Ontario Wrongful Dismissal Claims in Ontario Employment Law
In the recent Ontario court case involving a wrongful dismissal claim Jimmy How Tein Fat v. PRGX Canada Corp., 2023 ONSC 6374, the court ruled on many employment law issues that commonly arise in wrongful dismissal claims and therefore provides a useful guide to the leading legal precedents.
What is a Summary Judgment Motion and When is it Appropriate?
As this wrongful dismissal dispute case illustrates, the courts will agree to resolve a wrongful dismissal claim in a motion for summary judgment if there is “no genuine issue requiring a trial”, including:
- there are no credibility issues that are required to be resolved through a full trial
- there are no factual issues that would be assisted by a full trial to make a determination, such as with witnesses
- the parties have called all the evidence they intend to call for evidence to prove their respective cases
- the employment law dispute largely how Ontario employment law is to be applied to the facts and any inferences drawn from those facts
- a judge is able to resolve the dispute by applying the facts to the relevant law (e.g., was there a wrongful dismissal in this case? Is the termination clause in the employment contract valid? Did the employee comply with their duty to mitigate their wrongful dismissal damages)?
- there is no benefit to requiring the parties to endure delays and costs of a trial
If these factors are met, the court will likely conclude in favour of resolving the wrongful dismissal claim (or any other workplace dispute) by way of a summary judgment motion, because it can reach a fair and just resolution of the matters in dispute without a trial.
How Employment Lawyers Calculate an Employee’s Base Salary for a Severance Package Negotiation or Ontario Wrongful Dismissal Claim
When it comes to determining how to determine an employee’s annual salary for severance pay calculations, the courts will use an employee’s annual merit increases. So, in this case, the court took into account the employee’s most recent base salary after his merit increase, which resulted in an amount of $413,753.60 (which is what the court used to calculate the salary over the 24 months reasonable notice period).
In reaching this conclusion, the court disagreed with the employer’s calculation of a four-year average because, historically, the employee’s annual base salary increased. Since there was no evidence to suggest that the employee’s base salary would go down during the wrongful dismissal notice period. In such circumstances, taking a four-year average would unnecessarily reduce the salary component of his wrongful dismissal damages for the notice period.
How to Calculate Bonus Pay for Severance Packages and Wrongful Dismissal Claims?
When assessing an employee’s entitlement to bonus pay, the court applied the Supreme Court of Canada test in Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26, which involves answering two main questions:
(1) would the employee have been entitled to the bonus or benefit as part of their compensation during the reasonable notice period? and
(2) if so, do the terms of the employment contract or bonus plan unambiguously take away or limit that common law right?
In this case, the court concluded that, but for the employee’s wrongful termination, he was entitled to a bonus in 2022 and there was no evidence that he would not be similarly entitled to a bonus in 2023:
“These bonuses are calculable and paid based on the company and division performance, rather than the individual’s performance. As to the second question, I do not read the plan documents as unambiguously removing the entitlement to a bonus during the notice period. The limiting language of the plan refers to a requirement that the plaintiff be employed. For example, in Status Change & Termination, it refers to circumstances where “your employment ends for any reason, whether with or without cause” (emphasis added) and in the definitions of Earned Bonus and Eligible Participants the limiting language refers to an employee who “is employed”. In my view, this language does not deny the plaintiff his entitlement to a bonus. During the notice period, the employee is treated as employed for purposes of compensation. He is not treated as if the “employment ends”. This is very much like the argument in Matthews which was rejected. In Matthews, the particular provision at issue stated as follows:
Reiterating the Supreme Court’s words, this court held that this provision was not sufficient to oust the common law right to damages. Phrases requiring an employee to be “full-time” or “active” were also not sufficient to remove an employee’s common law right to damages. The reason for this was stated by Justice Kaiser as follows:
“Yet, it bears repeating that, for the purpose of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires. So, even if the clause had expressly referred to an unlawful termination, in my view, this too would not unambiguously alter the employee’s common law entitlement.”
As a result, the court concluded that the employer’s bonus plan do not exclude the wrongfully dismissed employee’s entitlement to a bonus during the common law reasonable notice period. For purposes of compensation in lieu of notice, the employee “is employed” and his employment is not at an “end”. Rather, he is to be treated as an employee during the common law reasonable notice period and that includes payment of the bonus.
Employee’s Duty to Mitigate
For this important issue of an employee’s duty to mitigate (which often comes up for Ontario employment lawyers resolving workplace disputes), the court emphasized that the onus is on the employer to establish that the wrongfully dismissed employee failed to:
(i) to take reasonable steps to search for a job, and
(ii) that a job comparable to the job lost by the employee could have been found
In concluding the employer was unable to successfully prove the employee failed to mitigate his wrongful dismissal damages, the court summarize the law as follows:
“Ultimately, mitigation is a two-part test. The second part of the test requires PGRX to establish that Mr. How could have found comparable employment. As stated in Lake the issue is “whether the [the employer ] had proven that, if reasonable steps in mitigation had been taken by the [employee], she would have found a comparable position during the reasonable notice period” (at para 34). PGRX has led no evidence that a comparable job was available with any of the competitors at any time since Mr. How’s termination. PGRX clearly knows the players in the industry and, if comparable jobs were available in the industry, that evidence could have been called. Moreover, there was no evidence adduced by PGRX of any comparable jobs suitable for Mr. How since his termination. The onus was on PGRX to establish both prongs of the test. Regardless of whether Mr. How acted reasonably or not at the outset of his search, the defendant has failed to establish that he could have obtained a comparable job had he conducted the search as proposed by PGRX.”
Call an Ontario Wrongful Dismissal Claim Lawyer
If you are an employee in Ontario who believes you have a wrongful dismissal claim (or a constructive dismissal claim), please contact our Toronto wrongful dismissal claim lawyer to arrange a confidential consultation to review and better understand your employee rights and options, including pursuing a human rights claim while you negotiate your severance package. We are here to protect your employee rights and best interests. With our detailed employment contract review with an Ontario employment lawyer, you can invest in your future by protecting your rights if you are ever terminated from your employment, including to ensure you receive a fair severance package, deal with a wrongful dismissal claims or constructive dismissal claims.