At Ascent Employment Law, we are committed to keeping you informed about important legal developments that can impact your business. Today, we want to shed light on a significant change coming to the law regarding federally-regulated employees in Canada, the Canada Labour Code (the “Code”).
The Code is being updated to increase the amount of notice of termination of employment or compensation in lieu of notice that employees are to entitled to receive if dismissed without cause.
The Shift: Modernization of the Canada Labour Code
After several years of anticipation, on June 1, 2023, the federal government took a momentous step by issuing an Order in Council (OIC), proclaiming that these amendments will come into force on February 1, 2024. This means that employers and employees alike need to be prepared for the changes that lie ahead.
Key Changes Explained
As of February 1, 2024, the current two-week notice period required under the Code will be replaced by a graduated notice system, resembling the one adopted by various Canadian provinces as set out in the following chart:
Period of Continuous Employment Notice Period
At least three months Two weeks
At least three years Three weeks
At least four years Four weeks
At least five years Five weeks
At least six years Six weeks
At least seven years Seven weeks
At least eight years or more Eight weeks
Here are the key points to understand
Notice Options: Employers must provide written notice of termination, or compensation in lieu of notice, at the employee’s regular wage for their regular hours of work. A combination of both notice and compensation can also be offered. It’s important to note that notice is not mandatory if an employee is dismissed for just cause.
Employee Statement: Within two weeks of the effective date of termination, employers must provide employees with a written statement comprehensively outlining the employee’s vacation benefits, wages, severance pay, and any other benefits and pay related to their employment up to the statement date. If the notice period is less than two weeks, the statement must be provided on the date notice of termination is given.
Severance Entitlements and Protections: The above changes do not alter employees’ severance entitlements under the Code, nor do they affect the safeguards provided by section 240 (“unjust dismissal”). As a reminder section 240 allows non-managers who have been employed for over 12 months to challenge their termination and seek reinstatement and/or damages for unjust dismissal. Remember, the Code exclusively applies to federally regulated employers, making up a minority of employers in Canada.
Preparing for the Transition
While these amendments are set to take effect on February 1, 2024, it’s crucial for federally regulated employers to proactively review their existing employment agreements and policies before that date and ensure that they are compliant with the changes. and align with the new minimum standards.
Employers must ensure their termination clauses meet the requirements of the newly established graduated system to avoid potential legal pitfalls.
The Importance of Compliance
Failure to update employment agreements to reflect the new standards could lead to unenforceable termination clauses. This, in turn, may expose employers to claims of reasonable notice of termination under common law. Such claims can carry significantly higher financial implications compared to statutory entitlements.
In light of these impending changes, we strongly recommend that federally regulated employers engage in a comprehensive review of their employment agreements well before February 1, 2024, to ensure compliance with the Code’s evolving regulations.