MICHELA V. ST. THOMAS OF VILLANOVA CATHOLIC SCHOOL, 2015 ONCA 801
The Ontario Court of Appeal recently overturned a lower court’s decision and clarified that an employer’s financial circumstances are not a relevant consideration when determining an employee’s entitlement to reasonable notice of termination.
Three teachers were employed by St. Thomas of Villanova Catholic School (the “School”). At the end of the academic year in June 2013, the School informed the three teachers that their employment contracts would not be renewed for the upcoming school year scheduled to begin at the end of August 2013. The teachers then initiated wrongful dismissal actions against the School, claiming that they were entitled to 12-14 months’ notice of termination.
THE SUMMARY JUDGMENT MOTION – 6 MONTHS’ NOTICE
The parties proceeded with a summary judgment motion where the judge found that the teachers were entitled to 6 months’ notice of termination.
The judge found that 6 months was reasonable based on the traditional factors set out in Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 at 145 (Ont. H.C.). Those traditional factors include: the character of employment; the employee’s length of service; the employee’s age; and the availability of similar employment.
When assessing the “character of employment”, the judge considered the employer’s financial circumstances and reasoned as follows:
 It should be self-evident that, by its nature, the School could not provide the security of employment offered by larger, more established and better-funded institutions. […]
 The three teachers cannot be taken to have been unaware of the circumstances of the School. Whatever their rights to notice, it must be understood that they worked there understanding its circumstances. This cannot be ignored in assessing what is reasonable notice. It is an aspect of the “character of the employment” as referred to in Bardal v. Globe & Mail Ltd. […].
 […] [I]f notice for 12 months is reasonable, the School will have to pay the same amount for these teachers as if they had remained on staff for the year that was upcoming. Assuming that the other two teachers who were terminated maintained the same rights, it is not difficult to see that the School would be unable to reduce its prospective deficit by terminating staff it did not need. The law does not ignore the dilemma of the employer. […]
THE COURT OF APPEAL DECISION – 12 MONTHS’ NOTICE
The teachers appealed and the Ontario Court of Appeal found that the motion judge erred by considering the employer’s financial circumstances when assessing the “character of employment”.
The Court clarified that the “character of employment” factor is concerned with the circumstances of the employee who was dismissed, not with the circumstances of the employer. The Court explained:
 […] An employer’s financial circumstances may well be the reason for terminating a contract of employment – the event that gives rise to the employee’s right to reasonable notice. But an employer’s financial circumstances are 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. […]
 It is important to emphasize, then, that an employer’s poor economic circumstances do not justify a reduction of the notice period to which an employee is otherwise entitled having regard to the Bardal factors. […]
Given that the School’s financial circumstances did not justify a reduction of the notice period, the Court allowed the teachers’ appeal and found that they were each entitled to 12 months’ notice of termination (subject to deductions).
While it is often the employer’s poor financial circumstances that have created the need to terminate the employment relationship, it is important for employers to remember that the amount of notice an employee is entitled to is not affected by the amount the employer can afford. Employers should be cautious not to consider their own financial circumstances when estimating the reasonable notice entitlements of their employees. That said, employers are able to avoid significant court-ordered payments if employees accept severance packages that represent a reasonable and mutually beneficial compromise.