Seniority of Employee Still Relevant Despite Signing Release

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In a recent decision, Antchipalovskaia v. Guestlogix Inc., 2022 ONCA 454, the Ontario Court of Appeal was presented with an appeal from a motion judge’s decision where a terminated employee was awarded 12 months’ reasonable notice for dismissal without cause. While a 12-month award is not in itself unusual, it is the circumstances surrounding the termination that make this case worthy of comment.

Facts

The employee was hired by the employer in 2011 as a Senior Business Analyst. The parties signed a written employment agreement at the time and the employee continued to be employed by the employer until 2016. In February 2016, the employer underwent insolvency and obtained creditor protection under the Companies’ Creditors Arrangement Act (CCAA). During the course of the proceedings, the employer agreed to a CCAA plan which specified that any claims against the employer need to be released, and this included claims by employees.

In implementing the plan, the employee’s employment was terminated in 2016 and she was immediately rehired by the employer. The employer then provided the employee with a letter notifying her of her status as a creditor under the CCAA plan. The employee submitted proof of her claim to termination pay to the plan administrator and was paid 72% of her claim as an unsecured creditor.

The employee then continued to work for the employer for nearly three more years until her employment was terminated without cause in June 2019.

Upon termination, the employee brought an action against the employer claiming common law notice. The motion judge agreed that the employee was entitled to common law noticed based on the entirety of her service from 2011 to 2019 and awarded 12 months as the reasonable notice, less the amount she was provided under the CCAA plan.

Court of Appeal Decision

The employer appealed the decision of the motion judge. The employer argued that only the employee’s period of employment following the employee’s rehiring in 2016 should be considered. The Court of Appeal disagreed with the employer and found that the employee’s period of employment prior to the termination and re-hiring could be considered.

While the Court of Appeal determined that the motion judge erred by not giving regard to the release that the employee signed under the CCAA Plan, it also did not agree with the employer’s suggestion that 4 months was a reasonable period of notice. The employer received a benefit from the employee’s prior experience working for the same employer. In particular, the employee continued in her position without the need for additional training, no recruiting costs were incurred, and the employee’s years of experience working for the employer were of a significant benefit compared to what the employer could expect from a new hire.  

The Court of Appeal found that the correct amount of notice in the circumstance is 7 months, varying the motion judge’s 12-month reasonable notice determination.

Takeaways

Despite obtaining a release from the employee, the employer in this circumstance was not successful in arguing that a period of employment prior to the creditor protection process should be disregarded. This decision follows an earlier decision by the Court of Appeal in Manthadi v. ASCO Manufacturing, 2020 ONCA 485, which came to a similar conclusion in different circumstances.

The implicants for employers are particularly clear in a purchase of business scenario. Employers entering purchase agreements should consider the seniority of employees even if those employees sign away their previous employment related claims. A termination following a purchase may be pricier than the employer expects if they do not take this seniority into account. Enforceable contracts should also be signed, as one of the issues in the matter at hand was the lack of an enforceable termination clause.

Outside of the purchase scenario, employers may from time to time encounter an interruption in an employee’s period of employment with the company. Whether this sort of interruption will lead to a court concluding that the two periods of service require contextual and fact-specific review.

At Bridge Legal & HR Solutions, we provide expertise for employers of all sizes. Call us today at (647) 794-5442 for all your employment law and workplace investigation needs.

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