In these uncertain economic times, employees and employers alike are apprehensive about what the future holds.
Even with the assistance promised by Federal Minister of Finance Bill Morneau, many businesses are concerned that they will have to downsize their workforce to reduce overhead. Small to medium-sized businesses will be hit the hardest. Many are trying to strike a balance that will save the team, while saving money.
But even COVID-19 cannot absolve the parties from performing their obligations pursuant to the employment contract, with some exceptions where the contract becomes impossible to perform, or in other words, is “frustrated”.
If an employee is sick and cannot work, the employer cannot dismiss them without paying the minimums required by the Employment Standards Act, 2000. This applies even if the contract becomes frustrated as a result of a prolonged illness.
Unless they can establish frustration of contract, employers must always pay a dismissed employee the ESA minimum notice, and severance (where applicable), or any amounts greater than the minimums specified by written employment contract. Employee benefits, including group health and disability insurance coverage, must also be continued during the minimum notice period.
Proving “frustration” is a high threshold. Courts will expect employers to demonstrate severe financial hardship before they can be absolved of their minimum obligations. Even a “permanent discontinuance of all or part of the employer’s business because of a fortuitous or unforeseen event” won’t justify withholding an employee’s severance.
Unilateral changes to terms of employment, including abrupt reductions in compensation, should also be avoided, as they can be viewed by the Courts as “constructive dismissal”. Transparency on proposed changes, obtaining the written agreement of employees, or providing working notice of changes in accordance with the ESA/contract, will be key to avoiding or reducing liability for decisions made during this crisis.
Just because the contract becomes harder to perform, doesn’t mean that it becomes impossible to
perform. Mere apprehension of the hard times ahead is not enough to justify dismissing without compensation.
For advice on how you or your business can properly weather these unprecedented times, please contact me at pierre@pnladvocacy.com.