Employers Face Increased Termination Obligations

In the past 12 months, the Canada Labour Code (the “Code”) has undergone significant amendments, creating or revising a host of employment obligations for federally regulated employers. These changes include:

• requiring employers to reimburse employees for reasonable work-related expenses, unless these expenses are deemed ineligible for reimbursement by regulation or under the terms of a collective agreement or individual agreement with the employee—effective July 9, 2023;
• requiring employers to provide employees with certain Ministry of Labour materials and with written statements regarding their terms and conditions of employment – effective July 9, 2023; and
• requiring employers to provide menstrual products in all bathrooms, as well as a covered container for the disposal of menstrual products in any toilet and stall in their facility—effective December 15, 2023.

Increased Termination Entitlements

The most notable change to the Code, however, is the significant increase to the minimum termination notice owing to employees terminated on a without cause basis.

Previously, employees were generally entitled to two weeks’ notice or pay in lieu of notice upon termination of employment without cause. This required notice applied to all employees after three months of continuous service and did not increase regardless of the employee’s length of service.

Effective February 1, 2024, this requirement will drastically change. Entitlement to termination notice will operate on graduated basis – the notice requirements will be very similar to the mechanism applying to provincially-regulated employees in Ontario and British Columbia. Employees will continue to gain entitlement to two weeks’ notice after three months’ service but then will be entitled to an additional week of notice after three consecutive years of employment. Employees will then gain an additional week of notice entitlement after each additional year of continuous employment, up to a maximum of eight weeks.

Please note that, after these changes takes effect, federally regulated employees will remain entitled to severance pay under section 235 of the Code, in addition to the enhanced termination notice or pay in lieu of same. Non-managerial employees will also retain access to the unjust dismissal protections stemming from section 240 of the Code.

Preparing for Change

To smoothly adapt to these changes, federally regulated employers should take several proactive steps:

• Review and update employment contracts and policies to reflect the revised notice period requirements. In light of recent case law, notably the Ontario Court of Appeal’s 2020 decision in Waksdale v. Swegon North America Inc., employers should be extra careful to ensure their contracts do not appear to provide less than the minimum requirements of the Code. Any such appearance may otherwise threaten the enforceability of termination provisions contained therein.
• As needed, ask employees to execute revised employment agreements and provide fresh consideration in return to ensure enforceability.
• Communicate all changes transparently to employees to ensure everyone is aware of the new requirements.
• If considering a without-cause termination of an employee, it may be advisable to act prior to February 2024 in order to avoid the enhanced notice obligations.

For more information on any of the changes to the Code detailed above, or to discuss a review of your current employment contracts, please contact Matthew E. McCarthy of our employment group.