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One of the most common questions our Employment Law Group hears is the following: Is this termination package fair?

There is no formula for evaluating reasonable notice at common law. Rather, reasonable notice is a fact-specific exercise, which depends on a variety of factors, including age, length of service, character of employment and availability of similar employment, having regard to the employee’s experience, training, and qualifications. That said, what if the employer is experiencing financial strain? Does this impact the length of reasonable notice award that should be awarded?

The short answer is no. An employer’s financial circumstances cannot reduce an employee’s entitlement to reasonable notice. This is because the objective of reasonable notice is allowing the employee reasonable time to find replacement work. This principle was affirmed in a very recent 2021 case, Ristanovic v. Corma Inc., where Justice Dunphey ruled that considering an employer’s ability to pay while determining reasonable notice entitlements is a “slippery slope”. He stated:

While it is tempting to accede to the defendant’s suggestion that if the prevailing economic circumstances may operate to lengthen notice from the perspective of the terminated employee it should also serve to curtail it from the perspective of the employer who is also blameless and is being hard hit, that is not an analysis that I think can fairly be applied. Ability to pay as a criterion for fixing damages is a slippery slope to engage upon and I do not intend to do so here. 

Ability to pay, and its impact (or lack thereof) on reasonable notice awards are understandably often a live issue for many employers. However, the courts have been clear: Employers must be careful not to conflate these practical considerations with legal ones.



This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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