Can COVID-19 Impact Reasonable Notice Entitlements?

Many employers have been waiting to see if courts will increase notice periods because of COVID-19. The Ontario Superior Court of Justice recently issued a decision that hints this might be the case. 

In Yee v. Hudson’s Bay Company, 2021 ONSC 387, the employee, Mr. Yee, worked for Hudson’s Bay Company for 11.65 years. He was 62 years old and worked as a Director of Product Development when his employment was terminated without cause in August 2019. Mr. Yee’s employment contract did not contain a valid termination clause, which left it to the court to determine what the appropriate notice period would be, having regard to Mr. Yee’s age, length of service and position.

Mr. Yee’s legal counsel argued that Mr. Yee’s reasonable notice period should be increased to reflect the impact of the pandemic on his prospects for re-employment. After all, a downturn in the economy or in a particular industry, such as the retail sector, may justify a longer notice period. 

Justice Dow concluded that COVID-19’s impact on the job market is relevant for terminations that occur after COVID-19 hit, but not for terminations occurring before the pandemic. In making this finding, Justice Dow appeared to be relying on previous cases which have found that reasonable notice entitlements should be determined by the circumstances that exist at the time of termination and not by an after-the-fact look at the amount of time it takes the employee to find alternate employment.

Since COVID-19 did not exist at the time of Mr. Yee’s termination, Justice Dow did not take the pandemic into account when assessing what the appropriate notice period should be. Relying only on the traditional factors, including Mr. Yee’s age, length of service and senior-level position, Justice Dow found that Mr. Yee was entitled to a 16-month notice period.

While Justice Dow did not specifically state what the impact of the pandemic will be on reasonable notice assessments, he confirmed COVID-19’s negative effect on employees’ ability to find comparable employment may be a factor to be taken into account in awarding notice periods for terminations that occur during the pandemic.

This case underscores the importance to employers of having legally enforceable termination clauses in their employment contracts. Without these clauses, for terminations that occur after COVID-19 hit, the courts may consider increasing common law notice entitlements, particularly in industries that have been hard hit by the pandemic.