While many employers realize the increased liability of dismissing long-service employees, they should also be aware of the risks associated with dismissing short-service employees. In the recent decision of Grimaldi v CF+D Custom Fireplace Design Inc [Grimaldi], the Ontario Superior Court of Justice (the “Court”) awarded more than five months of reasonable notice to an employee who worked less than five months. The Court awarded this notice period despite the employee’s short length of service, in part, because the brief duration of employment likely affected how long it took the employee to find a new job.
Background
The employee was hired as a Senior Project Manager and reported directly to the owner of the company. In this role, the employee was expected to act like an owner. He supervised and oversaw five to seven employees, and was the highest-paid employee of the company at the time. The employee was also to receive a five percent interest in the company after the first five years of employment.
However, after just four months and 23 days of employment, the employer dismissed the employee without cause and offered him two weeks’ pay in lieu of notice. The employee then brought an action against the employer for wrongful dismissal.
Decision
The Court allowed the action and awarded the employee a reasonable notice period of five months and two weeks.
In assessing the appropriate notice period, the Court accounted for the fact that the employee was 50 years old at the time of dismissal, as well as his owner-like role in the company. The Court also placed significant emphasis on the short-term nature of his employment. Specifically, the Court stated that the short duration of the employee’s employment, considering his age and past experience, would “require him to explain to prospective employers why he was terminated so soon after being hired”, which likely affected how long it took him to find a new job.
Additionally, the employee claimed he was entitled to a bonus in the form of company shares. However, the Court found that the employment agreement was clear in restricting the employee’s entitlement to the bonus until he completed at least one year of employment. The employer was not obligated to pay out the bonus, as the combined duration of the employee’s actual service time with the employer and the notice period was less than one year.
Takeaways for Employers
Considering the conventional wisdom that long-service employees are typically owed more notice upon dismissal, the Court’s decision in Grimaldi may seem counterintuitive at first. However, the reasoning in the decision is consistent with that of other wrongful dismissal cases, where the focus was on how long it would take the dismissed employee to find comparable employment. The Court stated that the employee was likely disadvantaged in his job search when prospective employers requested an explanation for his dismissal after such a short period of employment. Accordingly, it is possible that the Court will continue to adopt this line of reasoning for short-service employees in the future.
As such, employers contemplating dismissal should carefully consider the employee’s particular circumstances. In addition to the employee’s age and character of employment, employers should also assess whether an employee’s short service will hinder their search for alternative employment.
However, prudent employers can significantly reduce the risk of paying unpredictable and lengthy notice periods to short-service employees through the use of employment agreements with valid termination clauses which limit employees’ entitlements at dismissal to the minimums under the Employment Standards Act, 2000.
This blog is provided as an information service and summary of workplace legal issues.
This information is not intended as legal advice.
