It is a well-established principle that employees who are wrongfully dismissed and who do not have an employment contract which specifies severance or notice entitlements are entitled to damages at common law, most commonly in the form of a reasonable notice period, which bases damages off an employee’s monthly income. Dismissed employees have a duty to make reasonable efforts to obtain similar employment to offset these damages, referred to as the duty to mitigate.
Bardal v The Globe & Mail Ltd.[i] established the foundational test to determine an appropriate notice period for an employee who has been terminated without cause. The Bardal test requires judges to make a highly contextual analysis with attention to certain factors including the character of employment, length of service, age and availability of similar positions. Additional “moral” damages may also arise from a manner of dismissal that is unfair or in bad faith.[ii]
In times of slow economic growth employers are often forced to reduce their workforces. In the context of allegations of wrongful dismissal, employers sometimes contend that their difficult financial situation is an element of the character of employment, especially when this was known to an employee at the time of hiring. Recent case law out of Ontario has considered this position.
In Michela v St Thomas of Villanova Catholic School,[iii] the Ontario Court of Appeal held that an employer’s financial troubles were not a relevant consideration in assessing the character of employment. The trial judge in that case had reduced a 12-month notice period to six on account of the employer’s difficult circumstances and that the dismissed employee should have known about this difficulty. The court held that this consideration was in error and increased the award back to 12 months.
In Strudwick v Applied Consumer & Clinical Evaluations Inc.,[iv] the Court of Appeal was asked to reassess the damages awarded to an employee who was dismissed in bad faith. The employer denied accommodation for the employee’s disability and made things harder for the employee at work in hopes it would force her to resign. The Court increased damages by over $100,000 due to the conduct of the employer and determined that the trial judge overemphasized the impact of the damages on the employer. While there was very little evidence on record of the employer’s actual financial situation, the Court of Appeal did pay some attention to the fact that the company was a relatively small, family-held corporation when setting moral damages.
These decisions stand for the proposition that employers need to be aware of their conduct when contemplating workforce reductions. Financial difficulty is an argument that will generally not be accepted by the courts in order to lower the amount of reasonable notice, but could figure as an appropriate factor in assessing moral damages.
Of course, employment jurisprudence from other jurisdictions may not always be seen as good law with regard to reasonable damage estimates in Saskatchewan. For example, the Saskatchewan Court of Appeal has suggested that a three-month floor for reasonable notice arising from British Columbia case law is not appropriate and is contrary to the Bardal factors.[v] Further, pay-in-lieu of notice calculations may be more tempered in Saskatchewan than other jurisdictions.[vi]