Employer’s Financial Status Not Relevant to Wrongful Dismissal – By Alan Melamud

In Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801, the Court of Appeal answered the question of whether an employer’s financial circumstances are relevant to determining the period of reasonable notice for wrongfully dismissed employees with an unequivocal “no”. The case involved the wrongful dismissal claims of several teachers of a private school, who had been terminated because of lower enrolment in the school.

The motions judge had concluded that the teachers’ notice period should be reduced from 12 to 6 months on account of the financial straits of the employer school. The motions judge based his conclusion on the fact that the teachers’ employment was not secure, but rather based on the renewal of successive one-year contracts.[1] The motions judge reasoned that the uncertainty of the teachers’ employment meant they understood that the tight financial circumstances of the school could affect their employment. Accordingly, that understanding informed the “character of employment” factor referred to in Bardal v. The Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), therefore reducing the period of notice.

The Court of Appeal overturned the motions judge’s decision, finding that the employer’s financial status does not form part of the “character of employment”. The “character of employment”, like all of the Bardal factors, is only concerned with the circumstances of the dismissed employee. In particular, the “character of employment” refers to the nature of the position that had been held by the employee, including issues such as responsibility, expertise, etc. In summary, the Court concluded that the employer’s financial status has no place in the determination of the reasonable notice period:

But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.

[1]                  The motions judge had found that the teachers’ were employed for an indefinite period and so entitled to reasonable notice notwithstanding the fixed term contracts. This determination was not appealed.


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