Termination of

Employment, Part I
 + With statutory notice and/or severance pay

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Today’s lecture

1. Termination by parties’ agreement

2.
3.
A couple of questions
Termination by ER with ‘reasonable notice’
Termination with notice (statutory)
4. Quitting or resigning (employee)
5. Frustration of employment contract
 • Work is essential to one’s
Employment contract identity, self-worth, and
unique, so judges consider emotional well-being;

employee vulnerability in • Fundamental in financial support

and role in society;
interpreting such contracts.
• Employee without the same
bargaining power;

• Termination is most vulnerable

time of employment.

Matchinger v HOJ Industries [1992] 1 SCR 986;

Wallace v United Grain Growers Ltd. [1997] 3 SCR 701
Terminated with Notice
- Contractual term/notice
- Reasonable notice (CL)
- Statutory notice (ESA)
Questions:
- Was notice sufficient?, that
is ‘reasonable’ (CL) or in
compliance with ESA
- Was the contractual notice
unconscionable or have
work conditions
substantially changed?
- If not, wrongful dismissal or
breach of ESA
No Notice Given/Required Other Possibilities
- Fixed term/ task contract
- Employee quits
- Contract was frustrated
- Dismissal for cause
- But if employee quits because
(summary)(CL and ESA) of change in conditions of
work or violation of their other
rights:
Absent these conditions:
- Constructive dismissal
- Wrongful dismissal (CL)
- Claims under other
- Claim for termination pay
(ESA) statutes (HRC, OHS, etc.).
1) Termination
by agreement
The employment contract
can be brought to an end
by express consent of both
parties at any time as long
as the termination is in
accordance with general
contract law principles.
1A) Termination by Fixed-Term or
Fixed-Task Clause

• Usual right to notice of termination is forfeited

in fixed-term and fixed-task contracts.

• Courts demand clear evidence that both

parties intended this result.

• Courts look at the reality of the situation and

each parties’ evidence if a contract is
ambiguous.

• If an employee remains beyond end of fixed

term, the contract becomes indefinite and
reasonable notice of termination is required.

• Where ER terminates prior to end of fixed-

term, damages = remaining salary
1B) Termination
According to a
Contractual Notice
Clause (Express) Courts may decline to enforce termination
clauses in a contract when:
i. It violates statutory notice
provisions (minimums)
ii. It is ‘unconscionable’
iii. Changes to employee’s job render
the original notice of termination
clause unenforceable (‘changed
substratum’ doctrine)
 i) Violates
statutory notice
• Notice periods prescribed by
the ESA are the minimum with
which all employment
contracts must comply.
• Parties free to negotiate
upwards. But not lawful to
negotiate downwards.
ii) Is unconscionable
A contract term that a court refuses to enforce because it is a
result of (a) inequality of bargaining power that was (b) exploited
by the more powerful party to obtain a contract that is (c)
substantially unfair considering community standards of
commercial morality.

Stephenson v Hilti (Canada) Ltd.

iii) Changed substratum doctrine
• In situations where the nature and conditions of work have
changed substantially since the time that the contract (with its
reasonable notice term) was formed, courts might deem the
term/clause unenforceable
• Example – employee who starts out in an entry-level position
and climbs the ladder to a managerial position; but their
contractual notice provision remains unchanged. The
substratum has changed; and so should the notice term.
 • People are having a harder time preparing for retirement.
• 30% of Canadians 18-34 have no retirement savings.
• Has led governments to prohibit age discrimination and include
mandatory deductions to CPP. Mandatory retirement at age 65 can
1C) now be challenged as discriminatory (on basis of age)
Termination by BUT,
Retirement • At common law, a contract can still have a retirement clause
(even if it violates human rights law at the same time).
Clause
• Even though no presumption of retirement age at common law
2) Termination
with ‘Reasonable
Notice’ (implied)
Origins of Implied Reasonable Notice

Employment contracts were one-year

Contracts were indefinite unless Employment was rare compared with fixed term unless otherwise stated
otherwise indicated. farming/land ownership. (Britain, not Canada).

