Historically, the character of employment or level of position has been an important factor in determining appropriate severance payments. Unskilled or lower level employees have typically been entitled to less severance than more highly skilled and higher level employees. Some decisions have capped severance for such lower level positions at 12 months. However, in Di Tomaso v. Crown Metal Packaging Canada LP, the Ontario Court of Appeal recently rejected any distinction between skilled and unskilled workers when determining appropriate severance payments. This case also demonstrates the importance of clear and unambiguous termination dates.
When Crown Metal made plans to close its manufacturing facility, the company gave advance working notice to an employee who had worked for over 33 years in a position which the employer characterized as "unskilled". Shortly before the expected termination date, Crown Metal extended the termination date and, over the following five month period, the employee received five separate written notices of termination outlining four different termination dates. Each letter characterized the employment as being "extended" for a "temporary period".
On the final termination date, Crown Metal provided the employee with 26 weeks of severance pay pursuant to the Ontario Employment Standards Act ("ESA"), along with the requisite vacation pay and benefits, but no other termination or severance payments.
The employee subsequently commenced a civil action, claiming failure to provide proper notice of termination or pay in lieu or notice under the ESA, as well as wrongful dismissal damages of 24 months pay. Crown Metal disputed the notice period and sought credit for the overall period of working notice.
On an application for summary judgment, the motion judge determined that, while the ESA permits an employer to provide a period of temporary employment after the original termination date without having to give new notice, the cumulative notices in this case exceeded the 13 week period contemplated under the ESA and created uncertainty about the exact date of termination. As such, only the final letter received by the employee provided clear and unequivocal notice of termination. Therefore, the notice period began on the date of the final letter.
The motion judge also rejected the historical distinction between skilled and unskilled workers and Crown Metal's argument that an unskilled employee in a non-managerial position should never receive more than 12 months' of severance, regardless of length of service. The employee was 62 years old at the time of termination, had 33 years of service, and was awarded 22 months pay in lieu of notice.
Court of Appeal Agrees
The Ontario Court of Appeal has agreed with the motion judge's decision. The Court of Appeal determined that a proper and purposive interpretation of the ESA demands fresh notice if a single period of temporary work exceeds 13 weeks beyond the original termination date. Additionally, the Court of Appeal observed that a notice of termination would not be "clear and unambiguous" if it does not include the final termination date.
The Court of Appeal has also rejected the notion of a 12 month cap on reasonable notice entitlement for "unskilled" employees. The Court of Appeal said that in this case, factors such as the worker's age (62), length of service (33 years), and unsuccessful job search made the 22 month notice period reasonable, albeit within the upper end of the range for reasonable notice. The Court of Appeal also suggested that the character of employment, or level of position, is a comparably less important factor. It rejected the assumption that it is easier for an unskilled employee to find replacement work (which would otherwise justify a lower notice period).
Take-Away for Employers
Employers must be mindful that when terminating the employment of employees in lower level positions, particularly those with long service, careful consideration should be paid to all relevant factors in order to determine an appropriate notice period. This decision may leave employers open to higher severance awards for lower level positions than they have previously been accustomed to. To protect against long notice periods, employers should consider adding severance clauses in employment contracts or offer letters for such employees.
Further, the case is a reminder that employers must be very careful when providing notice of termination, particularly when the employer must later amend or extend the actual termination date.