When it comes to Ontario workplace law, there are many common employment law misconceptions – both among employees and employers. While many believe they understand their rights and obligations, the truth often lies far from these common assumptions. In reality, courts have repeatedly debunked several employment myths that continue to circulate in the workplace.
As any experienced employment lawyer in Toronto will tell you, failing to understand the actual legal landscape can lead to costly consequences, especially when it comes to wrongful dismissal claims, constructive dismissal claims,, severance package reviews, and employment contract disputes.
In this employment law blog, we break down some of the top employment law myths that courts have dismissed – and what you really need to know to protect your rights or your business.
Misconception 1: It’s Always Better to have an Employment Contract
For employees, it’s usually better not to sign an employment contract, since it is usually one-sided to benefit the employer. For instance, employers will include restrictions on an employee’s rights and entitlements, such as:
- termination clause that limits an employee’s financial compensation (termination pay and severance pay) when the employer terminations their job to only the minimum entitlements under the Ontario Employment Standards Act, 2000.
- non-solicitation clause that restricts an employee’s ability to solicit the employer’s customers or employees after their employment ends.
- intellectual property clause that transfers an employee’s legal rights to ownership over work products or inventions, such as copyrights.
- restrictions on an employee’s ability to earn and be paid bonus pay or commission pay, especially upon termination of employment.
As may be obvious from the above, what’s true for an employee is not true for employers: for the above reasons, it is usually better for employers to have employees sign employment contract.
Misconception 2: Employees Can Be Fired Within the First 3 Months Based on Probation
Many employers (and even some employees) believe that the first 3 month of employment serve as a “probationary period” during which workers can be terminated without notice or severance.
In reality, the belief is only true if the employment contract explicitly defines and outlines a probationary period – and even then, employment law requires an employer to comply with duty of good faith and fair dealing when dealing with the employee. For example, this means the employer provides the employee with a fair chance to prove themselves capable of performing the job requirements.
Additionally, the courts have ruled that unless an employment contract includes a well-drafted probation clause that complies with Ontario’s Employment Standards Act, employees are still entitled to reasonable notice or pay in lieu of notice under common law (severance package) if their employment is terminated.
Therefore, probation is not automatic under Ontario employment law. If a severance package review lawyer examines an employment contract and finds no enforceable probation clause, employers may be required to pay full termination entitlements – even if the employee has only been on the job for a short time.
Misconception 3: “Financial Difficulties Reduce Severance Obligations”
Some companies believe that if they are experiencing financial hardship – such as downsizing or nearing bankruptcy – they can reduce or avoid paying full severance to terminated employees.
Ontario courts have firmly rejected this notion. An employee’s entitlement to a severance package is based on whether they have signed an employment contract with a valid termination clause setting out their termination entitlements. Otherwise, an employee’s length of service, position, age, and availability of similar employment, not the company’s financial status. For example, in one case, the court made the following observation:
“The defendant submitted that the notice period should be reduced on account of the fact that he had modest earnings over the years he employed the plaintiff. I do not agree. As a matter of law ability to pay is generally not a factor to be considered in assessing damages for breach of contract.”
In another case, the court in Michela v. St. Thomas of Villanova Catholic School, 2015 ONCA 801 (CanLII) dealt squarely with the issue of whether an employer’s financial difficulties is a relevant consideration in determining the period of reasonable notice. The Court held that, in wrongful dismissal cases, not concerned with the financial circumstances of an employer. Specifically, it held that:
“It suffices to say that the character of the employment, like the other Bardal factors, is concerned with the circumstances of the wrongfully dismissed employee. It is not concerned with the circumstances of the employer. An employer’s financial circumstances may well be the reason for terminating a contract of employment – the event that gives rise to the employee’s right to reasonable notice. But an employer’s financial circumstances are not relevant to the determination of reasonable notice in a particular case: they justify neither a reduction in the notice period in bad times nor an increase when times are good.“
This myth often leads to wrongful dismissal claims, as employees seek help from a wrongful dismissal lawyer to obtain their full entitlements.
The bottom line: an employer’s financial situation does not affect an employee’s legal right to severance. If you’re unsure about your entitlements, a severance package review lawyer can help clarify your rights and maximize your compensation.
For many employers, termination of employment is a difficult and confusing time, especially when it comes to drafting severance packages. Therefore, in a wrongful termination of employment, it is important for employers to consult with an experienced Ontario employment lawyer for a severance package review to understand the impact of wrongful dismissal on pension plans. If you are an employer or employee needing to speak with an experienced Ontario wrongful dismissal lawyer to discuss your options and next steps on how to deal with workplace issues, call Bune Law, employment law firm in Toronto. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.