1898 1908 1920s

1890s 1900s 1911

Annual hires did not exist; Judge ruled that an employee is Contracts were indefinite unless
employment based on each contract entitled to reasonable notice otherwise indicated (Canada).
term. dependent on a variety of factors •Reasonable notice had taken root in Canada.
(Canada).
How do courts today determine
reasonable notice?
• How much notice is reasonable?
• Following Bardal v. Globe and Mail, courts
assess what is reasonable at the time of
termination with the view to both the employee
and employers’ positions (and broader labour
market context)
• This approach displaces approaches that
focused on intention of the parties at the time
they made the agreement, e.g. Lazarowicz v
Orenda Engines Ltd. (1961, OntCA)
The “Bardal Factors”

• Bardal v. Globe & Mail Ltd. (Ont. High Court 1960) –

• Judge must survey situation at time of termination to calculate

reasonable notice, taking into account:
1. Length of service
2. The employee’s age
3. Character of employment/status of the job
4. The availability of replacement work: the Cushion Rationale
Other factors beyond Bardal affecting length of
reasonable notice
• Inducement:
• Decision to quit due to expectations of future job
security.
• If expectations were misguided, may warrant
longer notice period

• Some attempts to expand Bardal factors have failed:

• Notice reduced if employee engaged in
misbehaviour not serious enough for dismissal
(‘near cause’).
• Notice extended if employer acts in bad faith or in
callous and insensitive manner (SCC’s Wallace
Doctrine; punitive; but overturned by Honda
Canada Inc v. Keays).
 Task 1 (7 mins):

1) Is character of the job still

important?
Follow the links (see Brightspace) to a
‘notice calculator’ and compare how these
two workers would fare:
A. 42-year-old, clerical or technical
worker with 15yrs of service
B. 42-year-old, middle manager with
15yrs of service
2) Compare the the “Severance Pay
Are there any discrepancies? How
significant are they? Calculator” with the Statutory
Termination Pay Tool (link 2).

What are the key differences?

What factors are determinative in each?
The Test for Frustration of Contract
• Contractual obligation has become incapable of
being performed.

• Circumstances have become radically different

than at time of original contract (Davis
Contractors Ltd. v Farenham Urban District
Council (HL, 1956))

• e.g., Destruction of the workplace by

natural disaster

• Death of employee

• Change in the law that would make it

unlawful for employee to continue their job.

• Does not apply for self-induced frustration (i.e.

bankruptcy, layoffs caused by downturn, loss of
customers, etc.)
Frustration due
to Illness or
Disability
• If medical condition renders
performance impossible or
radically different than what was
contracted for.

• If condition is permanent, or will

last until foreseeable future,
frustration can apply.

• Temporary illness will not frustrate

an employment contract.
Illness or Disability, cont.
A. What Medical Evidence is Relevant in Assessing Permanent Disability?
• Is the condition likely to improve over time?
• Consider
• only medical evidence available on the date of termination OR
• all medical evidence up to the date of the trial.

B. Does Frustration of Contract Apply when a Contract Provides for Sickness

and Disability Benefits?
• Controversy over relevance of contract terms regarding disability benefits.
• Doctrine of frustration applies to unforeseen circumstances not in the
reasonable contemplation.
• If illness and disability are in the contract, clearly they have been
contemplated and frustration would not result.
Illness or Disability, cont.
C.Is the Duty to Accommodate a Disabled Worker a Precondition for
Frustration of Contract?
• Human Rights Law
• Employer cannot dismiss an employee for absenteeism due to a disability.
• Dismiss only if impossible to accommodate without undue hardship.
• Collective Bargaining Regime
• Unionized workers entitled to accommodation to the point of undue
hardship if they become disabled.

• Common Law Regime

• Not yet recognized requirement for accommodation as a precondition
for a finding of frustration due to disability.
• So at odds with contemporary regulatory/social expectations
4) With Notice (Statutory)
Common Features of Statutory Notice of Termination Provisions in Canada
1. Minimum Notice of Termination Provisions
2. Greater Notice Period for Mass Terminations
3. Definition of Termination of Employment
4. The Exemption of Certain Employees from Statutory Notice Entitlements
5. An Employer’s Statutory Obligation to Provide Notice of Termination
Individual Notice Requirements
Under the Ontario Employment
Standards Act
• Seniority
• an employer is required to give notice of termination
of between 1 to 8 weeks depending on the length of
the employee service
• 1 week notice = 3 months but less than 1 year
• 2 weeks notice = 1 year but less than 3
• 3 weeks notice = 3 years but less than 4…
• for each week that the employer decides to give pay
in lieu of notice, they must pay the employee a lump
sum equal to the employee’s regular wages
Group Termination
Provisions under the
Ontario ESA
• In the case of mass terminations there is specific
legislation for termination pay and notice
required.
• Termination of 50 or more – fewer than 200 =
8 weeks notice
• Termination of 200 – 500 =12 weeks notice
• Termination of 500 or more = 16 weeks
notice
 • Section 64(1) of the Ontario Employment
Severance Pay Standards Act, 2000 also restricts
severance pay to employers who meet one
of the following two conditions:
a. The severance occurred because of a
permanent discontinuance of all or part
of the employer’s business at an
establishment and the employee is one
of 50 or more employees who have
their employment relationship severed
within a six-month period as a result;
b. The employer has a payroll of $2.5
million or more

