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04/12 - W. Michael Thomas
CFP, CLU, GBA, RPA, CH.F.C., R.F.P.


Common Law Reasonable Notice – How much notice is good enough?

TA recent decision issued by the Ontario Court of Appeal appears to have raised the cost of terminating employees.

The Court of Appeal recently reviewed the case of DiTomaso v. Crown Metal Packing Canada LP. Mr. DiTomaso had been employed with Crown Metal Packing for 33 years as a mechanic and press maintainer. His responsibilities included setting up the metal manufacturing line, minor repair work and assisting the millwright with mechanical work on machines. Upon closing the facility where Mr. DiTomaso worked, Crown Metal terminated his employment at age 64.

Dissatisfied with the notice of termination provided by Crown Metal, Mr. DiTomaso sued his employer for 24 months pay in lieu of notice. Crown Metal defended their actions by relying on the long established principle that non-managerial employees (and certainly unskilled employees) were not entitled to the same level of compensation in lieu of notice as managerial employees. Crown Metal also argued that typically non-managerial employee entitlement in this regard is subject to a 12 month cap.

Two noteworthy findings were made by The Court of Appeal. First, it noted that the cap of 12 months’ notice for unskilled workers is no longer good law. And, second, The Court of Appeal also rejected the principle of law that higher paid, more skilled employees are entitled to a longer notice period than lower paid, low-skilled employees.

What can Canadian employers learn from this decision?

  1. When terminating “unskilled” workers on a without cause basis, employers may no longer be able to rely on the principle that unskilled workers are to be treated differently than managerial employees and are subject to a cap of 12 months.
  2. It is critical that employers ensure a properly drafted employment agreement incorporating a termination provision is given to all newly hired employees.

By incorporating termination provisions in employment agreements, the issue of employee entitlement to compensation in lieu of reasonable notice is no longer relevant. If Mr. DiTomaso had been subject to such an employment agreement, there would have been no issue for resolution before the courts. In other words, termination provisions create certainty.

 

W. Michael Thomas is a Partner at The Investment Guild (the Investment Guild is a People Corporation company)


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