Authors – Alan Riddell & Kyle Van Schie
Iriotakis v. Peninsula Employment Services Limited 2021 ONSC 998
This past January, the Ontario Superior Court of Justice released a decision answering the key question of whether employees who were terminated during the economic crisis created by the COVID-19 pandemic ought to be provided with longer periods of notice due to the difficulty they experienced in immediately securing comparable new employment during that crisis.
In this particular case, the employee, Mr. Iriotakis, was terminated from his employment on March 25, 2020, that is to say only a few weeks into last Spring’s significant, COVID-created economic slowdown.
Although Mr. Iriotakis was a non-managerial salesperson, with little more than two years of service, he nevertheless sued his employer for the considerable sum of six months’ notice. He argued that such a long notice period was justified by the exceptional problems that he had faced in trying to rapidly secure new employment during the pandemic.
The Court largely rejected Mr. Iriotakis’ argument. Instead of awarding him six months’ notice, the Court ordered his employer to pay him only three months’ notice. In so ordering, the Court confirmed the general rule that an employee’s period of reasonable notice is to be calculated based on the state of the job market as it exists on the date of the termination itself, without the hindsight of what may later have occurred to that job market.
The Court determined that as of late March 2020, the impact of the COVID-19 pandemic on the Canadian job market was still highly speculative and uncertain. As a result, the Court concluded that Mr. Iriotakis’ termination ought not to entitle him to any significantly longer notice period of notice because it occurred at the very start of the pandemic, when it was not yet known what, if any, future impact the pandemic might have on the Canadian economy and job market.
On the other hand, in this case the Court also ruled that when a terminated employee receives the Canada Emergency Response Benefit (“CERB”), his CERB income cannot be deducted from the pay-in-lieu of notice that is owed by his employer. This particular aspect of the Court’s ruling surprised many employment lawyers, because when a terminated employee receives employment insurance benefits (“EI”), the law requires his employer to deduct that EI income from the pay-in-lieu of notice payable to that employee, and to remit it directly to the EI fund. One side-effect of this new court decision is therefore to permit anyone who was terminated in 2020 or early 2021 to effectively ‘double-dip’ by banking the CERB income that the Government of Canada paid to them, whilst banking the totality of the pay-in-lieu of notice that their employer simultaneously pays to them.
This decision serves as a reminder to Ontario employers that the amount of pay-in-lieu of notice that they must pay to a terminated employee will vary according to the state of the job market as it existed on the date of termination itself, but not according to subsequent economic developments that had not yet occurred and that were not yet clearly foreseeable at that time.
This decision clarifies that employees who were terminated during the pandemic will therefore only be entitled to enhanced pay-in-lieu of notice if they can establish that by the date of their termination, it was already clear that the pandemic would negatively impact their prospects for re-employment. Establishing this should be fairly easy for employees whose termination occurred sometime after May 1, 2020; however, it may be difficult for employees to establish that if their termination occurred any earlier, that is to say in February, March or April of 2020.
In a nutshell, the further into the 2020-21 pandemic the dismissal of the employee occurred, the more likely it is that the Ontario Superior Court may order his or her employer to pay enhanced pay-in-lieu of notice, as compensation for the poor prospects for re-employment that may have prevailed during the pandemic.
