Amendments to the notice of termination provisions of the Canada Labour Code ("CLC") under the Budget Implementation Act, 2018, No. 2 ("BIA 2018 No.2"), will come into effect February 1, 2024. These amendments will require that federally regulated employees (excluding members of the public service) with at least 3 years of service receive more notice (or pay in lieu of notice) of termination without cause, in addition to introducing new requirements for federal employers to provide written statements of benefits to employees upon dismissal.
These changes have significant implications for federally regulated employers because they may impact the legal enforceability of the termination provisions in their employment contracts and increase the costs of dismissing employees in certain circumstances, as further discussed below.
Background
Part III of the CLC sets out the employment standards requirements that apply to employees of federal Crown corporations and private-sector employees in federally regulated industries such as banking, telecommunications, and airlines (but not members of the federal public service). In turn, Division X of the Part III of the CLC sets out the entitlements of such employees upon individual terminations without cause. Currently, these employees are entitled to 2 weeks of notice or pay in lieu of notice of termination, so long as they have at least 3 months of service and they are not dismissed for cause. The current entitlement does not increase beyond 2 weeks as employees length of service increases, but that will change pursuant to the new amendments discussed below.
The Amendments to the CLC Individual Termination Provisions
Effective February 1, 2024, the BIA 2018 No. 2 will amend Division X of Part III of the CLC to provide federally regulated employees with greater entitlements to notice or pay in lieu of notice upon termination of employment without cause, in addition to introducing new requirements for federal employers to provide employees with written statements of benefits upon dismissal.
In particular, employees subject to Part III of the CLC will be entitled to receive 3 weeks notice or pay in lieu of notice of termination without cause upon completing 3 years of continuous service. Moreover, such employees will also be entitled to receive an additional week of notice or pay in lieu of notice for each additional year of service that they complete, up to a maximum of 8 weeks notice or pay in lieu.
However, it is important to note that these notice entitlements will only apply where an employee was not dismissed for cause. Moreover, non-managerial employees subject to the CLC who have completed at least 1 year of service are protected from being dismissed without cause in most circumstances, such that they can generally only be dismissed for cause, but there are exceptions to this. In particular, such employees can still be dismissed without cause where it is due to a lack of work or a discontinuance of function, even where they have completed at least one year of service. Ultimately, this means that the new entitlements that are being introduced by the amendments discussed above will only apply to non-managerial employees in limited circumstances, but they will apply to managerial employees who are subject to the CLC and who have at least 3 years of service in most circumstances.
Additionally, the amendments to the CLC that will come into effect on February 1, 2024 will also require federally regulated employers to provide employees with written statements of benefits upon dismissal. This statement of benefits must outline the employees rights to vacation benefits, wages, severance pay, and any other benefits and pay arising from their employment.
The Bottom Line
The amendments discussed above will have significant implications for federally- regulated employers beyond making it more expensive to dismiss employees in certain circumstances and requiring them to provide written benefit statements to employees upon dismissal. In particular, many termination clauses contained in employment contracts could be rendered legally unenforceable once the amendments come into effect. This is because termination clauses must provide employees with at least their minimum entitlements under employment standards legislation in all foreseeable circumstances or they will not be enforced by the courts.
If their contracts become legally unenforceable, federally-regulated employers could become liable for common law notice or pay in lieu of notice upon termination (which is significantly greater than the statutory minimums). Given that employees can be entitled to up to 24 months of reasonable notice under the common law, or even more in exceptional circumstances, impacted employers should strongly consider having their employment agreements reviewed and updated as necessary. By doing so, such employers can greatly reduce their potential liability where it is necessary to terminate an employee without cause.
If you have any questions regarding the amendments discussed above, or if you would like assistance with updating your employment contracts or ending an employment relationship with minimal liability, please do not hesitate to contact us for expert legal advice and guidance.
