Wrongful Dismissal

When people are terminated from their employment they often think that they are entitled to nothing more than the one week of pay for each year of service which the Ontario Employment Standards Act allows to them. In actual fact, they are entitled to much more.

Courts are willing to give people who have been wrongfully dismissed what is called damages in lieu of notice. Basically, the court decides how much notice the person should have received before being terminated and then makes an award equal to the pay they would have received during that notice period.

For example, if a person had worked for a company for 12 years a court might decide that a reasonable notice period was 9 months. The court then calculates how much the person would have earned during the 9 months from the date of dismissal less any monies earned by way of a new job obtained during that notice period.

As a rough guide, it might be said that a court is willing to award one month for each year of service which is far in excess of the one week for each year of service which a person is guaranteed by the Employment Standards Act.

There is no hard and fast rule as to how much notice a court will award. This is because courts like to retain flexibility and tailor the award to each specific case using such factors as the age of the person, the position held, the years of service and any other factors which a court might think are relevant in a specific case.

There have been some significant cases recently from the court of appeal for Ontario which strengthen the rights of employees.

‎ In two cases last year the court made it clear that even where an employment contract says you have to be 'actively employed' at the time annual bonuses are paid or declared in order to be entitled to your annual bonus, you can still be entitled to receive your bonus if you were dismissed months earlier. That's great news for employees and long overdue.

Most recently the court has re-established that a contract will not exclude your right to receive generous common law reasonable notice if your employment is terminated without proper cause (often this reasonable notice entitlement equates to a month of pay for each year you worked there) unless the contract explicitly states you will only be entitled to Employment Standards Act severence, termination pay and also benefits for the statutory period (which is one week for each year you've been there up to a maximum of eight weeks).‎

Furthermore, if the contract tries to limit severence and termination pay to base income even though you would normally have been paid more (such as for commissions) then even if the contract is otherwise properly worded, it will be null and void and you will be entitled to full common law reasonable notice as described above.


LAYOFFS

A layoff of unreasonable duration will be considered as a dismissal in law so that the employee will be entitled to sue for damages based on their years of service with the company and the factors outlined above. In many employment situations, lay offs are not part of the employment contract and constitute wrongful dismissal.

THE DUTY TO MITIGATE

When a person is dismissed they have a duty to mitigate their damages which means that they must make efforts to ensure that their loss is minimized as much as possible.

This is done by taking positive steps to obtain new employment as soon as possible. For this purpose, a person should keep a written record of every prospective employer they contact and every resumé they send out and all other steps they take toward replacing their former income such as looking in the want ads and newspapers, going to the unemployment office, contacting an employment agency, going online, etc.

BONUSES, OVERTIME, AND BENEFITS

In calculating the amount of money that an employee would be entitled to a court will base it on the employee’s total income before dismissal, include bonuses earned as well as overtime pay if it is satisfied that such items were regularly part of the employee’s remuneration. If the employee had a health benefits package and if the employee incurs out of pocket expenses during the notice period for a trip to the dentist then the employee will be entitled to receive reimbursement for that expense to the extent that it would have been covered by the health benefits package.

SEVERANCE PACKAGES

It is not uncommon for employers to offer a settlement by way of a severance package so that the terminated employee receives a lump sum or payments to compensate them for the loss of their employment. Generally, when the economy is good these severance packages tend to be generous and when the economy is bad the severance packages tend to be poor.

It is standard for the employer to require the former employee to sign a Release. Some Releases contain restrictive covenants or non-competition clauses which prohibit the former employee from working in the same industry or in the geographical area for a set period of time, These really don’t belong in a release. Such restrictions are usually unfair and courts will not be inclined to enforce them unless they are fairly brief in duration and are reasonable enough to allow the former employee to continue to earn a livelihood.

TERMINATION FOR CAUSE

An employer does not need a reason to terminate an employee. Employers are free to do so for economic reasons or for any other reason other than one which would be considered a human rights violation such as termination based on race or gender or disability. It is clear from the above commentary that where an employer terminates an employee, the employee is entitled to damages in lieu of notice. However, where an employer terminates an employee for cause, that is because the employee has engaged in some sort of misconduct in the workplace, then the employer will not be obligated in law to pay the employee any sort of severance. For example, theft from the employer will almost always constitute grounds for termination for cause. Numerous other types of conduct can also constitute grounds for termination for cause depending on the severity of the circumstances and the impact of the behavior on the employment relationship.

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