The Employer’s Poor Financial Circumstances Are Not Important In Wrongful Dismissal

June 8, 2016

By Brad Smith

…an employer’s poor economic circumstances do not justify a reduction of the notice period to which an employee is otherwise entitled …”

The Ontario Court of Appeal stated this on November 23, 2015 in Michela v. St. Thomas of Villanova Catholic School.

Three employees were employed on successive year to year contracts of employment. When their contracts were not renewed, they sued for wrongful dismissal. The employer argued the notice should be reduced because of its poor financial situation. While the argument was successful at trial, the Court of Appeal reversed the decision and stated very clearly the employer’s financial circumstances are not relevant when determining the length of notice owed to a terminated employee.

At paragraph 17 the Court stated:

“An employer’s financial circumstances may well be the reason for terminating a contract of employment – the event that gives rise to the employee’s right to reasonable notice. But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.”

The important points to take away from this decision:

  • The reason for terminating an employee is not always relevant to assessing the notice.
  • The financial circumstances of the employer do not justify a reduction or increase of the notice.
  • The character of employment is concerned with the circumstances of the employee, not the employer.