In the employment law blogosphere, there is much chatter about whether the COVID-19 pandemic extends periods of reasonable notice. As a lawyer who represents employees and employers, I’ve been thinking a lot about it and reading up on the top blogs. A lot of employment counsel surmise that much like notice periods generally, it will come down to the judge and where his/her sympathies lie. In short, no one really knows.
On a recent, physically distant, walk with my 20-month-old, it occurred to me that the law may have already provided an answer, albeit 166 years go. To understand the impact of COVID-19 on notice periods, employment lawyers may have to go back, WAY back, to 1L Contracts to figure out how to assess damages due to COVID-19: the rule in Hadley v Baxendale.
In Hadley, Mr. Hadley ran a mill. The mill’s crankshaft broke and he contracted with Baxendale to take the shaft away, repair it, and return it. Baxendale returned it a week late, causing Mr. Hadley to lose a week of production. Mr. Hadley sued for the week’s lost profits. Baxendale said he had no idea that holding onto the crankshaft would result in lost profits, therefore Mr. Hadley’s damages were too remote. The Court of Exchequer dismissed the claim. Mr. Hadley had not informed Baxendale about the consequences of the delay, therefore the damages were not reasonably foreseeable at the time of formation of the contract.
What do mills, crankshafts, and Her Majesty’s Exchequer have to do with COVID-19 and wrongful dismissal actions in 2020? Hadley stands for the common law proposition that plaintiffs can only recover losses which are reasonably foreseeable, or within the contemplation of the parties, at the time of the formation of the contract. Losses which are not reasonably foreseeable at the time of formation of the contract are deemed remote and not recoverable in law.
In employment law, breach of the employment contract gives rise to reasonably foreseeable damages; this is the legendary notice period. That notice period goes up or down according to circumstances which are reasonably foreseeable at the time of contracting (age, length of service, disability, pregnancy, specialization, etc.). In my view, the question is whether COVID-19 was reasonably foreseeable when the employment contract was made. Modern society has not dealt with a pandemic since 1918. Applying Hadley, unless the contract was made in early 2020 when the world learned of the outbreak in Wuhan, it was not reasonably foreseeable, therefore any additional damages incurred as a result of the pandemic are remote and not recoverable in law. While practically speaking, the notice period is assessed in light of the circumstances at the time of dismissal, I say those circumstances still have to be reasonably foreseeable at the time of hire. If this pandemic was not reasonably foreseeable at the time of the formation of the contract, additional notice may not be recoverable.
To be clear, I do not know how courts will grapple with this issue. I think that if Courts accept that “no one saw COVID-19 coming”, the notice period has to be fixed using the fabled Bardal factors and long-held dicta of assessing damages in contract (i.e. Hadley).
Time will tell how Courts deal with this issue.
This blog post was written by Nigel McKechnie, a member of our Employment Law team. Nigel can be reached at 613-369-0382 or at nigel.mckechnie@mannlawyers.com.
