Upcoming Changes to Notice Entitlements under the Canada Labour Code

In most jurisdictions in Canada, employees who are dismissed without cause are entitled to notice or pay in lieu of notice (called Termination Pay in some provinces) which increases based on their years of service with their employer. The Canada Labour Code (the “CLC“), which impacts federally regulated employers and their employees, has long been an outlier to these common entitlements. Unlike other jurisdictions, the CLC entitles all employees (who have at least three months of service and who are dismissed without cause) with a flat two weeks of notice or pay in lieu of notice.

Graduated System for Calculating Notice Period

As of February 1, 2024, the two week notice period will be replaced with a graduated system similar to that existing in other jurisdictions in Canada. These new notice requirements will be as follows:

1. two weeks, if the employee has completed at least three consecutive months of continuous employment with the employer;
2. three weeks, if the employee has completed at least three consecutive years of continuous employment with the employer;
3. four weeks, if the employee has completed at least four consecutive years of continuous employment with the employer;
4. five weeks, if the employee has completed at least five consecutive years of continuous employment with the employer;
5. six weeks, if the employee has completed at least six consecutive years of continuous employment with the employer;
6. seven weeks, if the employee has completed at least seven consecutive years of continuous employment with the employer; and
7. eight weeks, if the employee has completed at least eight consecutive years of continuous employment with the employer.

It is open to an employer to provide an employee with notice, pay in lieu of notice, or a combination of both, to satisfy these entitlements.

Requirement for a Statement in Writing

In addition to the new notice provisions, an employer will also be required to provide an employee whose employment is terminated with a statement in writing that sets out the employee’s:

• vacation benefits,
• wages,
• severance pay, and
• any other benefits and pay arising from their employment with the employer as of the date of the statement.

This statement must be provided to employees:

• no later than two weeks before the effective date of termination, or
• if the notice period is shorter than two weeks or pay in lieu of notice is being provided, on the date notice of termination is provided to the employee.

Severance Pay Entitlement

The CLC currently also entitles employees who are dismissed without cause and who have completed one year of service to Severance Pay, equal to the greater of

1. two days wages at the employee’s regular rate for each completed year of employment with the employer, or
2. five days wages.

This entitlement will remain in place even after the changes noted above come into effect next year.

Existing Termination Clauses that Don’t Meet New Minimum Standards Will Become Unenforceable after February 1, 2024

To prepare for these upcoming changes, it is crucial that any federally regulated employers review their employment agreements as soon as possible to ensure that they meet these new minimum standards. A termination clause which provides an employee with less than these new entitlements after they come into effect on February 1, 2024, will not be enforceable. As a result, these employees would become entitled to potentially substantially greater entitlements at common law.

In light of these significant changes, any federally regulated employees who are dismissed after February 1, 2024, should consider obtaining legal advice from an employment lawyer before accepting any package being offered upon termination.