The Ontario Court of Appeal has decided that employers should not get a discount on reasonable notice in bad times. On November 23, 2015, the Ontario Court of Appeal released its decision in Michela v. St. Thomas of Villanova Catholic School (2015 ONCA 801). The Court decided, among other issues, that the period of reasonable notice awarded to a dismissed employee is not reduced as a result of an employer's poor economic circumstances. The motion judge's decision in this particular case (2015 ONSC 15) to the reduce notice period from twelve months to six months was set aside.

The motion judge heard evidence that the reason for the termination of the plaintiffs' employment was lower than anticipated enrollment at the defendant employer's school, which would likely result in a $300,000 shortfall in revenue unless five positions were eliminated. The motions judge specifically noted that the employer was an independent school and not directed to making a profit. He decided it should be "self-evident" that the employer could not provide "security of employment". He further decided that the plaintiff employees worked at the school "understanding its circumstances", and that such circumstances could not be ignored in assessing what is reasonable notice. Citing the classic test for assessing the notice period in Bardal v. Globe and Mail Ltd., the motion judge decided to shorten the notice period from twelve months to six months.

The question before the Court of Appeal was: "are an employer's financial circumstances a relevant consideration in determining the period of reasonable notice to which a wrongfully dismissed employee is entitled?" The Court reviewed the case law governing the calculation of the notice period, noting that the motion judge included the employer's economic circumstances as part of the "character of employment" factor. The "character of employment" refers to the nature of the position, such as the level of responsibility and expertise. The Court concluded that the Bardal factors are not concerned with the circumstances of the employer.

While the Court acknowledge that an employer's poor financial circumstances might be the reason for termination, it is not relevant to the determination of reasonable notice in a particular case: "they justify neither a reduction in the notice period in bad times nor an increase when times are good." The employer's argument in this case was well-reasoned and reflects the reality facing many Ontario employers. The law, at this point, does not reflect such reality.