Economic downturns and terminations

The Civil Code of Quebec recognizes that an employer cannot terminate an employment contract without giving reasonable notice, unless there is a serious reason. 

Our courts have addressed the issue of what constitutes a “serious reason” on numerous occasions and always on a case-by-case basis. In the recent decision of CMP Advanced Mechanical Solutions Ltd. v. Snow, 2012 QCCA 1692 (CanLII), Justice Pierre J. Dalphond of the Quebec Court of Appeal confirmed to us what does not constitute a “serious reason” for dismissal without notice, within the meaning of article 2094 CCQ.

In this case, the employer sought to appeal a judgment of the Quebec Superior Court that ordered him to pay his former employee compensation in lieu of notice of termination. The parties were bound by an individual contract of employment with an indeterminate term.

The employee worked for the employer for over 17 years before the employer put an abrupt end to the contract. The employer argued that it was going through an unexpected economic hardship and thus had to terminate the employee, along with 37 others. He claimed that this was a reason serious enough to justify a termination without prior notice.

Justice Dalphond, however, did not retain the employer’s argument. He rather confirmed that, as supported by jurisprudence and doctrine, the financial situation of an employer does not constitute a serious reason, justifying termination without prior notice. Justice Dalphond went on to state that as the employee had a long-term working relationship with his former employer, he was entitled to a notice of a substantial length. After considering the relevant factors of article 2091 CCQ and the employee's duty to mitigate, Justice Dalphond decided that the evidence supported the Superior Court judge's award of a ten-month notice and dismissed the motion for leave to appeal. 

In these difficult times, this decision confirms that the employer's economic situation alone does not justify foregoing notice.  Employers must plan accordingly. While the Superior Court of Quebec has confirmed that the employer's economic situation can be one of many factors taken into account when determining what constitutes reasonable notice (Bernatchez c Commonwealth Plywood ltée, 2012 QCCS 2119 (CanLII)), it remains that the employer will not be successful in arguing that its financial difficulties alone are equivalent to a serious reason for termination without notice.

In collaboration with Melanie Josepovici, student at Norton Rose Canada LLP