Successor Employer Case Calls for Flexibility in Fixing Notice

Written by Daniel Standing, LL.B., Editor, First Reference Inc.

This article will consider the Court of Appeal for Ontario’s recent decision (2022 ONCA 454) calling for a flexible approach to calculating reasonable notice when an employee is dismissed by a successor employer. For employers, this approach might spell a somewhat longer notice period than they would have otherwise anticipated.

Background

The employee worked for the company from 2011 until 2019, when her employment was terminated without cause. The only event of note during this period happened in 2016 when, as part of the fallout from creditor protection proceedings, she was dismissed and then immediately rehired under a new contract to do the same work, having submitted a claim for her termination and severance entitlements under the employment standards legislation for her previous period of service.

When she was let go the second time in 2019, she sued for wrongful dismissal and won. The motion judge awarded her 12 months of reasonable notice based on her assessment of a continuous period of employment. This was the primary issue on appeal.

On appeal, the company argued the motion judge was wrong to have treated the period of employment as continuous and to have awarded notice for the 2011-2016, given the court order releasing the company from its creditors’ claims. Looking solely at the almost three years between 2016 and the termination, the company said that four months’ notice would have been reasonable. For her part, the employee fought to keep the full 12 months’ notice she had been awarded, arguing the judge below made no error and was entitled to deference.

The court’s decision

On appeal, the court said the motion judge should have only considered 2016 to 2019 as the period to which reasonable notice applied. Of the Bardal factors that courts rely on to fix reasonable notice periods, this case focused on the employee’s length of service.

The court explained how the sale of a business has differing effects under the legislation (which deems continuity between employers) and at common law (where a change in the employer’s identity following a sale equals constructive dismissal). Relying heavily on its 1986 Addison decision, the court explained how it can recognize, under the rubric of experience, some or all of the employee’s service with the previous (vendor) employer in order to provide a fair outcome. It held that when an employee is dismissed and rehired because of a change of ownership, while the period of service is not continuous, the value an experienced employee brings to the employer (based on what they learned about the work and the workplace before the sale of the business) is worth something when reasonable notice is calculated.

In addition to her conclusion about continuity, the court said the motion judge also erred in her failure to account for the court-ordered release from creditors’ claims (such as the one by the employee). This, the court said, tainted her reasonable notice assessment.

The court concluded its judgment by reassessing the notice period which it said was at the “high end of the range,” setting it at seven months instead.

Key takeaways

When a successor employer provides a notice period to an employee who has prior experience with the vendor employer, the notice period may have to be longer than post-sale period of work would normally lead to. Length of service is only one of the Bardal factors, and to arrive at a fair result, a court may enhance the effect of this factor by looking beyond the short timeframe of the post-sale employment relationship and require recognition of the benefit the employer received from the employee’s prior experience.