In our last edition, we wrote about the rules for collective dismissals. In this article, we consider an exception that may prove useful in today’s difficult economic times.
The provisions of the Act respecting Labour Standards (LSA) concerning an employer's failure to comply with the notice periods and indemnities that apply to collective dismissals were discussed in Commission des normes du travail v. Industries Troie inc. The Court of Québec ruled in this case that the sudden and significant loss of contracts could constitute, in certain specific circumstances, an unforeseeable event exempting an employer from having to pay a collective dismissal indemnity to dismissed employees.
Collective Dismissal Procedures under the LSA
An employer who, for economic reasons, implements a collective dismissal of not fewer than ten employees in the course of two consecutive months, must give notice to the Minister of Employment and Social Solidarity within eight weeks. If the employer fails to give such notice, or gives insufficient notice, it must pay each dismissed employee an indemnity equal to his or her regular wages for the same period. To be exempted from the payment of collective dismissal indemnities, the employer must establish a case of a superior force or an unforeseeable event preventing the employer from giving such notice to the Minister within the required time period.
The LSA also requires an employer to give individual written notices to each of the dismissed employees. This notice varies from one to eight weeks, depending on the length of continuous service of the employee. Failure to do so will lead to the payment of a compensatory indemnity equal to the period of notice. The employer is exempt from giving this individual notice or from paying the compensatory indemnity only in the case of a superior force, as the concept of unforeseeable event does not apply in the case of an individual dismissal.
It is important to recognize that these two procedures provided for under the LSA are not cumulative, although the employee will receive the greater of the indemnities to which he or she is entitled.
The Case of Industries Troie and the Unforeseeable Event
In Industries Troie, the court had to determine if the sudden and significant loss of contracts constituted a likely event that the employer should normally have been in a position to foresee, considering the information available at the time.
In this case, despite the difficult situation in the clothing industry since 2003, the employer had adopted some measures to achieve stability and steady economic growth. According to the evidence, nothing could have led the employer to predict the quick and radical downturn of orders at the end of the summer of 2004. Regular contracts obtained over the last few years had caused the employer to believe it could maintain its activities. However, in August 2004, an unexpected loss of major contracts caused production of the employer’s product, jeans, to be reduced by 5,000 pairs per week. The court found that this constituted an unforeseeable event that a reasonably diligent person in the same circumstances and operating the same type of business would probably not have foreseen.
The employer acted in good faith by immediately giving a notice of dismissal to its employees and by giving them individual notices. The sudden and significant loss of orders prevented the employer from giving the Minister the required 12 weeks’ notice before proceeding with the collective dismissal.
Lessons for Employers
Considering that any exception in law must be narrowly construed, and that a loss of or a significant downturn in contracts or orders is often foreseeable by the employer, relief from providing notice to the Minister or a compensatory indemnity to employees in a collective dismissal for an unforeseeable event will not happen very often.
Nevertheless, in certain specific situations, such relief is possible but ultimately depends on the specific facts that led to the unforeseeable event in the first place. In such situations, you must consider if a reasonably diligent person, under the same circumstances and operating the same type of business, would normally have been in a position to foresee this significant loss of contracts or orders, in light of the information available at the time.