Common Law Notice: A Complete Guide for Canadian Employers

The purpose of common law notice is to give employees who are let go the time they need to find a new job. Depending on numerous factors, a judge can decide that this is several weeks, months, or even years.  

In Canada, employers may be liable for common law notice if employees are terminated without an enforceable termination clause in their employment contract.   

Terminations can already be a difficult area for employers to navigate, and ensuring you handle them in compliance with the law will help protect your business from wrongful dismissal claims. For these reasons, it is important that employers are educated on the difference between statutory law and common law, what constitutes common law notice, and when it is applicable.   

What does “common law” mean? 

While statutory law is law legislated by the government, common law is judge-made law that is created over years and years of decisions by the courts.   

What is the history of common law?  

Common law originated over 150 years ago in the British courts. In 1154, King Henry II introduced a unified system of laws which were meant to be common to all the subjects in his realm. To enforce these laws, Henry appointed judges who resolved disputes on an ad-hoc basis, which were recorded and later used to guide future decisions—also known as the rule of precedence.   

Fast forward to the 1800s, and the concept of a one-year contract was introduced in the British Agricultural revolution, requiring a notice length equal to the period of the remaining contract. As the legal system has evolved over time, one-year contracts have been replaced with contracts with no end date. Today, most employees in Canada are employed under indefinite employment contracts.   

In 1960, a groundbreaking case for determining criteria for common law notice was set out under the Ontario High Court of Justice in Bardal v. The Globe & Mail Ltd.  The case established that each case needed to be addressed individually, with factors such as length of employment, the employee’s age, character of employment, and availability of similar employment in regard to the training and qualification of the employee.   

What is common law notice? 

While there are always exceptions, generally speaking when an employee is terminated there are two sources of entitlements: statutory ones under the Employment Standards Act, 2000 (ESA) or common law entitlements. 

Employees access common law entitlements by starting a legal action against the employer, asking a judge to decide how much is owed to the employee. 

Depending on numerous factors, this can be measured in weeks, months or even years. 

While entitlements under the ESA cannot be contracted out of, the right to seek common law entitlements can be contracted out of, which is what employment contracts do. 

Having strong, well-written employment contracts  can save employers thousands of dollars each year, alongside avoiding time and money spent on legal actions which can be avoided altogether. 

When is an employee entitled to common law notice?  

With some exceptions, generally all Canadian employees are entitled to common law notice of termination of employment unless an employment contract has an enforceable termination clause. In the instance that the employee does not have an employment contract, or has an employment contract without a termination clause, or has a contract with a termination 
clause that is unenforceable, they will be entitled to seek common law notice. 

How long is common law notice?  

Common law notice is calculated based on several factors including: 

• Length of service 

• Age of the employee 

• Position or job function 

• Availability of similar employment opportunities 

In this case, an employee might be entitled to far more than the statutory minimums, which can be financially detrimental to an employer’s business.   

In Canada, the maximum amount of common law notice is typically 24 months. However, the Courts have the discretion to increase past the 24-month threshold.   

Exceptions to this rule include an employee who:   

• Terminates their own employment  
• Is dismissed for a just cause   
• Is on a lay-off that does not constitute a termination of employment   
• Completes a contract that stipulates an end date  

Is common law notice the same for employers across Canada?  

Although each province slightly differs in statutory notice, each province relies on the Bardal Factors when determining a terminated employee’s reasonable notice period. It is important to check the employment standards legislation in the province you operate in or where your employee resides.   

What about common law notice for federally regulated employees?  

Federally regulated employees fall under the Canada Labour Code instead of a provincial employment standard legislation, but otherwise common law entitlements remain the same. If the employee’s termination clause is unenforceable, they may still sue at common law.   

Which types of employees are not entitled to common law notice?  

Although most employees in Canada are entitled to common law notice, there are certain groups of employees who are not. This includes employees resigning, unionized employees, fixed-term contract employees, employees terminated “for cause”, those with enforceable termination clauses, and employees who have signed releases.  

Unionized employees  

Employees who are unionized generally cannot sue for wrongful dismissal, as their rights are governed by a collective bargaining agreement. That doesn’t mean they’re not still protected, they just have additional legislation governing them, specifically the Ontario Labour Relations Act, and their respective collective bargaining agreement 

Fixed-term contract employees  

Common law notice is not generally available to employees who have a fixed-term contract. Instead, if an employee has been dismissed in breach of contract of a fixed-term contract, they are usually entitled to the balance of their term.  

This amount can vastly differ, depending on how much time the employee has left in their contract. For example, an employee on a two-year contract who has been terminated after only one year will be owed one whole year’s pay, while one with only two months left will be entitled to a significantly lower amount.  

Employers who use fixed-term contracts should be cautious that continuously renewing fixed-term contracts may be at risk of a judge determining that the employment is on an indefinite term. Thus, allowing the employee to receive the entitlement of reasonable notice.   

Employees terminated “for cause” or wrongful dismissal  

Employees terminated under wrongful dismissal or “for cause” are not entitled to common law notice. Some examples include:  

• Breach of contract: If you violate any of the terms in your employee’s contract when you terminate an employee, it can be considered wrongful dismissal. An example is terminating an employee only verbally instead of in writing  
• Committing illegal acts: If you ask an employee to commit illegal acts, such as accepting cash payments to avoid taxes, employees have the right to refuse.  
• Discrimination: Terminating an employee based on their age, gender, disability, religion, or sexual preference is considered wrongful dismissal.  
• Harassment: If an employee was terminated or encouraged to quit for reporting a form of harassment (for example verbal or physical), they may have been wrongfully dismissed.  

Employees with enforceable contracts or who have signed releases  

Employment contracts with valid and enforceable termination clauses that limit the employee’s entitlement to only statutory notice are not entitled to common law notice. Moreover, employees who may have signed full and final releases are not generally entitled to common law notice.   

Do I have to contribute to the employee’s health benefits during the notice period?  

Whether an employer must provide health benefits during the notice period differs by each province. It is important to check the employment standards legislation in the province you operate in or where your employee resides.   

Under the ESA, employers in Ontario are required to continue all benefits during the statutory notice period on termination of employment. This includes all extended health and dental benefits that the employee had during their employment. In British Columbia, benefits typically terminate on the date of termination, unless extended by the employer.   

As for common law, employers have an obligation to continue the health benefits plan during the entirety of the notice period.  

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