Wrongfully Dismissed - or About to Be? An Introduction to the Law of Wrongful Dismissal
Termination of your employment can be highly disturbing and unsettling. The modern workplace is often an important cornerstone in one’s emotional and social well-being. Along with the financial upheaval and hardship that often flows from the loss of a job, an improper termination of employment may also be a source of great personal anxiety, discomfort and distress.
The law has long recognized the importance of protecting employees from arbitrary and unfair action by employers, and seeks to balance the difference in power between employer and employee by ensuring that employees’ basic rights are observed and that appropriate remedies and compensation are available to wrongfully dismissed employees.
The information below provides a general primer as to many of the typical concerns and questions our clients have when they consult us about employment law concerns in non-unionized workplaces. Legal advice, however, is required in any circumstance where your employment position has been terminated or where you believe your job may in be jeopardy.
If you have been wrongfully dismissed or have a serious concern regarding your employment, the employment lawyers at WISE LAW OFFICE may be consulted by telephone at (416) 972-1800 or by email without fee or obligation
Problems in the Workplace?
Certain signs may be telling you that something is not right at your workplace.
Each of these circumstances may foreshadow problems ahead. While there is no way of knowing exactly what the future will bring, it is possible to arm yourself with basic knowledge of your rights and entitlements, long before your concerns may regrettably be proven justified.
We hope that this article will be of assistance if you are having problems in your workplace.
We also stress the importance of obtaining qualified legal advice early. If a serious workplace problem appears to be looming, it can be very useful to consult with an Employment Lawyer. With legal advice and guidance, you can ensure you act most advantageously as your workplace issues develop.
Dismissal without cause
Most terminations of employment in Ontario are “without cause.” That means the employer has ended the employment even though there are no grounds or justification at law entitling termination with cause.
In non-unionized workplaces, Ontario employers generally do have the right to hire and fire employees as they see fit.
That discretion is subject only to observation of Ontario Human Rights Code and other, specific statutory restrictions, including certain aspects of workplace safety legislation.
Where an employer wishes to terminate employment, and no grounds exist for doing so, an employer is required to give reasonable notice of termination to an employee. Where reasonable notice is not given, an employer is required to provide reasonable compensation, including benefits, to the terminated employee in lieu of notice. 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.
Most wrongful dismissal claims can be resolved through negotiations. In some cases, however, Court action is required. Even where legal proceedings are commenced, many cases can be resolved at an early stage, before a Trial is required.
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.
Rather than immediate termination, an employer may provide adequate “working notice,” or notice to an employee that employment will terminate on a reasonable, fixed date in the future. In such circumstances, an employee’s entitlement upon termination may be restricted to statutory termination payment required under Employment Standards legislation. If reasonable “working notice” has been given, there will be no entitlement, of course, to pay in lieu of that notice.
Whether a “working notice” period is of deemed to be of reasonable duration will depend on a number of factors, including the employee’s length of service, age, education, position held, seniority, and likelihood of obtaining similar employment in the future. If the “working notice” was inadequate, a wrongful dismissal claim may still be proper.
Available remedies upon wrongful dismissal are:
Upon termination of employment without cause, an employer must, at a minimum, provide any statutory payments to the employee which are required under Employment Standards legislation. An employer must also deliver an accurate Record of Employment (R.O.E.) to the employee within five (5) days of termination.
An employee who has additional entitlements to notice, or pay in lieu of notice, may receive a “severance package” or proposal from an employer to pay additional compensation. Usually, an employer will require that a release be signed by the employee prior to payment of any further compensation.
Often, very short time-periods or deadlines are given for the employee to consider the employer’s proposal.
Legal advice is critical, where any such proposal has been advanced by the employer. It is essential prior to the execution of a release by the employee.
Often, such proposals are mere invitations by the employer to negotiate reasonable compensation terms. A much improved “severance package” will often be achieved through negotiations on your behalf by your lawyer.
