The Impact of COVID-19 on Notice Periods: Yee v. Hudson's Bay Company

Introduction

Since the beginning of the pandemic, employers and employees have both been asking, “Will the pandemic cause employers to pay longer than normal common law reasonable notice periods?” In Yee v. Hudson’s Bay Company, 2021 ONSC 387 (“Yee”), J. Dow delivered what is the first glimpse at an answer, stating that the pandemic should be a consideration when determining reasonable notice for employees who are dismissed after the pandemic began. In this particular case, COVID-19 did not influence the notice period at issue since the plaintiff had been dismissed from his employment in August 2019, well before the pandemic. The real value and importance of this decision comes from J. Dow’s comments made obiter dictum, in which he touched upon the possibility of courts ordering increased common law severance to employees who have been terminated during the pandemic.

The Case

Mr. Yee was 62 years old when his case was heard in December 2020, following his termination from Hudson’s Bay Company (“HBC”), after working there for almost 12 years. He held the position of Director, Product Design and Development, and reported to a VP. He also supervised up to five people. Mr. Yee sought 18 months reasonable notice, while HBC argued that 11 months was the appropriate reasonable notice.

HBC acknowledged that Mr. Yee had tried to mitigate his losses, as he began his job search in February 2020, and had not found one as of the date of trial, which was close to 16 months after his termination.

As is routine in common law reasonable notice assessments, the Bardal factors were used to determine the proper notice. J. Dow held that Mr. Yee’s age would favour an increased notice period, his length of service was “neutral to somewhat favouring a longer period,” and his character of employment “favours awarding a longer period of reasonable notice” as he occupied a role with a “managerial nature."

COVID-19 has had the most notable impact on the fourth Bardal factor, which is “the availability of similar employment having regard to the experience, training, and qualifications of the employee.” It was argued that the COVID-19 pandemic should be accounted for as it has resulted in a harsh job market, making it difficult to find comparable employment. Paquette v. TeraGo Networks Inc., 2015 ONSC 4189 (“Paquette”) was referenced by the Plaintiff, where it was stated that “economic factors such as a downturn in the economy or in a particular industry or sector of the economy indicate that an employee may have difficulty finding another position may justify a longer notice period.”

However, the judge noted that Paquette should be contrasted with Holland v. Hostopia.com Inc., 2015 ONCA 762 (“Holland”), where it was stated that “Notice is to be determined by the circumstances existing at the time of the termination and not be the amount of time it takes the employee to find employment.” Notably, Mr. Yee was terminated from his position nearly 7 months before Ontario first went into lockdown in March 2020. As stated by the court, “It seems clear terminations which occurred before the COVID pandemic and its effect on employment opportunities should not attract the same consideration as termination after the beginning of the COVID pandemic and its negative effect of finding comparable employment.”

Although the above statement was made obiter dictum­ (which means it is not binding), it will nevertheless be persuasive in other notice cases going forward.

Ultimately, Mr. Yee was awarded 16 months reasonable notice.

Takeaway for Employers

With many businesses already facing financial hardship as the lockdowns persist in Ontario, the possibility of paying larger severance amounts to employees who were terminated after the pandemic began (approx. March 2020 in Ontario) is unwelcome news. Employers should strongly consider reviewing any employments contracts they currently have and discuss with an experienced employment lawyer the legal methods available to reduce employer risk when it comes to large severance payouts. At the risk of sounding overly dramatic, there has never been a more critical time to have your employment agreements reviewed.

Takeaway for Employees

Employees who have been terminated since March 2020 will now have a persuasive decision which may be utilized in negotiations and/or litigation for an increased notice period.