In a recent decision, the Quebec Superior Court confirmed that in determining the severance pay that an employee is entitled to upon dismissal, all circumstances, both of the plaintiff and of the employer, including those related to economic conditions prevailing at the time of dismissal, should be taken into consideration.1
The plaintiff had worked at the employer for close to 34 years when, on September 14, 2006, he was given a letter of layoff effective November 10, 2006. At the time, the plaintiff held the position of assistant manager at one of the employer’s plants. The employer stated in the letter that the plaintiff was being laid off on a temporary basis and for an indefinite time. Although the plaintiff was told that he would have to return all property and equipment belonging to the employer, he was allowed the continued use of a pickup truck belonging to the employer. Moreover, the related record of employment indicated that a date of recall was expected but unknown.
Convinced that he had been dismissed, the plaintiff promptly sent a letter to the attention of the president of the employer demanding the negotiation of a severance agreement. During a telephone conversation, the employer said that the plaintiff had been laid off, not dismissed. A few days later, the plaintiff returned to work for six hours per week. On October 10, 2008, the employer permanently terminated the employer-employee relationship. The record of employment issued at that time indicated, under “Expected Date of Recall,” that no return to work was expected.
The decision of the Superior Court
After considering the employer’s argument that the letter of layoff effective November 10, 2006, was a notice of termination of employment or, at the very least, a letter of termination of employment, the judge found that the employer’s intention at that time was, in fact, to lay off the employee. With a crisis in the forestry industry, the employer was clearly struggling with both supply problems and disputes with competitors, but that information was not enough to persuade the plaintiff that his employment was being terminated. The judge noted that if the situation was unclear for the employer, then it was reasonable to conclude that it had to be even less clear for the plaintiff, as the letter of layoff effective November 10, 2006 indicated that the layoff was only a temporary measure. And, indeed, a few days after he was laid off, the plaintiff was called back to work on a temporary basis. What’s more, the record of employment issued following the letter of layoff indicated that a recall was expected and the plaintiff was allowed to continue to use a pickup truck belonging to the employer. In short, it was a layoff, not a termination. The judge was of the opinion that the letter of layoff and the subsequent return to work could not be considered by the parties to be a transaction for the purpose of terminating the pre-existing employment. It was certainly not the plaintiff’s aim in agreeing to work part-time to give up his full-time position, which he had held for 35 years. At no time was there complete and final severance of the employer-employee relationship, as is clear from analyzing the letter of layoff and the subsequent conduct of the parties.
After rejecting the employer’s argument that the plaintiff had failed to mitigate his damages, the judge emphasized that Article 2091 of the Civil Code of Québec tells us that in determining the duration of the notice of termination of employment, it is necessary to consider the special circumstances of each case. The judge therefore took into account the economic situation that prevailed at the time of dismissal, more specifically the crisis in the forestry industry – particularly in the Abitibi-Témiscamingue region – and determined that the duration of such notice should be established at 18 months. Although the plaintiff could have been entitled to the maximum duration of 24 months recognized by case law as notice of termination, the judge felt it necessary to consider not only the plaintiff’s situation, but also the situation of the employer, which was struggling with a major financial crisis.
This is an interesting decision for employers in Quebec. It indicates to them that in determining the duration of a notice of termination or pay in lieu of notice, exceptionally, they will have the right to shorten the duration of such notice, taking into account, along with the usual criteria (the sector in which the business operates, the duties performed by the employee, and the employee’s seniority and age, etc.), the economic situation facing the employer at the time of dismissal. This decision reminds us that calculating the duration of a notice of termination or pay in lieu of notice entails a detailed contextual analysis and does not simply involve mechanically applying pre-established tables.