Dismissal with cause
In very limited, rare circumstances, employment may properly be terminated for cause without any prior notice to the employee. In such cases, the terminated employee has no claim to compensation or severance.
It is very difficult 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 requiring attention, and the employer must further grant reasonable opportunity to the employee to remedy and improve performance or conduct in the areas of concern.
If no improvement or change is demonstrated after a prolonged period and the presentation of repeated warnings, usually in written form, an employer may consider whether grounds present for termination of employment with cause.
As well, in rare circumstances of gross misconduct, grounds may also present for immediate termination with cause. Examples of such circumstances could include serious theft or fraud, blatant and gross negligence, serious and intentional dereliction of employment duties, or fundamental breach of specific, critical term of an employment contract. Legal advice is required in assessing whether adequate grounds for termination with cause present in any such circumstance. If the circumstances do not justify lawful termination for cause, working notice or financial compensation must be provided to the employee if the position is to be terminated, even if performance has been unsatisfactory.
An employer may also, in some circumstances, have lawful grounds to take reasonable disciplinary steps, such as short suspensions to redress employee misconduct.
In short, it is difficult to establish just cause for termination in a court proceeding, unless written warnings have been provided and adequate opportunity for improvement has been provided. In most cases, reasonable notice is required.
Constructive Dismissal or Rightful Resignation
It is lawful, in extreme and difficult situations, for an employee to claim that an employment position has effectively come to an end, even where there has been no actual termination.
In such cases, an employee has been constructively dismissed, and may be entitled to resign while still maintaining all entitlements to compensation from the employer.
Constructive dismissal may occur where a unilateral and fundamental change is imposed by the employer on the duties or responsibilities of the employment, including the removal of important responsibilities and functions, so that the employee has effectively been demoted to a lesser position. Such constructive dismissal may occur even in the absence of a reduction in salary, compensation or benefits.
Constructive dismissal may also occur where continuation of the employment has reasonably become untenable to the employee due to persistent and serious harassment or discrimination, a major change in working conditions, location of employment or terms of employment, or a unilateral, reduction in the terms of compensation paid to the employee.
In such circumstances, an employee may have the right to treat the job as terminated, even where the employer has no specific intention to terminate or end the employment.
An employee who has been constructively dismissed has the same entitlements to salary in lieu of notice, statutory severance and termination payment, and such additional compensation which would have been available had he or she been dismissed without cause
Legal advice is essential prior to alleging constructive dismissal in any specific case. There is no “rule of thumb” as to when an employee has been constructively dismissed. A claim of constructive dismissal is not without risk, and should be made only after thorough consideration of the circumstances with a qualified employment lawyer.
How is “reasonable notice” determined?
The required amount of “reasonable notice” is determined on the individual facts of each case, based on factors including the terminated employee’s age, length of service and seniority, the nature of the employment position, and the circumstances of the employee’s hiring and termination.
The “classic” statement of factors to be considered in determining reasonable notice was made by Mr. Justice McRuer in the 1963 case of Bardal v. Globe and Mail Ltd.
There is no “rule of thumb” as to the calculation of notice entitlements upon a wrongful dismissal. Typically, an experienced, senior manager may be entitled notice in the range of one month of notice for each year of service. An entry level, junior employee’s entitlement may be somewhat reduced. In some cases, however, a short-term employment that ends preemptively may give rise to a considerable notice period that may even exceed the duration of the actual employment.
It is unusual for more than two years’ notice to be deemed reasonable, irrespective of the duration of employment, except in the most compelling of circumstances.
Inducement to leave stable prior employment
Inducement is another factor considered by the courts in determining the reasonable notice period for a wrongfully dismissed employee. An employee who is terminated without cause from a relatively new position after being induced to leave an earlier, stable position may be entitled to an extended notice period that includes consideration of the time employed in the prior position:
– Justice Iacobucci, Supreme Court of Canada, Wallace v. United Grain Growers Limited
For an inducement to affect the applicable period of reasonable notice, it must exceed the ordinary level of persuasion utilized by a typical, recruiting employer, and rise beyond the level of encouragement inherent in any ordinary hiring process.
