When speaking with clients they often do not know what constitutes wrongful dismissal in Ontario. This is because many people falsely believe that a wrongful dismissal is when an employee is dismissed without a valid reason. When we advise clients what a wrongful dismissal is it often surprises them.

A wrongful dismissal is when an employee is terminated or dismissed and not provided reasonable notice.

Please note: This article is for non-unionized employees who are not Federally employed. There are different statutory rights for Federal employees. 

It comes as a surprise to most employees that they can be dismissed for just about any reason or lack thereof. You can be the best employee in the entire company and still be dismissed just because your manager does not like you.

You cannot be dismissed for a prohibited ground of discrimination under the Human Rights Code. This includes being dismissed for your age, ancestry, citizenship, colour, creed, disability, ethnic origin, family status, marital status, race, receipt of public assistance, place of origin, sex or sexual orientation. You also cannot be dismissed as a reprisal in some circumstances.

If you are illegally dismissed, then you may have further recourse including claims for human rights damages and seeking reinstatement.

A wrongful dismissal is when one of the following two things occur:

• An employer dismisses or terminates an employee without cause and fails to provide the employee reasonable notice.
• An employer terminates an employee for cause without providing reasonable notice in a situation where the employer did not legally have just cause to dismiss the employee.

Note: It is rare for employers to legally be able to dismiss an employee for cause. If you have been dismissed for cause you should still contact an employment lawyer.

Notice refers to the amount of time you are legally entitled to be paid for when you have been dismissed. For simplicity, 6 months notice = 6 months pay though there are some things that may be included / excluded.

There are two types of notice which an employer may provide an employee.

• Working notice
• Pay in lieu of notice

Working notice is what it sounds like. Your employer can advise you that you will be terminated at some specific date in the future and that you are to continue working until that date.

As an employee you cannot refuse to work and demand pay in lieu of notice except in limited circumstances. Typically, such circumstances would only arise where the relationship has broken down so far that working notice is simply not reasonable.

Employees are entitled to pay in lieu of notice when the employer wishes to terminate their employment. The amount the employee is to be paid is based on the reasonable notice period. Pay in lieu of notice begins when you are no longer working for your employer. Working notice by comparison is when you are still working for your employer.

An employer may provide you either one or combination of each of these. A common scenario that occurs is where an employer provides an employee working notice, but the working notice falls short of the reasonable notice period.  The employee may seek the difference as pay in lieu of notice / termination pay.

As an example, lets assume your reasonable notice period is 8 months. Your employer provides you 3 months working notice. If your employer does not also provide you 5 months pay in lieu of notice, then you will have been wrongfully dismissed. This is because you were not provided the 8 months of reasonable notice that you were legally entitled to.

For many people this is a difficult term to grasp. The Employment Standards Act (hereinafter “ESA”) provides statutory reasonable notice. While the common law (decisions made by judges) provides common law reasonable notice.

Statutory reasonable notice represents your minimum entitlements of notice. Employers will often try to make you think this represents your actual notice entitlements. In the vast majority of cases your actual entitlement to notice is significantly higher at common law.

Do not make the mistake of accepting a termination / severance package prior to seeing a lawyer. You cannot accept a severance package or pursue statutory notice through filing a claim with the Ministry of Labour and then afterwards seek common law notice. It should be viewed as you get one or the other. 

It is important to understand why employers are legally obligated to provide notice. The idea is that people are to be paid notice to bridge the gap while they seek new employment. The ESA only provides you the minimum entitlements. In most cases these minimums are insufficient to bridge the gap while you seek new employment. This is especially magnified in short term employees.

Judges understand that people take months or years not weeks to find new employment. As a result of this they have stepped in and said the amounts provided by statute are too low in almost all circumstances.

Common law refers to decisions made by Judges. At common law most employees are entitled to 10’s of thousands of dollars more than the minimums provided by the ESA. Long term / older and more senior employees are often owed 100’s of thousands of dollars more in common law then under the ESA.