• The amount of severance pay an

employee is entitled to receive in Ontario is
one week’s pay per year of service (or part
thereof) up to a maximum of 26 weeks’ pay
5) Quitting and/or
Resignation
The Test for Assessing Whether an
Employee Has Resigned

• The employee’s intention to resign is clear

and unequivocal.

• Objective test asks whether a reasonable

person of normal intelligence looking at
what happened would conclude that the
employee had resigned.
The Requirement for an Employee to Give an
Employer Notice of Termination
• Employee termination notice legislation not in
every Canadian jurisdiction.

• Statues of ON and BC don’t require

employee notice.

• Or, dependent on contract.

• Bardal factors do not apply.

• Employer needs time to find a suitable

replacement.

• Usually employees do not have to give much

notice, finding new labour is fairly easy.
Calculating Damages When an Employee Fails to Give
Proper Notice of Termination
• Damages for breach of contract requires that victim be
“made whole.”

• Damages assessed based on the actual harm caused

to the employer due to lack of notice, not the decision to
quit itself.

• Damages incurred from employee lack of notice are

usually so nominal that employers don’t bother to sue.

• Wrongful quitting lawsuits are far less frequent.

Interaction
with other
regimes…
 Frustration of contract
Something unexpected happens that prevents parties from
completing/continuing their contract (i.e., ‘act of God’, injury,
disability)

Consequences:
• Instantly terminates the contract.
• Relieves parties of any future contractual obligations.
• No need to provide notice of termination in some cases.

Arguments about frustration arise in wrongful dismissal cases.

“Who should bare the risk of unforeseen events?” (G England)
The Test for Frustration of Contract
• Contractual obligation has become incapable of being performed
because circumstances have become radically different than at time
of original contract (Davis Contractors Ltd. v Farenham Urban
District Council (HL, 1956)

• In employment law context see Naylor Group Inc. v. Ellis-Don

Construction Ltd., 2001 SCC 58: “[f]rustration occurs when a
situation has arisen for which the parties made no provision in the
contract and performance of the contract becomes ‘a thing radically
different from that which was undertaken by the contract.’”

• e.g., Destruction of the workplace by natural disaster

• Death of employee

• Change in the law that would make it unlawful for employee to

continue their job.

• Does not apply for self-induced frustration (i.e. bankruptcy, layoffs

caused by downturn, loss of customers, etc.)
Frustration due
to Illness or
Disability
• If medical condition renders
performance impossible or
radically different than what was
contracted for.

• If condition is permanent, or will

last until foreseeable future,
frustration can apply.

• Temporary (even if long lasting)

illness will not frustrate an
employment contract.
Does Frustration of Contract Apply when a Contract
Provides for Sickness and Disability Benefits?

• Controversy over relevance of contract terms

regarding disability benefits.
• Doctrine of frustration applies to unforeseen
circumstances not in the reasonable contemplation.

• If illness and disability are noted in the contract;

clearly, they have been contemplated and
frustration would not result.
BUT, see Wigthman Estate v 2774046 Inc (2006 BCCA 424)
• Test for frustration not whether parties contemplated possibility
that long-term disability might occur, but whether they have
provided that the contractual relationship will continue despite
the radical change in circumstances.
Is the Duty to Accommodate a Disabled
Worker a Precondition for Frustration of
Contract?
• Human Rights Law
• Employer cannot dismiss an employee for absenteeism due to a disability.
• Dismiss only if impossible to accommodate without undue hardship.
• Collective Bargaining Regime
• Unionized workers entitled to accommodation to the point of undue
hardship if they become disabled.

• Common Law Regime

• Has not yet recognized requirement for accommodation as a
precondition for a finding of frustration due to disability.
• So, at odds with contemporary regulatory/social expectations
• Although, some moves towards incorporation of accommodation
requirement (see Antonacci v Great Atlantic & Pacific Co of Canada).
Task 3:
• Read the ‘applying the law’ problem on p. 176 Law of Work. If
you don’t have the book, the scanned problem text is posted on
Brightspace. Discuss the problem in your group.
Questions