As a result of a plunge in oil prices and COVID-19, we are experiencing an unprecedented recession. The government of Alberta has reported that our economy is expected to contract by 8.8% in 2020. The financial situation of our province will not likely improve in the short term. To decrease expenses and to protect their businesses, some employers in Alberta have made the difficult decision to terminate their employees. If this trend does not change in the months to come, our province will be heading to a 25% unemployment rate. Losing a job is always challenging for a business owner or an employee, and, in the current time, is more so than ever before.
When people lose their jobs and receive their payments in lieu of notice, the very first question they want to know is whether this payment is fair. In Alberta, a payment in lieu of notice is “the wages the employee would have earned if the employee had worked the regular hours of work for the applicable termination period.” This means that if a terminated employee was entitled to a termination notice period of 2 weeks, then his or her payment in lieu of notice would be equal to the wages this employee would have earned for these two weeks. To answer the question of whether a payment in lieu of notice is fair or not, it is necessary to determine the applicable termination notice period for the employee who has been terminated.
If there is a written employment agreement that has provisions that deal with the termination of the employment relationship, the agreement needs to be considered. The employment agreement will apply if the provisions regarding termination are clear and unambiguous and contain at least the minimum statutory termination periods set out in the Alberta Employment Standards Code. If these conditions are met, the applicable termination notice period for the employee who has been terminated would be according to the agreement. The applicable termination notice period according to the common law will apply when: a) there is no written employment agreement; b) the provisions of termination of the agreement are unclear or ambiguous; or c) these provisions contain termination notice periods lower than the termination periods set out in the Alberta Employment Standards Code. (More about common law notice in the paragraphs below in this blog).
As a lawyer, I am often asked to review termination provisions in employment agreements and give an opinion regarding appropriate payment in lieu of notice. I am mindful that the courts have found that termination provisions in an employment agreement that merely refer to the Employment Standards Code, without further language, are not sufficient to displace the entitlement to termination notice periods pursuant to the common law. Take as an example, Kosowan v. Concept Electric Ltd., 2007 ABCA 85 which was a Court of Appeal decision. In this case, the employment agreement said: “Should you be terminated for reasons other [than] cause then you will be entitled to advance notice or severance pay thereof in accordance with the Employment Standards Act of Alberta.” Unfortunately, for the employer, this provision was insufficient to displace entitlement to termination periods according to the common law. According to the Court, the termination provision in this employment agreement was not clear enough. Consequently, it could not cap the employee’s payment in lieu of notice to the minimum amounts set out in the Employment Standards Code. The Court of Appeal also added: “The clause does not, on its face, confine the Appellant to compensation pursuant to ss. 56 and 57(1) of the Code. On the contrary, the choice of language leaves open to the employee the ability to pursue an action.”
Another example is Gillespie v 1200333 Alberta LTD., 2012 ABQB 105 which was a Court of Queen’s Bench decision. In this case, the court found that termination provisions in an employment agreement were not adequate to displace the entitlement to termination notice periods pursuant to the common law. In Gillespie, the employer had given the employee double the notice required pursuant to the Employment Standards Code. To support its position, the employer was arguing that in its policies there was a reference that a termination notice would be according to employment standards. Unfortunately for the employer, the Court rejected this argument and said that even “a contractual provision that termination notice will accord with legislated provincial standards should be interpreted as an agreement regarding minimal notice, not an agreement to exclude the implied contractual term that dismissal without cause requires reasonable notice. Although employers are free to make contracts that limit an employee’s notice entitlement to the statutory minimums, any such agreement to exclude the employee’s common law protection must be clear and unambiguous.”
Consequently, expressions such as “in accordance with the provincial legislation for the province of employment” or “in accordance with the Employment Standards Code” in an termination provision, in an employment agreement might, not be enough to displace common law provisions regarding termination periods. At this point, you might be wondering why displacing common law provisions regarding termination notice periods is an important consideration. Common law provisions regarding termination periods tend to be much more generous to employees. They tend to consider the length of service, age of the employee, nature of the work, education level, and the ability to find a similar job in the area. If you are an employer, this means that if the termination clause in the employment agreement is unclear and ambiguous, you will most likely be paying more money to your terminated employee. If you are an employee who has been recently terminated and the termination clause in your employment agreement is unclear and ambiguous, you would be likely to receive more money.
In summary, whether your payment in lieu of notice is fair depends on whether there is an employment agreement that deals with termination, whether these provisions are clear and unambiguous, and whether the common law provision regarding notice will apply or not. Because these are fact specific questions, whether you are an employer or employee, you should speak with a lawyer. As an employee, you will want to know if you should receive a better payment in lieu of notice. If you are an employer, you may want to know if the termination provisions in your business employment agreement would resist the scrutiny of the courts.