What is the limit on reasonable notice? As stated in our July 2019 newsletter, in Dawe v. Equitable Life Insurance Company, 2019 ONCA 512 (“Dawe”), the Ontario Court of Appeal (“ONCA”), reiterated that 24 months is the longest reasonable notice period that can be awarded absent exceptional circumstances.
In McLean v Dynacast Ltd., 2019 ONSC 7146 (“McLean”), the Ontario Superior Court distinguished the facts from Dawe in awarding 28 months as the appropriate notice period finding exceptional circumstances to justify going beyond 24 months.
In McLean, Mr. McLean was employed with Dynacast for 35 years and most recently held the position of a Sales and Service Technician, which he had been promoted to in 2010. He earned an annual salary of $62,000 plus 3-5% commission.
In January 2017, Dynacast reassigned Mr. McLean to the position of Project Technician. After refusing the reassignment, Mr. McLean was advised that if he did not show up to work on the following Monday and perform the duties of his reassignment, he would be considered to have ended his employment. Mr. McLean brought a claim for constructive dismissal and alleged Dynacast breached its duty of good faith.
Justice Smith, following the Supreme Court of Canada’s test in Potter v. New Brunswick Legal Aid Services Commission,  1 SCR 500, held that Mr. McLean had been constructively dismissed. Namely, (1) Dynacast unilaterally changed his employment agreement (heavily factoring in a clause in his written agreement which stated that any modifications were required to be in writing and signed by the parties) and (2) by their conduct, Dynacast demonstrated an intention to no longer be bound by the contract. In awarding a 28 month notice period, Justice Smith distinguished the facts from Dawe and found exceptional circumstances existed based on Dynacast’s conduct, including:
- the unilateral breach of his employment contract;
- the “radical reconfiguration” of his role, which was held to amount to a demotion;
- the “mistaken or misguided” rationale given for the change to his role; and
- the “domineering attitude” taken by Dynacast in imposing the changes.
Mr. McLean was also awarded $25,000 for aggravated/moral damages for bad faith based on the above-listed conduct.
In Dawe, like McLean, there was evidence of concerning conduct on the part of the employer; however, Justice Smith noted that the ONCA in Dawe did not find that the employers conduct rose to the level of exceptional circumstances such as to warrant a notice period longer than 24 months. Justice Smith considered the conduct of Dynacast referenced above and found that when considered collectively it did rise to the level of exceptional circumstances. As such, the Court awarded Mr. McLean a greater notice period and aggravated/moral damages for the unfair and/or bad faith conduct of his employer.
Dawe confirmed that 24 months is the longest reasonable notice period that can be awarded absent exceptional circumstances. McLean shows that courts are willing to find exceptional circumstances and award more than 24 months notice. In McLean, the employer’s questionable conduct was strongly considered in finding expectational circumstances existed.
Update on Changes to the ESA during COVID-19
Ontario’s state of emergency officially ended on July 24, 2020. This has implications for employers relying on the modifications to the Employment Standards Act, 2000 (“ESA”) made by Regulation 228/20: Infectious Disease Emergency Leave.
Among other things, Regulation 228/20 (1) provisionally froze temporary layoff timelines and (2) stated that temporary reduction or elimination of an employee’s work hours or wages for reasons related to COVID-19 are not considered constructive dismissals under the ESA. As many of these rules are only applicable during “the COVID-19 period”, defined as March 1, 2020 until six (6) weeks after the state of emergency in Ontario ends, employers need to be cognizant of the return of the regular ESA rules as of September 4, 2020 (six (6) weeks from July 24, 2020). For example, as of September 4, 2020, the time employees spend on temporary layoff will count towards the maximum an employee can remain on temporary layoff without being considered terminated. See our newsletter of June 2, 2020, for further details of the changes to the ESA brought in by Regulation 228/20.