Severance Packages During the COVID-19 Pandemic

It will take some time for the Plaintiffs claiming wrongful dismissal in the COVID-19 era to get to trial. So, we don’t know how the Courts in Alberta will assess the pandemic as a factor in determining the length of notice periods/size of severance awards. Will the unprecedented circumstances mean larger awards for employees who were unable to find jobs after being let go?

Or maybe they will work to benefit the employers, who may argue that the Act of God ought to excuse them from paying reasonable notice when they’re struggling just to stay afloat. Only time will tell.

As some form of a guide, it is perhaps useful to look at how the Courts in Alberta have assessed the impact of economic downtimes in the province on reasonable notice periods. The provincial economy entered a period of economic contraction when commodity prices plummeted in 2014.

It has never truly recovered from this. Shortly thereafter the oil price collapse, the Courts began referring to the downturn in wrongful dismissal cases.

Lederhouse v Vermilion Energy Inc

In Lederhouse v Vermilion Energy Inc, 2015 ABQB 387, both the employee and the employer referred to the economic downturn as bolstering their case. The Court went so far as to take “judicial notice” of the oil price collapse, meaning that it was so uncontroversial and well-known that it didn’t need to be formally led or established as evidence.

The employee argued that the downturn had limited her employment opportunities and meant she ought to receive a severance at the high end of the range. The employer argued the opposite – that it should not be punished for a faltering economy that is out of its control. The Court stopped short of actually expressing a view on which argument is accepted. That said, it did award 9 months of notice to an employee (a geologist) who had only been with the company for 2½ years, and it may reasonably be inferred that the economic downturn and dearth of employment opportunities got her into the very high end of the range.

Rice v Shell Global Solutions Canada Inc

In the more recent decision of Rice v Shell Global Solutions Canada Inc, 2019 ABQB 977, the Court expressly refers to the ongoing economic downturn in Alberta as one factor justifying a severance award at the high end of the range.

In Morrison v McCoy Brothers Group, [1987] 3 WWR 301 (ABQB), the Court took judicial notice of the economic downturn afflicting Alberta in the 1980s and weighed it as a factor that, if nothing else, would have made the Plaintiff’s job-hunting more difficult. This limited the employer’s ability to argue that Plaintiff hadn’t been reasonable in looking for or obtaining other work.

Morrison v McCoy Brothers Group

Employees who are let go due to COVID-19, the continuing woes in the oil industry, or a combination of those factors are likely and unfortunately (and depending on the industry) going to face greater difficulty finding alternate employment than they would in pre-2014 Alberta.

If you have any doubt as to the adequacy of a severance package proposed to you or a family member, it would be wise to at least keep in mind that the beleaguered economy may serve as a basis on which to argue for severance at the higher end of the reasonable range.