In September 2022, the Ontario Court of Appeal in Pavlov v. The New Zealand and Australian Lamb Company Limited (“Pavlov“) confirmed that an employer may be liable for a longer notice period, even for a short-term employee, based on prevailing economic factors beyond the parties’ control. In this case, it was COVID-19.

Background

Phillip Pavlov was hired by The New Zealand and Australian Lamb Company Limited (“NZAL Co.”) as their Director of Marketing and Communication on June 12, 2017. Pavlov’s employment was terminated on May 28, 2020. As a result, Pavlov brought an action for damages for alleged wrongful dismissal. Given that NZAL Co. did not argue that this was a termination for just cause, which would not have required notice, the main issue centred around the reasonable notice period, or pay in lieu thereof, that Pavlov was entitled to.

At trial, the judge turned to the well-established Bardal factors to determine the length of reasonable notice, including the age of the employee, character of employment, length of service, and availability of similar employment. In the Court’s analysis, it considered that Pavlov was forty-seven years old at the time of termination, had only served a short term of approximately three years in his position, and although his position was a senior role, he was not a corporate director or an officer. Nevertheless, the Court emphasized the “prevailing economic uncertainties” of COVID-19 which had a negative impact on Pavlov’s ability to secure similar alternative employment. As a result of these circumstances, the Court determined that Pavlov was entitled to ten months’ reasonable notice of termination, and consequently pay in lieu thereof, as opposed to the three to five months offered by NZAL Co. The Court also rejected NZAL Co.’s argument that Pavlov failed to mitigate his damages by not seeking adequate employment. On the contrary, Pavlov gave evidence accepted by the Court demonstrating that he applied to over 100 jobs for which he was qualified, but remained unemployed at the time of trial. Finally, the Court found that Pavlov was eligible for his annual bonus and benefits that he would have earned during his notice period.

On appeal, NZAL Co. challenged the following: (1) the trial judge’s application of the Bardal factors in determining the notice period; (2) Pavlov’s entitlement to his annual bonus during the notice period; and (3) the costs awarded to Pavlov in the amount of $50,000. In response, the Ontario Court of Appeal found that the lower court made no error in its analysis or conclusions and ordered NZAL Co. to pay an additional $24,000 in costs.

Key Takeaways

Employers are not in the clear from the effects of COVID-19. When considering termination, Pavlov serves as a reminder to employers about the additional liabilities they may have to their employees. In fact, as stated in the lower court and affirmed by the Ontario Court of Appeal, it should have been known by NZAL Co. at the time of Pavlov’s dismissal that the effects and uncertainties of the COVID-19 pandemic were obstacles to Pavlov’s efforts to obtain alternate employment.

Pavlov‘s emphasis on considering the “prevailing economic uncertainties” when conducting the Bardal analysis can likely extend to present day, in light of the current shift in the economic climate and potential recession. To help navigate the anticipated workforce changes and mitigate risks in the process, you can check out our recent 3-part video series on Reductions in Force.

Many thanks to Eloise Somera for her assistance with this blog.