Faced with the prospect of significant severance obligations, an employer may choose to give an employee working notice of termination to reduce their monetary liability. Given that the implied contractual requirement at common law is to provide “reasonable notice of termination” (as compared to payment in lieu of notice), an employer is typically entitled to credit working notice against an employee’s wrongful dismissal damages.
However, courts have been loath to give credit for working notice where the employee is not given a reasonable opportunity to search for new employment during the working notice period. This reluctance was re-affirmed in Wood v. CTS of Canada Co., 2017 ONSC 5695 (“Wood”), where the Court held that the employer was not entitled to credit for working notice during which the dismissed employee was required to work excessive hours.
Wood involved a class action against CTS Canada Co. (“CTS”) brought by 74 former employees who had been dismissed as part of a “mass termination”. The plaintiffs were all employed pursuant to unwritten contracts of indefinite duration that could be terminated on reasonable notice. On April 17, 2014, CTS informed the employees in writing that their employment would terminate on March 27, 2015. CTS subsequently extended the termination date for most employees to June 26, 2015.
One of the issues in dispute was whether CTS was entitled to credit the working notice against the employees’ claims for wrongful dismissal damages. On that point, the plaintiffs alleged that CTS required excessive overtime work during the working notice period, which denied them any reasonable opportunity to seek new employment.
The Court agreed with the plaintiffs’ submissions, and found that the significance of any working notice period is a function of the context in which it is given, and how it plays out:
The primary objective of notice is to provide the dismissed employee with a fair opportunity to obtain similar or comparable employment. It follows that the weight to be given to a particular working notice will vary depending on the quality of the opportunity it gives the employee to seek an alternate position. In this particular case, the trial judge’s finding of fact that the respondents could not actively seek work during the working notice period deprives the latter of any legal value. As a result, no weight can legitimately be attached to it.
The Court ultimately held that CTS failed to prove that it provided “reasonable” working notice – accordingly, CTS was not entitled to credit for working notice during any week in which the overtime worked had a significant adverse effect on the ability of the impacted employees to look for new employment.
Wood suggests that there is both a quantitative and a qualitative component to the assessment of what constitutes “reasonable” in the context of “reasonable notice of termination”. Specifically, employees must be afforded both a reasonable notice period and a reasonable amount of time during which they can search for new employment.
Key Takeaways for Employers:
- Maintain Regular Duties During Working Notice Period: Attempts to credit working notice against wrongful dismissal damages are most likely to succeed where the employee’s duties remain unchanged during the working notice period. The employer should avoid increasing hours of work, or otherwise imposing additional duties that have an adverse impact on the employee’s ability to search for new employment.
- Allow Time Away from Work for Job Interviews: The employer should consider allowing the employee to take reasonable time away from work to attend job interviews. Such a bona fide practice (although basic) will significantly assist the employer’s case that the working notice was “reasonable”.
- Insert Appropriate Language in Termination Letter: As part of the written notice of termination, the employer should consider expressly stipulating that reasonable efforts will be made to assist the employee in securing new employment, including by providing a reference (if appropriate) and allowing time away from work to attend job interviews.