Employment / Labour Law
The employer – employee relationship is governed by the Labour Relations Act (LRA) for unionized workers and the Employment Standards Act (ESA) for non-unionized workers. Employment law generally refers to the area of law dealing with non-unionized workplaces, while Labour law generally refers to the area of law dealing with unionized workplaces.
When you are terminated without notice you have two possible theories of recovery: 1. The common law remedy of wrongful dismissal, or 2. ESA Notice plus severance if certain conditions are met (please refers to the severance section for more detail).
Wrongful dismissal discussion here only applies to non-unionized working environment. In unionized environments, collective agreements provide for employees’ rights and responsibilities, and union workers’ concerns are to be addressed through their unions and the grievance processes in place. Most importantly, if you think you might have an action for wrongful dismissal, you are well advised to contact a lawyer immediately to prevent you from statutory barred from doing so, by waiting for too long before acting on it.
Termination Without Cause
When dismissing an employee without cause, the employer may generally elect between providing “working notice” to the employee or ending the working relationship immediately by paying compensation “in lieu” of notice equivalent to the pay and benefits the employee would have earned during the required notice period.
The compensation an employer is required to pay is based on the salary, benefits and bonuses the employee would have received during the period of reasonable notice that the employee ought to have received from the employer prior to termination. Where an employer fails to provide such compensation or seeks to provide inadequate compensation, an employee’s legal rights may be enforced by proceeding with a claim for compensation for wrongful dismissal.
Please note that a claim of wrongful dismissal might be available to an employee terminated during probation. Unless the employment contract specifies otherwise, probationary status enables an employee to be terminated without notice during the probationary period ONLY if the employer makes a good faith determination that the employee is unsuitable for permanent employment, and provided the employee was given a fair and reasonable opportunity to demonstrate their suitability.
What is “Reasonable Notice?”
The Bardal factors are usually what’s being used to determine reasonable notice. The basic factors established by the courts for determining reasonable notice are “the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant”. The list, however, is not exhaustive. Employers have routinely attempted to limit notice periods in the employment contracts, they are usually unenforceable unless they comply with the Employment Standards Act and other employment law obligations. Reasonable notice is a very fact driven determination. However, absent exceptional circumstances, the courts have generally applied an upper limit of 24 months.
What is "Just Cause"?
Much of the protection against wrongful dismissal stems from termination without cause, because employment may properly be terminated for cause without notice.
It is an uphill battle under Ontario employment law for employers to prove “just cause” for termination of employment.
Generally, where an employer has concerns based on an employee’s performance or even misconduct, the employer must warn or advise the employee of the specific concerns, and that the employer must further provide reasonable opportunity to the employee to change. It is only if no improvement or change is demonstrated after a prolonged period and the presentation of repeated warnings, usually in written form, will an employer be considered whether grounds present for a termination with “just cause”. Since it’s a factual driven determination, preservation of evidence is key in establishing a “just cause” termination.
However, in rare circumstances of gross misconduct, “just cause” termination can be established much easily. This is especially so if the employee has engaged in activities that are actionable in courts. Examples of such circumstances could include misappropriation of company funds, criminal fraud, a significant breach of client/ customer confidentiality, etc…
However, even if the termination without cause was without reasonable notice, under Ontario employment law, a terminated employee is required to make reasonable and diligent effort to mitigate, seeking re-employment. In wrongful dismissal actions, damages may be reduced if such efforts are not proven. Reasonable re-employment options are not limited to job-searching efforts. The test is whether reasonable, consistent and active ongoing steps have been taken to move toward a return to the workforce on a reasonable basis. For instance, returning to school or starting a new business have been held to be reasonable mitigation. For this reason, as an employee contemplating a wrongful dismissal action, it is crucial to keep a comprehensive record of job search and other reasonable efforts to mitigate damage.
Do note that, however, the Supreme Court of Canada in Waksdale v. Swegon North America Inc., 2021 CanLII 1109 (SCC) has indirectly affirmed the Ontario Court of Appeal's position that termination provisions should not be analyzed independently but as a whole, and the illegality of one voids the other, even if the unenforceable clause is not at issue . So absent a stipulation in the employment contract that termination for just cause would only be invoked in the extreme cases where wilful misconduct on the part of the employee had been committed, it's very likely the entire section regarding termination (involving both termination at will and termination for just cause) will be invalidated by Court. In fact, several recent cases has already applied Waksdale in their legal analyses, see e.g. Sewell v. Provincial Fruit Co. Limited, 2020 ONSC 440.
Remedies for Wrongful Dismissal
The remedy for wrongful dismissal is an award of damages equal to the earnings (salary, commissions, bonuses, and other monetary allowances) and other contractual entitlements (benefits) that the employee would have received during the appropriate notice period, subject to certain deductions such as mitigation earnings.
In addition, employers may be held accountable for mental distress damages caused by “bad faith” conducts of the employers in related to the termination provided that the employee suffers actual provable psychological harm and medical injury. Extended or consequential economic losses flowing from the failure to provide proper notice have also been awarded if these were within the parties’ reasonable contemplation when entering the contract. Punitive damages may also be awarded in exceptional cases where the employer’s conduct constitutes a marked departure from ordinary standards of decency, and that compensatory damages are insufficient to express society’s repugnance at the conduct and to punish and deter.
If you think you have been wrongfully dismissed, or if you are an employer being served with a statement of claim for wrongful dismissal, you are highly recommended to seek legal advice. HTW Law can help. Call us now at 647-849-6582 or send us a message if you have some legal questions / inquiries or want to schedule an appointment with HTW Law.