Employers will usually offer you a severance package or termination package that is close to the minimums under the ESA. In the vast majority of dismissals, the severance package or termination package offered will constitute a wrongful dismissal. This is because the employer almost always fails to provide the employee reasonable notice at common law.

Do not make the ill-advised mistake of signing a severance package or termination package and thinking afterwards you can pursue a claim for wrongful dismissal. If you sign away your rights, you most likely will be precluded from successfully proceeding with a wrongful dismissal claim.

The truth is because they can. Your employer is likely playing the numbers game. They know that the vast majority of employees will sign away their legal entitlements. Think about it from a cost perspective.

QZY Electronics is going to terminate 10 employees over the course of a few years. They know that perhaps 9 of those employees will sign away their rights for close to the statutory minimums. The employer will likely have saved 100’s of thousands of dollars.

• Fight the wrongful dismissal all the way through to Trial. The problem with this strategy is that employers are usually unsuccessful at Trial and the loser pays a portion of the winners’ costs at either a partial or substantial indemnity basis typically. So now not only do they have to pay out the common law reasonable notice, they must pay their own lawyer and usually some portion of the employee’s legal accounts. Additionally, the employer runs the risk that the decision is published online.

• See whether the wrongfully dismissed employee will give up or take a more modest amount. The employer will likely recognize that the wrongfully dismissed employee is facing a large loss of income and still has bills to pay. As a result, the assumption by the employer will often be that the employee cannot afford to fight the matter. For that reason, we offer deferred fees to our wrongfully dismissed clients where practical.

• Settle the matter relatively quickly as the employer recognizes that in most cases it will cost them less money overall.

The chances of having to go to trial in a wrongful dismissal matter are low. Different studies provide different numbers regarding the chance of going to Trial. The studies tend to agree that in Ontario over 90 percent of matters never make it to Trial.

The Department of Justice suggests that 98 percent of civil suits never make it to Trial. Keep in mind that these numbers include incredibly complex litigation where it is not clear who is at fault. A wrongful dismissal claim is typically straightforward where the employee is dismissed without cause.

It is usually in both sides best interests to not have the matter go to trial and become public record.

When a settlement is entered into both parties receive the benefit of closure. An additional advantage for the Employer is that they will likely have the Employee sign a release / non-disclosure. For the employee they are provided funds during a difficult time and avoid a stressful trial.

In addition, some employees may be entitled to statutory severance pay. Severance pay is 1 week of pay for every year worked and accounts for partial years. Section 64 and Section 65 of the Employment Standards Act deal with severance pay.

You are entitled to severance pay if you have worked for your employer for at least 5 years and you meet one of the two following conditions:

• Your termination occurred due to the closing of all or part of your Employer’s business and at least 50 employees were terminated within 6 months due to this. OR
• Your employer has a payroll of at least $2.5 million.

Most terminated employees will be looking to the second provision to qualify for severance. Case law has varied on how payroll is to be calculated in terms of the $2.5 million minimum. The 2018 decision in Doug Hawkes v. Max Aicher (North America) Limited, 2018 CanLII 125999 (ON LRB) provides that payroll is only to be calculated based on the business’s Ontario payroll. The reasoning is given at paragraph 25 of the decision. 

It should be noted that there are separate mass layoff severance requirements.

Example 1: Bill works 11.5 years at a ZYZ Trucking before being dismissed without cause. The company has an Ontario payroll of over $2.5 million. Bill is entitled to reasonable notice termination pay of 8 Weeks (the maximum) and 11.5 weeks of severance pay. Bill is therefore entitled to a total of 19.5 weeks pay.

Example 2: Chris works 4.5 years at TYZ Electronics. The company has an Ontario payroll over $2.5 million. Chris is entitled to 4 weeks reasonable notice. He does not qualify for statutory severance pay as he has not worked 5 years for the company.

