How Do You Calculate Wrongful Dismissal Damages?
In Ontario, an employee is considered “wrongfully dismissed” (or wrongfully terminated) if their employer fires them without providing them with prior notice of termination, or severance pay compensation. Put simply, there is nothing “wrongful” about an employer firing an employee from their job. What make it a wrongful dismissal is the employer not fulfilling their obligation to provide an employee with a severance package consisting of notice of termination (or severance pay compensation) as a result of terminating the employment contract.
As a result, unless an employment contract has a termination clause that restricts an employee’s entitlement to receive notice of termination or severance pay compensation, an employee is entitled to common law reasonable notice (or pay in lieu of notice) upon termination without cause. If an employer fails to provide the employee with enough notice (or pay in place of notice), they may be forced by a court to provide the employee with wrongful dismissal damages. So, what are wrongful dismissal damages and how do the courts calculate wrongful dismissal damages when determining the appropriate amount the employee is owed?
Minimum Standards of Notice of Termination or Termination Pay
As a bare minimum, the Ontario Employment Standards Act, 2000 requires an employer to provide an employee with the following amounts of notice of termination (or termination pay):
| Period of employment | Notice required |
|---|---|
| Less than 1 year | 1 week |
| 1 year but less than 3 years | 2 weeks |
| 3 years but less than 4 years | 3 weeks |
| 4 years but less than 5 years | 4 weeks |
| 5 years but less than 6 years | 5 weeks |
| 6 years but less than 7 years | 6 weeks |
| 7 years but less than 8 years | 7 weeks |
| 8 years or more | 8 weeks |
It is important to note that an employee’s severance pay entitlements are limited to only the above minimum amounts if they have signed an employment contract agreeing to give up their common law right to reasonable notice of termination (or pay in lieu of notice).
Employee Common Law Rights are Greater than ESA Minimums Entitlements
In other words, the rules under the Employment Standards Act, 2000 about termination and severance of employment are only minimum requirements. In fact, many employees may have rights under common law that are greater than the rights to notice of termination (or termination pay) and severance pay under the Employment Standards Act, 2000.
As a result, if an employee has never limited their termination entitlements to the minimums, he or she may want to sue their former employer in court for wrongful dismissal. In deciding such cases, a court would consider a few relevant circumstances to determine how much an employee is entitled to be paid by their employer as a result of a termination without cause (these are called “wrongful dismissal damages”).
Some factors the Courts commonly consider to calculate an employee’s wrongful dismissal damages based on common law reasonable notice include but are not limited to:
- Age
- Salary
- Years of service (generally speaking, the longer the duration of employment, the longer the reasonable notice period) (Bullen v. Proctor & Redfern Ltd.).
- Character of employment (e.g., employees working in senior management or highly skilled occupation are generally entitled to a longer notice period, while employees working in lower-rank or unspecialized occupations are entitled to a short notice period) (Cronk v. Canadian General Insurance Co.).
- Pregnancy (Nahum v. Honeycomb Hospitality Inc.)
- Education
- Inducement
- Disability
- Economic conditions impacting the labour market (e.g., as a downturn in the economy or in a particular industry or sector of the economy that indicate that an employee may have difficulty finding another position may justify a longer notice period) (Paquette v. TeraGo Networks).
The court’s approach to calculating an employee’s wrongful dismissal damages (or severance package) is very fact-specific and can vary depending on each case. The point is for a court to reasonably estimate how long it would take for that employee to secure comparable alternate employment. As one court put it:
“The determination of a reasonable notice period is a principled art and not a mathematical science…
Determining the period of reasonable notice is an art not a science. In each case trial judges must weigh and balance a catalogue of relevant factors. No two cases are identical; and ordinarily, there is no “right” figure for reasonable notice. Instead, most cases yield a range of reasonableness.”
The approach to determining an employees wrongful dismissal damages is flexible, and each case will turn on its own particular facts. The weight to be given each factor will vary according to the circumstances of each case and what a judge considers are of particular importance. Contrary to a common misconception, there is no such thing as a rule of thumb (such as “one-month-per-year”).
Generally speaking, a longer notice period will be justified for older long-term employees, who may be at a competitive disadvantage in securing new employment because of their age. In one case, the Court held:
“Barring specific skills, it is generally known that persons over 45 have more difficulty finding work than others. They do not have the flexibility of the young, a disadvantage often accentuated by the fact that the latter are frequently more recently trained in the more modern skills. Their difficulty is also influenced by the fact that many in that age range are paid more and will generally serve a shorter period of employment than the young, a factor that is affected not only by the desire of many older people to retire but by retirement policies both in the private and public sectors.”
The courts have been clear that no one factor is to be given more consideration than others, but in practice, certain factors generally warrant greater notice relative to other factors in a given situation, particularly an employee’s age and years of service.
There are general guidelines about how the courts may decide how much an employee is entitled to receive in wrongful dismissal damages (or a severance package) upon termination of employment. As every case depends on its own unique facts, an employee should immediately consult an employment lawyer upon the termination of their employment to determine their entitlements.
Wrongful Dismissal Lawyer
If you are an employer facing a wrongful dismissal claim, or an employee who believes that you were wrongfully dismissed from your employment, our experienced employment lawyer at Bune Law, Employment Law Firm in Toronto, can help you immediately. Contact us by phone toll-free at 647-822-5492, or fill out at the contact form on the side. Our employment law firm would be happy to assist.
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