because the employee has broken the relationship of trust between the employer and employee, and as a result the employment relationship cannot continue. However, in many cases an employer alleges cause where there is in fact none. Employees terminated "for cause" should consider speaking with an employment lawyer to discuss their situation.

What are my entitlements on a "not for cause" termination?

There are two types of "notice" that apply to provincially regulated employees in Ontario. The first type is outlined in the Ontario Employment Standards Act (“ESA”), which sets out an employee's bare minimum employment standards. This statute indicates that employees with more than three months of service must receive a bare minimum of one to eight weeks of notice, depending on their length of service.

However, the much greater entitlement called the "reasonable notice period" is found at common law. The term "common law" simply refers to the decades and decades of law developed by Canadian judges. While the ESA notice period is purely based on an employee's years of service, the common law reasonable notice period attempts to estimate how long it was take that employee, consider their unique circumstances, to find their next job. While the ESA notice period has a maximum of eight weeks (plus twenty-six weeks of severance) of notice, a common law notice period is usually much longer, and may be as much twenty-four months. In exceptional circumstances, it may even be longer!

Many employees ask why there are two types of notice periods, especially when one entitlement is so much greater than the other. The answer is that employers and employees are allowed to "contract out" of the longer common law notice period, provided that their agreement stipulates the employee will receive at least the ESA minimums. These provisions are called "termination clauses", and you can read more about them HERE. Courts regularly find termination clauses to be invalid, so if you have questions about a termination clause in your employment contract, you should contact a lawyer for advice.

           The ESA Notice Period

All employees in Ontario with at least three months of accumulated service are entitled to notice under the ESA. Termination clauses that purport to provide less generous entitlements than those provided by the ESA are unenforceable in Ontario. The following chart outlines the amount of notice an employee is entitled to under the ESA:

The ESA also provides that some employees are entitled to severance pay upon termination. Severance pay is owed to employees who have worked for their employer for at least five years and either:

1. were terminated by the employer along with 50 or more employees within a six-month period as part of a permanent discontinuance of all or part of the employer’s business, or
2. the terminating employer had an annual payroll of $2.5 million or more.

The important thing to note about ESA notice periods is that they are not subject to mitigation. This means that even if you find another job during your notice period, you are still entitled to receive these payments from your old employer.

Notice at Common Law

As explained above, the common law notice period is much more difficult to calculate as it depends on the employee's unique circumstances at the time of termination. To determine the appropriate notice period, judges have determined a set of factors they rely on to estimate the number of months an individual will likely need to find their next comparable position. These factors include:

1. the employee’s age,
2. length of service,
3. the character of employment and
4. the availability of similar employment in the labour market.

One often hears that, as a "rule of thumb", employees are entitled to one month of notice per year of service. While this may be a good starting point to estimate your entitlements, the reality is that reasonable notice is calculated on a case-by-case basis and will vary from person to person. In addition to the above four factors, there may be other relevant circumstances, such as whether the employee was induced to leave a job to work for the terminating employer.

While the common law entitlements are generally much greater that the ESA minimums, the one major caveat is that the common law notice period is subject to the employee's "duty to mitigate". This means that employees must mitigate their financial losses by seeking comparable employment during the notice period. If an employee finds alternate employment, the employer's damages will be reduced accordingly. Employees should always keep a record of their job search efforts during the notice period.

Calculating an employee's entitlement on termination can be complicated. If you have questions about your entitlements on termination, you should contact an employment lawyer for more information.

*Special thanks to articling student Cole Eisen for his assistance in drafting this post.