Who is entitled to Reasonable Notice, and how is it calculated?

Authors: Stephanie McDonald and Baljinder (Bal) Singh Tiwana

Introduction

When your employment is terminated, you are entitled to reasonable notice or pay in lieu of notice (with a few exceptions).

In other words, you are entitled to:

• Advanced notice of an upcoming termination (i.e., you will be terminated on this date in the future, and you will continue to work and we will pay you until then); and/or
• The income you would have received had you remained employment during the reasonable notice period (i.e., your employment is at an end now, but we will pay you for a period of time in the future).

This article explains how the reasonable notice period is calculated, who qualifies for it, and what compensation you may—or may not—be entitled to.

Who is entitled to reasonable notice?

Employees in Ontario are entitled to reasonable notice if:

• They are a permanent employee (as opposed to an employment contract was a definite start and end date) or a dependent contractor;
• They were terminated without just cause; and
• Their employment contract does not contain a valid termination clause precluding their entitlement to reasonable notice.

Employees in Ontario are not entitled to reasonable notice if:

• They were properly terminated for just cause. But, keep in mind that this is a high threshold. Employers often assert just cause but fail to meet the legal standard. In many cases, what begins as a “just cause” termination ends with a severance package, or a court finding that reasonable notice is owed after all;
• Their employment contract contains a valid and enforceable termination clause;
• They were employed on a fixed-term contract that expires as per the fixed contractual end date; or
• The employment contract becomes frustrated.

Relevant factors in the calculation of the reasonable notice period (The Bardal Factors)

The determination of the reasonable notice period is an art, not a science. The Bardal Factors are the key considerations used by courts and negotiating parties alike to determine the appropriate duration of the reasonable notice period.

The Bardal Factors include:

1. Length of Service. Longer service generally increases notice. Conversely, very short service attracts disproportionately longer notice periods.
2. Character of Employment. Senior or specialized roles usually attract longer notice due to the difficulty in replacing or transitioning to similar roles.
3. Age. Older employees (55+) may have a harder time finding a role due to age discrimination.
4. Availability of Similar Employment. If similar employment is not available, a longer notice period may be justified.
5. Any other factor which could increase or decrease the amount of time it would take the employee to find a new role. Courts will consider a range of personal and practical circumstances that may make the job search more difficult or prolonged. These can include:
   1. Pregnancy during the notice period
   2. Level of education and training
   3. Ongoing medical conditions that affect employability
   4. The need for workplace accommodations
   5. Caregiving responsibilities
   6. Limitations related to physical or cognitive ability
   7. The employee’s geographical location or access to a limited job market
   8. Timing of termination
   9. Economic conditions

Are bonuses and commissions included in the calculation of the reasonable notice period?

Yes, employees are entitled to:

• Bonuses or commissions that accrued before termination.
• Bonuses/commissions that would have been earned during the notice period had the employee not been terminated.

However:

• Employees may not be entitled to bonuses/commissions if the contract clearly excludes bonuses/commissions upon termination, those bonuses/commissions are not considered wages under the Employment Standards Act, and that clause is enforceable i.e. legally valid.

What happens to vested equity (e.g., Stock Options, PSUs, DSUs, RSUs, etc.) on termination?

During the notice period, employees are generally entitled to equity that has vested as of the last day of the statutory notice period, including any that would have vested during the reasonable notice period—unless the plan explicitly and validly excludes it.

What happens to unvested equity on termination?

Unvested equity that will not vest during the reasonable notice period is typically forfeited at termination.

However, if the language used in the plan is ambiguous, unlawful or unfair, courts may allow full or partial recovery as part of a damages award for wrongful dismissal.

Pension Contributions

Employees are generally entitled to pension contributions during the reasonable notice period, unless your plan or contract validly excludes them.

Other benefits: car allowance, cell phone, and other perks

If these benefits formed part of the employee’s regular compensation, courts typically require employers to continue or compensate for them during the reasonable notice period.

This includes:

• Car allowance.
• Cell phone or technology allowances.
• Employer-paid benefits or reimbursements.

These are treated as part of the employee’s total compensation unless lawfully excluded by the employment contract.

Conclusion

If your employment is terminated with or without cause, you are likely entitled to more notice than your employer has offered you at first instance.

We highly recommend consulting with an employment lawyer before accepting any severance offers. Once you accept the offer, and sign a release, you will have waived your rights to seek more compensation.

At Workplace Sage Legal, we are here to support you through this process and work with you to obtain a fair resolution.

DISCLAIMER: This article/blog is provided for educational/informational purposes only. The views expressed are solely those of the author(s) and should not be attributed to any other party not listed as the author(s).

While reasonable efforts have been made to ensure the accuracy of the content provided, it does not constitute legal advice. Prior to relying on any aspect of this article, you should consult with a suitably qualified legal professional promptly in your relevant jurisdiction, to obtain advice tailored to your individual circumstances

Nothing in this article should be interpreted as forming a solicitor-client relationship or construed as a solicitation for legal services.