July 15, 2012
By Michael Thomas
Investment Guild

A recent decision issued by the Ontario Court of Appeal appears to have raised the cost of terminating employees.

The Court of Appeal recently reviewed the case of DiTomaso v. Crown Metal Packing Canada LP. DiTomaso had been employed with Crown Metal Packing for 33 years as a mechanic and press maintainer. Upon closing the facility, Crown Metal terminated his employment at age 64.

Dissatisfied with the notice of termination provided by Crown Metal, DiTomaso sued his employer for 24 months pay in lieu of notice. Crown Metal defended its actions by relying on the long established principle that non-managerial employees (and certainly unskilled employees) were not entitled to the same level of compensation in lieu of notice as managerial employees.

Two noteworthy findings were made by The Court of Appeal. It noted that the cap of 12 months’ notice for unskilled workers is no longer good law. It also rejected the principle that higher paid, more skilled employees are entitled to a longer notice period than lower paid, low-skilled employees.

Employers may no longer be able to rely on the principle that unskilled workers are treated differently than managerial employees and are subject to a cap of 12 months; and it is critical that employers ensure a properly drafted employment agreement incorporating a termination provision to all newly-hired employees.

By incorporating termination provisions, the issue of employee entitlement to compensation in lieu of reasonable notice is no longer relevant. In other words, termination provisions create certainty.