Upcoming CLC Changes Impose New Obligations on Employers
Amendments to the Canada Labour Code (the “Code”) that first received royal assent on December 13, 2018, with a to-be-determined coming into force date,[1] are now slated to soon come into force – imposing new obligations on federally regulated employers in the process.
On February 1, 2024, changes to the Code come into effect that will expand the amount of working notice, or payment in lieu of notice, an employer must provide to an employee on a "without cause" termination. The upcoming Code amendments will also require that federally regulated employers provide employees with a written benefits statement upon termination.
Expanded Termination Notice Requirements
As of February 1, 2024, federally regulated employers will be required to comply with new graduated individual notice of termination requirements under a revised section 230, wherein employee entitlements to termination notice will increase based on the employee’s continuous length of service.
Currently, under section 230(1) of the Code, employees with three consecutive months or more of continuous employment are entitled to 2 weeks’ notice (or payment in lieu) upon being terminated on a without cause basis.
Once the new provisions come into effect, this termination notice period will increase to 3 weeks after at least 3 consecutive years of continuous employment, continuing to increase by 1 week for every additional year of employment completed thereafter, before capping off at a maximum of 8 weeks:
As previously, any combination of notice or wages in lieu of notice will remain permissible, provided the resultant overall notice period equates to, at least, the statutory minimum number of weeks enumerated above.
These amendments have no retroactive application; employers who provide notice prior to February 1, 2024 will not be required to adhere to the new provisions.
The expansion of termination notice entitlements under the Code will also not impinge on an employee's concurrent entitlement to severance pay.[2]
Practical Impact
Though the expanded termination notice period requirements appear significant, and bring the Code’s individual notice of termination provisions closer to those of provincial employment standards legislation, their application may be relatively limited in practice due to other employee rights that must be taken into account.
For instance, the Code’s “unjust dismissal” provisions prohibit terminations without cause, unless the employee in question: 1) has less than 12 months of service; 2) is a manager; or 3) is terminated for lack of work or discontinuance of a function. However, employees with less than 12 months service will have access to no greater entitlements under the new provision than under the current one – remaining entitled to 2 weeks’ notice.
Furthermore, the Code’s "group termination" provisions already require employers to provide 16 weeks’ notice to any employee terminated as one of 50 or more in any four-week period. As such, employees terminated for lack of work or discontinuance of a function as part of a larger downsizing/business closure affecting 50+ employees, are already entitled to 16 weeks notice – far surpassing the new statutory minimums.
Likewise, employment contracts for managerial employees often already provide for greater termination entitlements than those guaranteed by the Code revisions – meaning the new notice requirements will be relevant only to the subset of managers lacking contractual entitlements to greater termination benefits.
As they apply only to those employees who do not qualify for unjust dismissal, group termination, or greater contractual rights, the expanded notice requirements will consequently, generally have no impact on most legitimate terminations without cause.
Benefits Statement
The upcoming Code changes will also require federally regulated employers to provide terminated employees with a written statement delineating their vacation benefits, wages, severance pay, and any other benefits and pay arising from their employment.
The statutory deadline for providing employees with this statement hinges on whether the employee received working notice, pay in lieu, or a combination thereof:
if working notice is provided, the employee must receive the statement “as soon as possible,” but no later than 2 weeks before the termination date;
if pay in lieu of notice is provided, the employee must receive the statement no later than the date of the termination; and
if a combination of notice and payment in lieu of notice is provided, the employee must receive the statement “as soon as possible,” but no later than 2 weeks before the termination date, unless the period of notice is shorter, in which case, not later than the date of termination.
As a statement of benefits is already required by section 213(2) in the context of group terminations, this amendment aims to equalize the applicable requirements for both group and individual terminations of employment under the Code.
Takeaways & Next Steps
Employers should implement procedures that will reliably ensure that terminated employees receive a statement of benefits within the statutorily mandated time period. Similarly, any internal notice-calculating systems utilized by employers should be updated in timely fashion to ensure the seamless provision of proper notice upon the amendments' coming into force.
Federally regulated employers in common law jurisdictions should also take care to review their employment contracts for Code compliance well in advance of February 1, 2024. Otherwise, termination clauses that provide employees with less than statutory notice will, as of that date, no longer comply with the Code – and thus be rendered unenforceable.
This is an important risk for employers in common law jurisdictions to be attuned to, as in cases of valid without-cause terminations, employees are entitled to "reasonable notice" under common law in addition to statutory notice under the Code. While access to reasonable notice of termination may be contractually limited by a termination clause, such limits are enforceable only if the termination clause is Code-compliant. Employers should therefore consult with counsel to make timely revisions where necessary.
[1] Budget Implementation Act, 2018, No. 2, SC 2018, c. 27.
[2] Under section 235 of the Code, employees who have completed 12 consecutive months of continuous employment are entitled to severance pay, in addition to termination notice or pay in lieu, for the greater of:
(a) 2 days wages at the employee’s regular rate of wages for his regular hours of work in respect of each completed year of employment that is within the term of the employee’s continuous employment by the employer, and
(b) 5 days wages at the employee’s regular rate of wages for his regular hours of work.