When terminating employees without cause, employers must provide reasonable notice or pay in lieu of notice. While reasonable notice under the Employment Standards Act 2000 is based on the duration of employment, notice periods under the common law may be more generous. We recently reported on the factors that are considered in determining the length of the notice period.

One issue that can arise in employee terminations is whether there has been a break in the employment relationship. This matters because the length of service is relevant for the purpose of determining the period of reasonable notice.

This article looks at whether retirement and then re-employment constitutes a break in service. We also look at a recent decision of the Court of Appeal for Ontario in which an employee argued that she was terminated after 39 years of service. On the other hand, the employer claimed that she recently retired and then was rehired for a period of one and a half years only.

Does retirement constitute a break in service?

It all depends on the specifics, so it is important to get advice from an experienced employment law lawyer. Assessing a potential break in service is a fact-specific exercise.

If an employee unequivocally resigns or retires and then accepts a new offer of employment, it is possible that this will constitute a break in service.

However, as will be seen, this is not always the case. In some circumstances, signing a new employment contract will not break the period of service for the purpose of determining the length of reasonable notice. The years of service clock might not be re-set to zero, for example, if the employee did not voluntarily and knowingly give up their right to common law reasonable notice.

An employee retired for the purpose of accessing her pension plan

In Currie v Nylene Canada Inc., the plaintiff employee took up employment with the employer’s predecessor in 1979. She worked in fiber operations and was employed in a specialized manufacturing role. After numerous promotions and title changes over the years, and changes to the employer following sales of the business, the plaintiff was advised in 2017 that she satisfied the criteria to receive her pension plan. The defendant’s employer told her that she would need to retire to access the plan, but that she would be offered employment following the retirement.

One and a half years after accepting a new offer of employment, the defendant discontinued the relevant part of the business and 17 employees, including the plaintiff, were dismissed without cause. The plaintiff was 58 years old. She was paid 8 weeks of termination pay and 26 weeks of severance pay but remains unemployed. The plaintiff commenced a claim against the employer, including seeking 26 months’ notice.

There was no break in service

The employer argued that the plaintiff retired and accepted a new offer of employment, constituting a break in service. In terms of recognition of service, all that the new contract said was that her service would be recognized for the purposes of determining benefits eligibility.

The trial judge found that there were no entries for 2017 in the plaintiff’s employment file and that the defendant told her that nothing was going to change in her employment. She did not provide the defendant with a notice of resignation or retirement. His Honour found that there was no break in service, stating:

[The plaintiff] was not prepared to stop working. She signed the documents prepared by [the defendant] for the sole purpose of accessing her Pension Plan and on the assurance that her employment would remain the same.

The Court of Appeal agreed, saying that it was open to the trial judge to conclude that the retirement and re-hiring process was for the limited purpose of enabling the plaintiff to access her pension plan and did not affect her years of service for the purpose of determining the reasonable notice period.

Exceptional circumstances supported a notice period that exceeds 24 months

The defendant argued that 15 months’ notice was reasonable, whereas the plaintiff sought 26 months. Prior decisions held that exceptional circumstances should exist to support a notice period that exceeds 24 months. 

The trial judge agreed with the plaintiff that 26 months was reasonable, based on her 39 years of service. His Honour found that there were exceptional circumstances, including:

  • that the plaintiff left high school to work for the defendant’s predecessor and she faithfully remained there for her entire working life;
  • at the time of termination, the plaintiff was in her twilight working years;
  • the plaintiff had very specialized skills making it difficult to find alternate employment and despite diligent efforts to acquire basic computer skills, it was unlikely she would succeed in securing alternative employment;
  • the work landscape had evolved since 1979 and the plaintiff’s experience with one employer in a specialized manufacturing job made it very difficult to transfer her skills to a new employer; and 
  • given the plaintiff’s age, limited education and skill set, the termination “was equivalent to a forced retirement”. 

The Court of Appeal agreed that there was ample support for the trial judge’s award of 26 months’ salary as compensation in lieu of notice. 

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

The team at Haynes Law Firm in Toronto helps employers in multiple industries to manage employer risk and reduce liability concerning employee terminations. We work with employers across the country to limit their exposure to legal claims stemming from poorly executed terminations. We also assist employees that have been terminated to ensure they receive maximum compensation and all eligible benefits from their employers.

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. To discuss how our employment law team can assist you, please contact us online or call us at 416.593.2731.