CASUAL LEGAL: Reasonable Notice Periods and the Impact of an Economic Downturn

Attention: AMSC Members – Please distribute to all appropriate personnel

Reasonable Notice Periods and the Impact of an Economic Downturn

By Lauren Chalaturnyk

Reynolds Mirth Richards Farmer LLP

AMSC Casual Legal Service Provider

When an employee is terminated without cause, they are entitled to reasonable notice or pay in lieu of notice. Specifically, employees are entitled to the minimum notice set out in the Employment Standards Code as well as additional common law notice. Common law reasonable notice is often referred to as severance pay and is typically offered to an employee in exchange for a release that protects the employer from any legal claims by the terminated employee.

Determining what common law reasonable notice period a terminated employee is entitled to involves weighing a number of factors. These factors include, but are not limited to:

• age
• length of service
• ability to find comparable employment
• experience in the industry
• educational background

Courts have also considered how an economic downturn impacts the reasonable notice period applicable to employees. In Alberta and Ontario, courts have increased the reasonable notice period for employees due to the economic climate of the time. Courts tend to recognize that employees are going to struggle to find alternate employment when the economy is poor, and this, in turn, requires a longer reasonable notice period.

In a recent Alberta Court of Queen’s Bench case, the Court considered the reasonable notice period applicable to an employee who had been employed in the energy industry for 21 years, and who was in a senior position at the time of his termination. The Court acknowledged the inherent volatility of the energy industry in Alberta and considered whether this warranted a shorter notice period for the terminated employee. It ultimately found that the employee’s position was not so directly related to the volatility that it warranted a shorter reasonable notice period. It found the economic downturn was a factor that militated in favour of a somewhat longer notice period. In that case, the Court found that a 10 month reasonable notice period was appropriate.

In some cases, employers have attempted to argue that an economic downturn should weigh in favour of a shorter notice period because the employer may also be struggling financially. Courts have generally rejected this argument; however, the law is not settled on this point, and, under the right circumstances, an employer may be able to make the argument that a shorter reasonable notice period is appropriate because of current economic conditions.

Municipalities should be cognizant of the impact of current economic conditions on reasonable notice periods when they are considering terminating an employee, as an economic downturn may lead to a finding by a court that a longer reasonable notice period is appropriate.

To access AMSC’s Casual Legal Helpline, AUMA members can call toll-free to 1-800-661-7673 or email casuallegal [at] amsc.ca and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] auma.ca, or call 310-AUMA (2862) to speak to AUMA’s Risk Management staff. Any Regular or Associate member of the AUMA can access the Casual Legal Service.

DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.