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Can Poor Economic Conditions Increase Reasonable Notice Period?
Employment Law

Can Poor Economic Conditions Increase Reasonable Notice Period?

Whenever the economy takes a downturn, people are more likely to lose their jobs. But does the state of the economy affect the reasonable notice period and employee is entitled to? As it turns out, it does.

The fact that poor economic conditions increase the reasonable notice period can be traced back to the landmark case, Bardal v Globe and Mail Ltd. (1960), 24 DLR (2d) 140 (ONSC). This case sets out the basis for determining the reasonable notice period. Bardal holds that one of the key factors that shape the reasonable notice period is “the availability of similar employment”. This means that someone who will have a difficult time finding a similar job requires more notice than someone who can replace their job easily.

The principle became crystalized in Lim v Delrina (Canada) Corp., 1995 CanLII 7271 (ONSC). In this case, a chartered accountant was terminated during a recession that especially affected accountants. When deciding on the case, the Court said that the following factors are to be considered when ascertaining an appropriate notice period:

(1) The depressed economic conditions of the employer.

(2) The lack of available employment opportunities due to depressed economic conditions in a particular industry.

(3) That factors 1 and 2 can be considered so as to increase notice but not to decrease it.

(4) That economic factors are not to be given undue influence.

Due to the economic conditions affecting the plaintiff, the court decided to increase the notice period by 33%.

In recent years, the Court of Appeal has upheld the notion that poor economic conditions increase the reasonable notice period. In example, in Hampton Securities Limited v Dean, 2018 CarswellOnt 544 (ONSC) a securities trader was terminated in 2009, during a recession that greatly affected the financial industry. The Superior Court cited Lim as an authority to demonstrate that “Depressed economic conditions at the time of termination which make a new position more difficult to find, are a relevant factor to consider when determining the length of notice”.

Takeaway

If you are terminated in the midst of an economic depression or recession, your reasonable notice period will be lengthened accordingly. This is especially true if your industry in particular suffered serious economic downturn at the time of your termination.

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