A notice period may be increased where specific promises, beyond the ordinary, have been made by an employer or recruiter as to future career advancement, expected increases in responsibility, long-term job security and or higher compensation with the new organization, particularly if employment is terminated after a short period of time.
The representations of “headhunters” or professional recruiters on behalf of prospective employers may also be considered in determining whether inducement has been a factor.
In considering the notice period applicable, a court will enquire as to whether there was any inducement, what degree of inducement was exercised, and the degree to which the inducement influenced the employee’s decision to leave the prior employment position.
Where the employee has been actively looking for a new position, however, inducement may become a less compelling factor.
Similarly, in McCulloch v. IPlatform Inc., the Ontario Superior Court held that no inducement had occurred, even where employment was terminated after only four months, due to restructuring. In McCulloch, an employee had pursued a new position for significantly greater pay in the absence of specific promises from the employer regarding future prospects. Justice Echlin referred to the employee as a “willing seducee” and declined to extend the notice period on the basis of inducement.
Employment agreements often provide for a specified period of notice, or pay in lieu of notice, to be provided upon a termination of employment without cause. Upon a termination, it is necessary to determine at the outset whether any such agreement is applicable.
Employment agreements are not always legally enforceable. This is particularly the case with respect to employment agreements which are entered into after employment has already commenced, upon the employer’s insistence. Where an employment agreement includes any provision that purports to limit the employee’s notice or severance entitlements upon termination, it is essential to obtain immediate advice from a qualified employment lawyer.
Employment agreements that purport to limit severance entitlements may also be challenged following termination on the basis of ambiguity, unconscionability, or on the basis that they have become outdated due to position changes or promotions subsequent to the agreement.
Summary – Reasonable Notice
Many factors must be considered in arriving at a determination of the reasonable notice period applicable to a specific circumstance, and qualified legal advice is generally necessary to assist in this making this determination.
Compensation in Wrongful Dismissal Claims
Compensation in wrongful dismissal claims is determined with regard to the reasonable notice the employee was entitled to receive, but did not receive, upon termination. Reasonable notice is assessed with reference to an employee’s age, position, length of service, education, seniority and other relevant factors.
Depending on circumstances, in wrongful dismissal claims, damages are often calculated in the range of one month’s salary and benefits, in lieu of notice, for every year of an employee’s service, together with additional compensation for job-search expenses. In certain circumstances, reasonable notice can well exceed this range.
Damages may also be affected by the circumstances of hiring. As an example, damages may increase if an employee was, at the time of hiring, induced to vacate secure, long term employment in order to assume the new, ill-fated position.
If the conduct of the employer at the time of termination was grossly improper or in bad faith, a “reasonable notice” period may be extended and additional compensation may be awarded.
At WISE LAW OFFICE, we seek comprehensive compensation for our clients in wrongful dismissal claims, including:
Bad Faith by the Employer upon Termination
Canadian Courts regularly provide increased compensation to employees who have been wrongfully dismissed, where the employer’s conduct at the time of termination was in conducted in bad faith or dishonestly, in a manner that caused public embarrassment, or was otherwise callous, shocking, or in blatant disregard of the employee’s dignity and well-being.
In such cases, the Court will extend the period of notice applicable by a further, reasonable period of time. Below, you will find an excerpt from the leading Supreme Court of Canada decision on this issue.
The Employee’s Duty to Mitigate by Seeking Re-employment
Under Ontario Law, a terminated employee is required to make reasonable and diligent effort to secure re-employment after a dismissal. In wrongful dismissal actions, damages may be reduced if such efforts are not proven. The is duty to seek re-employment relates to the employee’s duty to mitigate damages.
The employer’s liability to pay damages for wrongful dismissal during a notice period is reduced by any income the employee receives (or ought to have received) during the notice period.
