A recent Ontario court decision has helped shed light on an issue which is expected to be the subject of much discussion and related litigation in 2021 – how will the pandemic affect the notice period which terminated employees are entitled to claim? From the employer perspective, the economic impact of COVID-19 is likely to be something which they will try to use to reduce the amount of their notice obligation. Conversely, employees and their lawyers are invariably going to argue that the economic downturn which has resulted from the pandemic results in fewer jobs being available in the market, thus supposedly justifying an increase to the required notice period.

In Iriotakis v. Peninsula Employment Services Limited, 2021 ONSC 998, the Ontario Superior Court of Justice reviewed the factors unique to the pandemic, and how these will influence the determination of the common law notice period which the employee may claim and the employer is liable for.

Peter Iriotakis commenced work for Peninsula Employment on November 27, 2017. His employment relationship was governed by an employment agreement signed before he started work. The employer terminated him without cause on March 25, 2020. As a result, at the time of termination he had about 28 months of service. Iriotakis was then 56 years old, and in his last full year of employment his compensation was $145,186. While his position was “Business Development Manager”, he did not manage others and the role was essentially a well-compensated and skilled sales role.

Upon dismissal, the employer paid out four weeks of base salary plus benefits.

Iriotakis proceeded to sue the employer, claiming that he was entitled to at least six months, in part as a result of the pandemic. The employer’s position was that notice should be limited to the two to three month range.

In determining the relevant notice, the Court refused to take the impact of the COVID-19 pandemic on the job market into consideration. In reaching this decision, Mr. Justice Dunphy said that reasonable notice must be measured at the time the decision to terminate is made, rather than in hindsight. In this particular case, there was not any clear view about the impact of the pandemic on the economy in general or the job market. Any view that said that, as of March 2020, there should be more notice was found to be “highly speculative and uncertain.”

The Court’s reasoning is based on the need to have certainty at the time of termination of the relevant obligations. There is an important distinction between the period when the employee is out of work and the relevant notice period. Employees may be unemployed for periods which are longer or shorter than the notice period. That does not, however, result in what is essentially a distortion to the analysis.

As the Court noted in the Iriotakis decision, the “principle of reasonable notice is not a guaranteed bridge to alternative employment in all cases however long it may take.” It is important that parties avoid what the judge described as “the dangers of applying hindsight to the measuring of reasonable notice.” As a result of this reasoning, the Court awarded Iriotakis three months of notice, calculated based on all elements of compensation.

In summary, there was no proper legal basis to award what some have called a “COVID bump” in this case.

The Iriotakis decision also involves a potentially important development with respect to how damages will be awarded in Canadian employee terminations in the context of the pandemic. In particular, the Court determined that benefits received under the Canada Emergency Response Benefit (CERB) did not reduce the employee’s entitlement to damages for wrongful dismissal. This approach is based on the principle that the CERB was a one-time program which neither the employee nor employer had paid into or contemplated prior to the pandemic. As a result, the CERB benefits should essentially be disregarded for the purposes of assessing the case and determining relevant employer liability. The Court made this finding based on the specific facts (where the CERB amount was much lower than the compensation) and did not, however, make a finding that CERB benefits will never be deductible from damages.

Takeaways For Employers

There are a growing number of pandemic-related dismissal cases which are making their way through the Canadian courts. The Iriotakis ruling provided a helpful argument to employers faced with demands for increased damages due to COVID-19. The caution, however, is that the decision does not confirm that there will never be a “COVID bump”. Instead, the issue is one which is to be determined at the time of termination (as opposed to when the trial judge reviews the case). In cases where employees were terminated early on during the pandemic, this may mean that their case is essentially the same as a “Before Times” termination case. Conversely, if the economic and job market data at the time of termination is sufficiently negative, there may be grounds for the employee to claim an extended notice period. Much of this will be a function of whether the actual impact of the pandemic can be properly assessed with any certainty. So, while there is now some further guidance which may reduce the number of excessive claims, a number of open questions remain for the coming months.