In Ontario, a mass termination occurs when 50 or more employees are terminated at an employer’s establishment within a four-week period. While mass terminations can occur as a result of many things, often, less-than-ideal economic conditions can increase the chances of larger-scale terminations. When a termination event is classified as a mass termination, there are certain rules which must be complied with.
What is a mass termination?
The Employment Standards Act (the “ESA”) prescribes different rules which can apply in the case of a mass termination. Under section 58 of the ESA, a situation where an employer terminates the employment of at least 50 employees at the employer’s establishment in the same four-week period is considered a mass termination.
In some circumstances, separate locations can constitute one establishment. We recommend speaking to an experienced employment lawyer to determine whether this applies to your situation.
However, there are some exceptions to bear in mind. For example, the mass termination rules do not apply if the number of employees terminated is not more than 10% of the number of employees employed for at least three months, and further, none of the terminations are caused by the permanent discontinuance of all or part of the business.
Statutory notice periods for a mass termination
When an employee is terminated without cause they are entitled to reasonable notice. Employees are entitled to a statutory period of notice under the ESA. The amount of notice is based on the length of the employee’s service. It is possible that they may be entitled to a lengthier period of common law notice.
In the event of a mass termination, the statutory notice period, rather than being based on the length of an employee’s service, is instead determined by the number of employees terminated, as set out below:
- 50 to 199 employees – 8 weeks’ notice or payment in lieu;
- 200 to 499 employees – 12 weeks’ notice or payment in lieu; and
- 500 or more employees – 16 weeks’ notice or payment in lieu.
Notifying the Ministry of Labour of a mass termination
When a mass termination occurs, employers must inform the Director of Employment Standards, regardless of whether they provide notice or payment in lieu. The notification takes place using Form 1, which requests information on:
- the number of employees to be terminated and the date of termination;
- the economic circumstances surrounding the terminations; and
- whether any alternatives to termination have been implemented or discussed with employees.
Once the form has been received, notice of termination may begin. The ESA requires the employer to put up a copy of the form in their establishment on the first day of the notice period, “in at least one conspicuous place … where it is likely to come to the attention of the affected employees.” This is in addition to the provision of individual notices.
Requirements during the notice period
Employers can provide payment in lieu in the form of a lump sum, rather than give the required period of notice. If they choose to provide notice, the ESA sets out some requirements designed to prevent underpayment, such as requiring employers not to reduce wage rates or change other employment terms.
Former employees brought a class action after employer failed to give timely notice to the Ministry of Labour
Failure to comply with these requirements can and has led to challenges. In the case of Wood v CTS of Canada Co., the Court of Appeal for Ontario found that an employer provided insufficient notice and required the working of excessive overtime.
In this case, the employer closed its Streetsville manufacturing plant which resulted in a mass termination. It notified employees on April 17, 2014, that their employment would end in March 2015, which was subsequently extended to June 26, 2015. However, the employer did not give Form 1 to the Director or post it in the workplace until May 12, 2015, which was 12 days into the eight-week notice period.
The employees brought a class action lawsuit against the employer.
Notice was not effective until Form 1 was served and posted
The Court of Appeal held that the employer was only required to serve and post the Form 1 information at the beginning of May 2015, coinciding with the start of the eight-week notice period, not when notice was originally provided to employees in April 2014.
However, because the employer was 12 days late in serving and posting the Form 1 notice, class members were entitled to an extra 12 days’ pay in lieu of notice.
Employer did not comply with overtime or temporary employment requirements
The Court of Appeal also found that a group of employees was forced to work overtime, contrary to the ESA. It observed that “exceptional workplace demands on the employee during the notice period that negatively affect his or her ability to seek alternate work, if not consensual, may warrant disentitling an employer to credit for some or all of the period of working notice provided.”
The Court decided that overtime worked in violation of the ESA was such an exceptional demand that it prevented the employees from finding alternative employment during the notice period. As such, it found that the employer was not entitled to credit for notice provided during such overtime weeks.
Finally, five employees were given temporary work for more than 13 weeks after the termination date in the original notice. Under the ESA, after a 13-week period, the employer changes the termination date and needs to issue a further notice of termination.
Contact Grosman Gale Fletcher Hopkins LLP in Toronto for Advice on Employee Termination
The experienced team of employment lawyers at Grosman Gale Fletcher Hopkins LLP advises both employers and employees on the termination process, regardless of the number of employees terminated. The firm provides advice on the rules that apply to mass terminations, ensuring that employers avoid costly claims and assisting employees in securing their entitlements. Contact us online or at 416.364.9599 to schedule a consultation and learn how we can assist you.
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