The duty to seek re-employment may be further complicated if an employment contract has been signed which contains a restrictive covenant such as a non-competition agreement or non-solicitation agreement. The enforceability of such agreements is often questionable, and advice is required from a qualified employment lawyer as to the limitations, if any imposed by such provisions.
If a terminated employee does not seek a new position, a Court can impute income to the employee, based on the amount the Court believes the employee would have earned, had a reasonable job search been undertaken. A Court may on that basis reduce or limit the notice monies payable by the employer.
Reasonable re-employment options are not limited to job-search. In certain circumstances, returning to school or starting a new business have been held to be reasonable mitigation, as well. The test seems to be whether reasonable, adequate and active steps have been taken to move toward a return to the workforce on a reasonable basis
As a result, in wrongful dismissal cases, Plaintiffs are almost always required to show evidence of their job search activity.
It is accordingly essential that complete records be maintained of all job-search activity following dismissal:
Employment Standards Legislation in Ontario
Wrongful dismissal claims are pursued by way of negotiation and through Ontario’s court system. An employee’s entitlement to damages for wrongful dismissal may greatly exceed the minimum benefits payable under the Employment Standards Act.
Minimum Statutory Benefits Payable under Ontario’s Employment Standards Act
Under the Act, these statutory minimum termination benefits are must be provided upon a termination without notice or cause:
Severance pay under the Ontario Employment Standards Act
In addition to statutory notice requirements, and the requirement of payment of salary in lieu of notice, Ontario employees in certain circumstances may be entitled to payment of Severance Pay, under the Act.
Severance pay must be provided to an employee who:
Statutory severance pay in these circumstances is approximately one further week of ordinary per year of service. The maximum severance entitlement under the Act is an amount equal to the employee’s regular wages for a regular work week for 26 weeks.
The statutory severance benefit is calculated specifically by multiplying the employee’s regular wages (excluding overtime) for a regular work week by the sum of:
Severance pay must be paid within seven days after termination of employment or on the next regular pay day, whichever is later, unless the employee agrees to a longer-term payment schedule.
Entitlements under common law for damages for wrongful dismissal may dramatically exceed the minimum statutory entitlements described in this section. We recommend that legal advice be obtained whenever a severance proposal is provided by an employer.
Other Provisions in the Employment Standards Act
The Act regulates and enforces many aspects of workplace law, including vacation and overtime pay, pregnancy and parental lave, Public Holiday entitlements and payroll issues.
The Employment Standards Information Centre may be reached at 416-326-7160 or toll- free at 1-800-531-5551, for further information.
The Ontario Human Rights Code
The Ontario Human Rights Code provides as follows
5. (1) Every person has a right to equal treatment with respect to employment without discrimination because of race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, age, record of offences, marital status, same-sex partnership status, family status or disability.
Harassment in employment
(2) Every person who is an employee has a right to freedom from harassment in the workplace by the employer or agent of the employer or by another employee because of race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, age, record of offences, marital status, same-sex partnership status, family status or disability.
The Code also provides for a process of dispute resolution and hearing by Tribunal in circumstances where its provisions are alleged to have been contravened in workplaces and elsewhere.
The Tribunal is empowered to make mandatory orders to require compliance with the Act. Orders may be made for reinstatement of employment where an employee has been terminated in contravention of the Code.
As well, the Tribunal may also make an Order requiring restitution, including monetary compensation, for loss arising out of Code infringement.
Where the infringement has been engaged in willfully or recklessly, monetary compensation may include an award, not exceeding $10,000.00, for damages for mental anguish.
Ontario Human Rights Code complaints generally must be commenced within six months of the offending actions.
The reader is expressly advised and cautioned to consult with a qualified Toronto Employment Lawyer or Wrongful Dismissal lawyer for advice regarding the reader’s specific circumstances. This information is not applicable to any specific case, and is intended for information purposes only. It is not a substitute for legal advice and may not be relied on as such.© 2007-2015, Garry J. Wise and Wise Law Office, Toronto, Ontario, Canada. This information may not be reproduced without consent in writing.