Example 3:  John works 7 years and 9 months at XTY Plumbing. The company has a payroll of under $2.5 million and has not closed a division of the company or let go 50 employees in a 6-month period. John is entitled to 7 weeks reasonable notice. He is not entitled to statutory severance pay despite having worked over 5 years with the company. The company must have a $2.5 million payroll or have closed a part of the company in which at least 50 employees were terminated within a 6-month period. As neither of those occurred John is not entitled to statutory severance pay.

If your employer has failed to provide you statutory reasonable notice you can file a claim with the Ministry of Labour. WE STRONGLY RECOMMEND AGAINST DOING THIS. The Ministry of Labour will only assist you in obtaining your minimum entitlements.

The ESA provides that you must be paid your statutory termination pay and severance pay by the later of the following dates:

·         Your next regular pay day

·         7 Days after termination

Employers can seek different terms of payment in the following ways:

·         An agreement in writing with the employee.

·         Applying to the Director of Employment Standards at the Ministry of Labour. (This will require the Director’s approval.)

If you file a claim with the Ministry of Labour you will be giving away your ability to pursue common law notice which will in most cases be 10’s of thousands dollars more than statutory notice. If you have made the mistake of filing a claim with the Ministry of Labour you typically have 2 weeks to withdraw the claim from the date of filing.

The leading case on common law notice is the 1960 decision in Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC)

This case set out what are referred to as the Bardal Factors. These factors are used to calculate the amount of reasonable notice. It should be noted that unlike in statutory notice there is no scientific method of calculation for common law reasonable notice. The Bardal Factors are as follows:

• Character of the Employment
• Age of the Employee
• Length of Employment
• Availability of Similar Employment

The reasoning in Bardal was followed in the 2011 Ontario Court of Appeal decision of Di Tomaso v. Crown Metal Packaging Canada LP, 2011 ONCA 469 (CanLII)

In order to determine the reasonable notice period, it requires a balancing of the four factors. Keep in mind that these factors are not balanced at 25% each. The calculation of reasonable notice at common law is not done using an equation. Employers and Employees usually rely on a wrongful dismissal database containing prior cases with similar circumstances to assist in determining the reasonable notice period.

The higher the position of the employee, the longer it will take to find a comparable position. This means that an Executive based on this factor should be entitled to a longer notice period than a clerical worker. This factor has been declining in importance.

The older the employee, the harder it will be for them to obtain comparable employment. A 30-year-old with a long career ahead of them will typically have a much easier time finding comparable employment then a 62-year-old.

A longer length of employment typically leads to a longer reasonable notice period. This is slightly misleading with that said. Reasonable notice is normally capped at 24 months. As a result, an employee of 25 years may receive less than a month per year worked in termination pay.

Short term employees are disproportionately rewarded in terms of length of the reasonable notice period. This is because the courts recognize that even a short-term employee is not going to easily find a comparable job in a few weeks. As a result, short term employees often receive months of termination pay per year of service.

There are a lot more jobs available for Receptionists than Chief Investment Officers at Fortune 500 companies. Courts have recognized this issue and provide longer notice periods for employees that have less similar employment opportunities available.

Typically, it will include your entire compensation package including salary, bonuses, benefits, car allowances, commissions etc. As a simple example lets assume Bob is entitled to 12 months common law notice. He made $75,000 in salary, $35,000 in bonuses and had a $6,000 a year car allowance. Bob would then be entitled to approximately $116,000 in compensation. 

Employees are generally entitled to be paid bonus payment(s) that are nondiscretionary and form an integral part of the employee’s compensation package for their entire notice period. This includes cases where the bonus would not have been payable until after the notice period ended. The Ontario Court of Appeal in Andros v. Colliers Macaulay Nicolls Inc., 2019 ONCA 679 (CanLII) made it clear that bonuses should be prorated for the notice period in these situations.

