Reasonable Notice and Severance Packages

Generally, all non-unionized employees who are dismissed without cause are entitled to reasonable notice or pay in place of notice, known as severance.

The employer’s obligation to provide reasonable notice of an employee’s dismissal began with the concept of “working notice”, where the employee would be required to continue to work for the employer from the time he or she is notified of the dismissal until the effective date of the termination, at some later point in time. Although working notice still occurs in some instances today, it is far less common than the concept of “pay in place of notice”. In this case, the employee is asked to leave the workplace at the time he or she is notified of the termination and the employer will provide salary continuance or a lump sum payment instead of having the employee continue to come to work.

The period of time that the employer is obligated to continue to pay an employee after his or her dismissal is referred to as the “notice period.” The purpose of the notice period is to insulate the employee’s economic losses until such time as he or she finds another job or ought to have found another job.

What is most often disputed is the amount of notice that an employee is entitled to. In other words, the critical question to ask when an employee has been dismissed is what is the length of the notice period?

In determining the notice period, the first step is to consider whether or not there is an employment contract. If so, the employee may have agreed to receive an amount less than reasonable notice. As this situation creates an unfavourable scenario for employees who may not have known the consequences of signing such an agreement, courts have historically only enforced these contract clauses in very specific situations. I have published articles about these types of employment contracts in more detail here and here. Generally, however, a contractual clause that limits an employee’s right to reasonable notice may not be enforceable where (a) it is signed under duress; (b) it is imposed on the employee without proper bargaining; (c) the clause is illegally drafted; (d) the clause is ambiguous or too vague to properly interpret; and (e) the result of applying the clause would be grossly unfair.

Without a written contract addressing how to end the employment relationship, there is an implied obligation to provide reasonable notice. To determine the amount of reasonable notice, the court will evaluate each case individually. However, over the years, the most often cited precedent or formula for assessing reasonable notice is called the Bardal Test, which is based on a famous case.

In the Bardal case, the employee was terminated without notice and therefore, he sued for wrongful dismissal. The only issue at trial was the period of notice that the employer ought to have provided. The judge explained the general principle when assessing the length of the notice period as follows:

There could be no catalogue laid down as to what was reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

Over the years a number of other factors have been considered by the courts. I am familiar with 105. Usually, however, there are only a handful of factors that are relevant in any one case. The most commonly considered factors still remain those from the Bardal Test: the type of position the employee held, the length of employment or tenure, the employee’s age and the availability of comparable employment.

If you have been dismissed without cause, you will usually be provided with a written termination letter setting out an offer of severance that the employer is prepared to pay, in exchange for a signed release. It is critical to obtain advice from an employment lawyer prior to signing any documents, so that you can either ensure that the deal is reasonable or fair, or if it is not, the steps you should take to improve the offer.

Read our employment law articles about reasonable notice and severance packages for more information.