What Does My Employer Have to Pay When My Employment is Terminated?
In Ontario, an employer has various legal obligations when it decides to terminate an employee’s job. Most important among them is the obligation to provide the employee with a severance package. Generally, the only exception to having to provide an employee with severance pay is if the employee’s job is terminated for cause.
As discussed below, the term “just cause” for termination refers to serious misconduct sufficient to justify the employer dismissing an employee without prior notice of termination or severance pay. However, it is usually very hard for an employer to prove it had just cause for termination. As a result, most employees (but not all) will be entitled to receive a severance package upon termination of employment.
Termination of Employment
In Ontario, an employee’s job can generally be terminated by an employer in one of two different ways: (i) termination without cause, or (ii) termination for cause. What’s the difference between these terminations of employment?
Terminations for Cause
An employee whose job is terminated “for cause” – usually for serious misconduct, which may include incompetence/unsatisfactory performance, theft or dishonesty, workplace harassment – is not entitled to notice of dismissal or a severance package.
How do you know if an employer has cause to terminate an employee’s job? In Ontario, employment law has specific rules to determine whether an employer has cause for termination, which will always depend on the particular facts and circumstances of each case. Some of the main factors considered include:
- the nature and extent of the employee’s wrongdoing/misconduct
- the surrounding circumstances (e.g., nature of the employer’s business, employee’s job and responsibilities, employer’s policies and practices, etc.)
- employment legislation and past court decisions
- whether termination is warranted and proportional in the circumstances
Terminations Without Cause
An employee whose job is terminated “without cause” must first be given reasonable notice of their last day of work, or pay in lieu of notice of dismissal (a “severance package“).
When it comes to terminations without cause, Ontario employment law allows employers terminate an employee’s job at any time and for any legal reason. For example, an employer could terminate an employee’s job, regardless of the employee’s work performance or how long the employee was employed by the employer. In fact, an employer’s main obligation is to give the prior “working” notice of termination (where the employee works until their last day of employment), or pay the employee a “severance package” instead of giving them prior notice of termination. If the employer fails to meet its legal obligation to provide notice of termination or pay in lieu of notice, the employee may be able to pursue a wrongful dismissal lawsuit against the employer.
Since proving termination for cause is typically very hard for an employer, most employees in Ontario are let go “without cause,” which means they should generally be offered a severance package.
What’s Included in an Employee’s Severance Package?
When an employer terminates an employee’s job, they will generally provide them with a termination letter that offers them a severance payment, and ask them to sign a legal release in exchange.
The specific amount of severance pay compensation an employee is entitled to receive when their employment is terminated without cause, will always depend on the employee’s unique employment history with the employer. However, as a guiding principle, the courts have said that the employer’s responsibility upon termination is:
“to make the employee “whole” and to put her in the same economic position as she would have been if the [termination of employment] had not occurred”.
In other words, the employee must continue to receive all the compensation (including salary, health benefits coverage, sales commissions, bonuses and pension plan) that she would have earned if were still actively employed by the employer throughout the notice period.
While there is no specific formula or rule-of-thumb of “one month per year of service,”most employees whose job is terminated without cause are entitled to a notice period of either prior notice of termination, or pay in lieu of notice (a “severance package”). Regardless of how long an employee has worked for the employer, there is a “cap” on notice periods, and it is very rare for an employee to receive more than 24 months of compensation (even if they have worked for the employer longer than 24 years). Unless an employee has signed an employment contract that stipulates how much they will receive upon termination, the courts will consider a few different factors when calculating the dismissed employee’s severance package entitlements, including:
- age
- years of service with the employer
- character of employment (job title, duties and responsibilities, compensation level)
- availability of similar employment
A court will consider and balance all of these factors, as well as other factors that are relevant to the specific facts of each case (e.g., inducement, pregnancy or disability) to determine what severance package is fair and reasonable for the employee.
SEVERANCE PACKAGE NEGOTIATIONS
It is important for employees to have a severance package reviewed by an employment lawyer whose legal practice is focused on employment law, in order to ensure that the severance package offered is fair and reasonable for them.
In most cases, Bune Law is able to help employees reach an amicable severance package settlement with their former employer, without the need for a wrongful dismissal claim.
If you have have been terminated from your employment and are unsure how to respond to the dismissal, you may contact Bune Law to obtain an initial consultation to determine your rights, legal entitlements and options.
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