Cash crunch no excuse for cut severance for axed employees, court rules

Villanova school in King City, Ont., employed three teachers on a series of one-year contracts but did not renew those contracts after 2012.

An employer's cash shortage is no reason to short-change a wrongfully dismissed employee, Ontario's top court ruled Monday.

The ruling overturns a decision by a lower court judge in a case involving three teachers who worked for Villanova College — referred to in court documents as St. Thomas of Villanova Catholic School —in King City, Ont.

"An employer's financial circumstances may well be the reason for terminating a contract of employment (but) are not relevant to the determination of reasonable notice in a particular case," the Appeal Court ruled.

"They justify neither a reduction in the notice period in bad times, nor an increase when times are good."

The school had employed the teachers on a series of one-year contracts. One of them had taught there for 13 years; another for about 11 years; and the last for eight years.

In May 2013, the school told them their contracts would not be renewed on the basis that enrolment for the following academic year would be falling.

The school argued they were not entitled to any notice because they had been employed on fixed-term contracts. The teachers sued for wrongful dismissal.

In January, Superior Court Justice Thomas Lederer found the teachers had, in fact, been employed for indefinite periods and were therefore entitled to reasonable notice. However, Lederer cut the 12-month notice period proposed by the teachers to six months on the basis of the school's financial situation.

"If notice for 12 months is reasonable, the school will have to pay the same amount for these teachers as if they had remained on staff for the year that was upcoming," Lederer decided. "It is not difficult to see that the school would be unable to reduce its prospective deficit by terminating staff it did not need."

In their appeal, the teachers also argued the judge was wrong to justify the shorter notice period by concluding they could have found work elsewhere within six months of losing their jobs.

The Appeal Court agreed on that score as well, saying Lederer had no basis to decide about alternative employment.

"It is a matter of speculation and is inconsistent with his conclusion that the appellants took all reasonable steps to mitigate their damages," the top court ruled. "It does not support the decision to reduce the notice period."

In its ruling, the Appeal Court raised the notice period to 12 months. It also ordered the school to pay $68,573 in costs to the teachers for their initial court battle — significantly more than what Lederer had awarded on the grounds the school had protracted the legal fight — and another $10,000 for the appeal.


  • A previous version of this story said the school was located in LaSalle, Ont. In fact, the school is in King City, Ont.
    Nov 24, 2015 1:24 PM ET