With clear and unambiguous language in an employment contract, it is possible for an employer to limit your bonus entitlement. This occurred Kielb v. National Money Mart Company, 2017 ONCA 356 (CanLII) in which the clause limiting bonuses was as follows:

“For example, if your employment is terminated, with or without cause, on the day before the day on which a bonus would otherwise have been paid, you hereby waive any claim to that bonus or any portion thereof. In the event that your employment is terminated without cause, and a bonus would ordinarily be paid after the expiration of the statutory notice period, you hereby waive any claim to that bonus or any portion thereof.”

Employers and employees can enter an Employment Agreement that limits the employee’s common law entitlement to reasonable notice. The clause(s) or term(s) cannot provide the employee less than the statutory minimums.

If clause(s) or term(s) provide the employee less than statutory minimums, then the Court will likely strike it out. This allows the employee to then be entitled to common law notice which in most cases will be significantly more. Additionally, the clause(s) and terms must be unambiguous and clear to be found valid.

Any time you receive an Employment Agreement you should meet with an Employment Lawyer. The Employment Lawyer can help you review the contract and advise you on key terms that you should try to have changed prior to signing. It is a lot easier and less expensive to deal with the matter ahead of time then after you have been dismissed.

• Inducement: An employee who is induced to leave a company for another may be entitled to a longer notice period. This is because they are sacrificing some of their entitlements. As an example, if you are induced to join a company and let go a year later but spent 17 years with your prior employer it will be arguable that the reasonable notice period should include your previous employment. This is relevant as an employee with 18 years of service will be entitled to a significantly longer reasonable notice period than an employee with 1 year of service.
• Unfounded Just Cause Allegations: The courts may award punitive damages in this situation.
• Bad Faith in the Manner of Dismissal: This encompasses a wide range of issues including untruthful conduct, harassment, humiliation, causing mental distress etc. The Courts may award moral damages.
• Non-Compete Agreements: It may be harder for you to find work due to a non-compete agreement.
• Failure to Mitigate: If an employee fails to mitigate their damages then the reasonable notice period may be reduced. The employee should actively be trying to seek employment after being dismissed.

There is a misconception that at common law people are entitled to 1 month of notice per year worked. For some employees it will be significantly more than this amount and for others it will be less.

Many employees are concerned about two things:

1)      That their subsequent employer(s) will find out about the wrongful dismissal claim.

2)      That they will no longer be able to get a letter of reference.

Very few cases end up going to Trial and there is a low chance that there would be public disclosure relating to an existing proceeding online. While proceedings are public record it is highly unlikely a potential employer would conduct a search for a claim involving you. Additionally, that would only be relevant if a Wrongful Dismissal Claim is issued with the courts. Many cases settle without ever requiring a Claim to be filed.

It is in the employer’s best interest that the settlement and dispute remain confidential. The employer does not want other employees to find out about your dispute and the amount they had to pay you. For this reason, typically terms of settlement will include a nondisclosure agreement by both parties.

In the rare circumstance that a future employer finds out about the dispute, you were only seeking your legal entitlements. An employer should not hold this against you.

As part of a settlement agreement an employer will usually be willing to provide a letter of reference.

Aside from Quebec, Judges rely on common law decisions made in each of the provinces. With that said when it comes to wrongful dismissal different provinces have different statutes. The Employment Standards Act is an Ontario statute. As a result, from province to province your statutory rights will differ.

Additionally, decisions made by courts in provinces outside of Ontario are not binding on Ontario Judges. As a result, there may be some differences in common law precedents depending on what province you were employed.

There is a 2-year limitation period to seek a claim for wrongful dismissal.

You should hire an employment lawyer for wrongful dismissal advice. Do not make the mistake of relying on what your friend, neighbour and family members tell you. The public perception of legal entitlements relating to a dismissal is far from reality. This is made evident by the overwhelming amount of people who sign severance and termination agreements which cost them 10’s of thousands of dollars. All to often this happens because they relied on the advice of someone that was not a wrongful dismissal lawyer.