Canada: New Notice Rules for Federally Regulated Employees Dismissed Without Cause

Under new labor code provisions, federally regulated employers in Canada now must give up to eight weeks’ written notice or pay in lieu of notice when dismissing 49 or fewer workers without cause.

Before the new provisions, which went into effect on Feb. 1, employers had to provide only two weeks’ notice or pay in lieu of notice to individual employees being let go after serving on the job for at least three consecutive months.

“The new requirements reflect a trend of modernizing employment standards legislation with an eye towards fairness, better protections for employees, and recognizing the inherent power imbalance in the employment relationship,” said Stuart Rudner, a lawyer with Rudner Law in Markham, Ontario.

Federally regulated employees in Canada work in industries and places under the federal government’s jurisdiction, including the federal government; federally owned corporations such as Canada Post Corp and Via Rail Canada; banks; transportation companies that cross provincial and international borders; airlines and airports; and broadcasters and telecommunication providers.

Graduated Notice Scale

The new and updated provisions under the Canada Labor Code (CLC) require federally regulated employers to provide affected individual employees with a graduated notice of termination or pay in lieu of notice based on the length of their continuous employment, said Trevor Lawson, partner with McCarthy Tétrault LLP in Toronto.

The graduated notice scale ranges from two weeks for employees with between three months and three years on the job to eight weeks for those with at least eight years’ service.

Previously, after three months of service, employees were entitled to two weeks of notice or pay in lieu and no more, regardless of the actual length of their service, Rudner noted.

The provisions also require employers to provide dismissed employees with a written statement of benefits that sets out the employees’ vacation benefits, wages, severance pay, and any other benefits and pay arising from their employment, Lawson said.

The employer must provide this statement no later than two weeks before the termination date if the employee is given advance working notice, no later than the termination date if the employee is given pay in lieu of notice, and no later than two weeks before the dismissal date if the employee is given a combination of working notice and pay in lieu. If the notice period is shorter than two weeks, the employer can provide the statement on the day the employee receives the termination notice.

Check Employment Agreements

“Now that these new notice provisions are in force, it is recommended that federally regulated employers audit their employment agreements to ensure these agreements provide for at least the minimum notice of termination required by the CLC,” which regulates the relationship between federally regulated employers and employees, Lawson said. An employment agreement that doesn’t meet the minimum requirements under the CLC will be unenforceable, he added.

“Federally regulated employers should be aware of the new notice and documentation requirements. Employers must comply with the new requirements for all without-cause dismissals which occur on or after Feb. 1, 2024,” Rudner explained.

The new provisions are minimum requirements, Lawson said, explaining that federally regulated employees’ benefits or rights may be greater under their employment agreements, under common law in all provinces except Quebec, or under civil law in Quebec.

The new requirements are separate from the CLC’s ongoing requirement for federally regulated employers to provide severance pay to employees who have completed 12 consecutive months of continuous employment, Lawson noted.

Such employees remain entitled to severance pay, in addition to the termination notice or pay in lieu, in the amount of two days’ wages for each completed year of employment, with a minimum severance payment of five days’ wages, he explained.

The new requirements are also separate from the CLC’s continuing requirements in relation to group terminations involving 50 or more employees in a four-week period, according to Lawson.

It’s also important to note that nonmanagerial employees continue to be protected by the CLC’s “unjust dismissal” provisions, which prohibit employers from terminating employment without cause unless the employee has less than 12 months of service, is a manager, or is dismissed for lack of work or discontinuance of a function, Lawson noted.

Rudner said the new requirements were enacted to bring the CLC up-to-date with its provincial counterparts.

“Notably, the new requirements introduce a graduated system of notice/pay in lieu of notice, whereas before, there was a flat notice/pay in lieu requirement of two weeks across the board for all federally regulated employees,” Rudner said. Now, the CLC is in line with provincial employment standards legislation, such as the Employment Standards Act in Ontario, which has a very similar graduated system.

Liability for Violations

Employees who have not received proper notice or pay in lieu of notice under the new provisions can file a complaint with the Canada Labor Program, which investigates and enforces federal employment standards, Rudner said. Depending on the results of the investigation, the program can order employers to pay outstanding unpaid amounts in addition to offering other remedies.

Employers that fail to comply with the CLC can also be subject to administrative monetary penalties, he added.

“Aside from that, failure to give proper notice and documentation … can expose employers to liability for wrongful dismissal damages and even for bad faith damages depending on the circumstances of the dismissal, making noncompliance potentially quite costly,” Rudner said. “It is crucial to remember that the entitlement to notice or severance is governed both by legislation and common law. While the legislative amounts are relatively nominal, the common-law entitlements can be as much as two years in some cases.”

The common law requires that employers provide “reasonable notice,” which is often difficult to predict with certainty.

“Strategic employers utilize contracts in order to displace the common law entitlement and set out clear provisions for what will be required in the event of a dismissal of the cause,” Rudner noted.

Lawson said an employer that fails to meet its obligations to provide notice, severance pay, or other compensation owed under the CLC may be ordered to pay those amounts and could be fined between CA$50,000 and CA$250,000, depending on whether it’s a first or subsequent offense.

Dinah Wisenberg Brin is a reporter and writer based in Philadelphia.