COVID-19 and the impact on termination entitlements

20 March 2020

Businesses across the country are bracing for the economic impact of COVID-19, while various levels of government simultaneously continue to announce measures to sustain their economies and help support affected Canadians. In this maze of business and legal challenges, employers are left wondering what their legal obligations are with respect to their employees and how best to manage those obligations in light of the state of the economy.

In our other recent posts on COVID-19, we discuss the various temporary measures that are available to employers to ameliorate the financial difficulties caused by the COVID-19 pandemic, such as specific leaves for infectious disease emergencies, general statutory leaves of absence, work-sharing programs, as well as temporary layoffs.

Some employers, on the other hand, may need to permanently downsize their operations and may be wondering if they can terminate someone's employment during this time, and whether the current pandemic has any impact on the employee's entitlements upon termination.

In this bulletin we seek to provide answers on the legalities and implications of terminations during the pandemic, and the effects the COVID-19 pandemic could have on a court's assessment of a common law reasonable notice period.



Can an employer under financial hardship terminate someone's employment during this time?

Yes, if an employer determines that they have no option but to terminate some of their employees, the usual rules will apply to termination. However, we recommend exercising caution, and it is always advisable to ensure that the reasons for termination are properly documented in advance of taking any such action. In most cases, in a "business as usual" situation, the employer is entitled to exercise its lawful contractual right to end the employment relationship, as long as the employer provides the appropriate notice of termination required under the employment contract.  If the employment agreement does not contain an enforceable termination clause, the employee's severance entitlements are determined under the common law.

On the other hand, it is not possible at this time to predict with any accuracy how the courts will deal with this unprecedented situation. In the face of uncertainty, employers must ensure that the termination is not perceived to be related to a prohibited ground of discrimination, such as disability (which includes certain illnesses, and possibly COVID-19), or related to an employee's request to take a sick leave or any other job-protected leave in connection with COVID-19. In this regard, employers should note that some provincial governments have passed legislation to provide job-protected leave to employees in isolation or quarantine due to COVID-19, and to those who need to be away from work to care for children because of school or daycare closures. This is in addition to all other existing statutory leaves which permit employees to, for instance, take care of their family members who are ill.

Employers should also keep in mind that special rules for notice of termination may apply when mass terminations occur, that is when the employer proceeds to terminate a large number of employees within a short period of time. These special rules and obligations will vary depending on the jurisdiction.

What effects could the COVID-19 pandemic have on a court's assessment of a common law reasonable notice period?

It is well known that, in many cases, employees are required to "mitigate" their losses by actively seeking alternate employment in order to recover the full amount of any entitlement to payment in lieu of notice.

Given the current COVID-19 situation, however, it is to be expected that terminated employees will attempt to argue that reasonable notice periods at common law should be elongated on the basis that the economic slowdown has led to reduced hiring and has in turn hampered their ability to find alternate employment and mitigate their damages. While it is impossible to predict how the courts will deal with this unprecedented situation, the recent view from the Ontario Court of Appeal is that any difficulty in securing replacement employment should not have the effect of increasing the notice period unreasonably (See: Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801).

Undoubtedly, this is an unprecedented situation for Canadian employers and employees, and the circumstances continue to evolve. We will continue to monitor these developments.

To learn more about workplace strategies for communicable illnesses and handling COVID-19 in your workplace, please contact a member of Gowling WLG's Employment, Labour & Equalities Group.


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