Company followed standards in mass termination

A recent Court of Appeal decision gives rare guidance about how to apply the Employment Standard Act’s rules about mass termination, employment lawyers say.

Company followed standards in mass termination
Timothy Pinos says a recent Ontario Court of Appeal decision re-affirms employers’ requirements under the ESA.

A recent Court of Appeal decision gives rare guidance about how to apply the Employment Standard Act’s rules about mass termination, employment lawyers say.

In September, the Court of Appeal said CTS of Canada had not erred when it filed notice with the government of its plans to close its Streetsville, Ont. plant 13 months after it had given written notice to employees about the closure. This reversed the Ontario Superior Court of Justice’s September 2017 decision that said the company should have filed notice of the closure with the government when it told employees about it.

“CTS was only required to post the Form 1 information at the beginning of May,” Associate Chief Justice Alexandra Hoy wrote for the three-person panel, which included justices David M. Brown and Gary T. Trotter. The ruling was unanimous.

CTS gave employees written notice about the plant’s closure and their resulting termination on April 17, 2014, the decision says. The plant was scheduled to close on June 26, 2015. The Employment Standards Act says employers must give employees notice of at least eight weeks when 50 or more employees are being laid off in a four-week period. The ESA says employers must also give the Ministry of Labour a form describing the reasons for the termination, consultations that are planned with the affected employees, proposed adjustments for employees and a statistical profile of the employees. The form is also to be posted in a place where the employees can see it, the ESA says.

CTS did not give the government that form until May 12, 2015 — 12 days after the mandatory minimum requirements, the decision says.

A group of 74 former employees filed a class action lawsuit, saying CTS should have filed the notice with the government when employees learned about the plant closure. In September 2017, Justice John R. Sproat decided in the group’s favour.

Timothy Pinos, a partner in the commercial litigation group at Cassels Brock LLP in Toronto, who represented CTS, says this decision re-affirms employers’ requirements under the ESA.

“Historically, the understanding has been that there is a separation between the employment standard rules that mandate minimum severances, notice period for various circumstances and the whole common law for reasonable notice,” he says. “The two work in parallel in employment law. One doesn’t trump the other. Compliance with one doesn’t affect the validity of the other as a general proposition.”

“The purpose of the ESA is to protect the interests of employees by requiring employers to comply with certain minimum standards, including minimum periods of notice of termination,” the Court of Appeal’s decision says.

“Its objective is not to impose requirements on employers in excess of the statutory minimums. Tying the requirement to provide Form 1 notice to the director to when the employer gives what it intends to be common law reasonable notice, in excess of the statutorily-required minimum notice period, is not consistent with the object of the Act requiring employers to comply with certain minimum standards.”

Stephen Moreau, a lawyer with Cavalluzzo Law LLP in Toronto, who acted for the employees, says this decision could have potential negative impacts wherever mass terminations occur.

“Any time a decision talks about what a workplace statute requires, it does start to set the floor for what is required,” he says. “This just sets the floor very low. It really provides no incentive to employers to actually give longer notice to the relevant ministerial authority. My real concern is that this kind of notice won’t be given. Employers are going to wait until the last moment because no one’s telling them not to, and employers and employees all throughout the country are going to be disparately impacted by it.”

Pinos disagrees.

“The decision didn’t lower the bar,” he says. “The bar is where it was. Justice Sproat raised the bar at an alpine level. The Court of Appeal said employment standards are minimum.”

The class members have filed for leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada, Moreau says.

The Court of Appeal’s decision says determining when to file the Form 1 with the government has many “practical consequences.” Receiving the form “can trigger the provision of significant government services to the employees,” such as career counselling and training for second careers. The decision says CTS did not provide employees with any such services.

“If [employees] don’t get these services early on, it means they’re focusing on the next part of their career much later in the process and, therefore, quite possibly spending a longer period of time without a new career. They’re not focusing on re-employment as early as they ought to,” says Moreau, adding long-time employees may be more adversely affected. They have mastered skills particular to the company and may have a harder time learning transferrable skills, he says.

Mass terminations can significantly impact communities, Moreau says, which is why laws about mass terminations are of public concern.

“It’s not good to have a bunch of unemployed people on social assistance when you can have productive employees who are re-trained to work in the economy,” he says.

CTS did not win all points on appeal. The court said workers were entitled to 12 days’ pay because Form 1 notice was 12 days late. It agreed with the lower court’s ruling that the company could not receive credit for any week during the notice period where employees worked overtime contrary to the ESA or when their overtime had a “significant adverse affect on the ability of the employee to seek new employment.” The decision also says that for five employees who worked more than 13 weeks after their original final day of employment, CTS is entitled to credit for “common law working notice from the date of the letter providing them with notice of their actual termination date.”

The decision says some employees worked 55 hours a week voluntarily during the notice period. Eighteen key employees were “forced to work overtime up to 60 hours a week. They were told that their job required that they stay and work overtime and that they had no option.”

The court found that, “in determining whether the employer is entitled to credit for working notice, it is relevant to consider the quality of the opportunity given to the employee to find new employment.”

“This demonstrates what employees should expect during a working notice period,” says Sean Bawden, a partner at Kelly Santini LLP in Ottawa.

Some employees may choose to leave when a mass termination is announced, but this decision shows employers aren’t supposed to use that as an excuse to change remaining staff’s schedules and make them work excessive hours, he says.

“The point of notice is to afford the employee time to find new work,” he says. “If that employee is suddenly expected to work double shifts, they’re not pounding the pavement.”

Bawden says this case is a rare “textbook case” that gives a thorough explanation of how the ESA works, he says.

“Notice is really a fundamental part of the law of termination,” he says. “We always talk about notice and the pay in lieu of notice, but rarely do we see jurisprudence on what it means to give notice to an employee and what can and cannot happen during that notice period. Given that notice is such a fundamental part of what we do in the employment bar, it’s a pretty big decision.”

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