What Makes a Termination of Employment Wrongful?
While an employment relationship may be indefinite (no preset expiry date), an employer is not required to keep the employee working forever. In Ontario, employers are free to end an employee’s job at any time – and in two different ways: For Cause or Without Cause.
1. Dismissal for Cause
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- this is reserved for situations for serious employee misconduct – very rare and difficult for employers to justify
- typically, this results in the employee not receiving any prior notice of termination or pay in lieu (severance package)
- considered by judges to be the “capital punishment crime” of employment law
- may include serious issues of:
- insubordination (disobeying orders)
- inexcusable absenteeism and lateness
- misconduct (dishonesty, criminal acts, sexual harassment)
- incompetent work performance
- workplace harassment
2. Dismissal Without Cause
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- this allows an employer to terminate employment for any reason (or no reason at all) – but not for a discriminatory reason or as a reprisal (unlawful retaliation)
- the most common form of employee’s losing their job
- this entitles the employee to prior notice of termination or pay in lieu (severance package) – the issue is how much?
Reasonable Notice of Termination
Under common law rules, an employer has an “implied” obligation to provide an employee with prior notice of termination of the employment relationship – unless:
- Employer has “just cause” for immediate dismissal
- Employee and employer signed an employment contract with a valid termination clause that limits the employee’s notice of termination or pay in lieu of notice to the statutory minimum requirements under the Employment Standards Act, 2000
- The employment agreement is a fixed-term.
If none of these exceptions apply, the courts will imply an obligation on the employer to provide “reasonable notice” to the employee before termination of employment.
With that in mind, the general rule becomes:
Where there is no cause for the employee’s immediate dismissal OR the employer provides less notice than is agreed upon in an employment contract or under common law, the employee’s dismissal is said to be “wrongful.”
The general rule the courts use to determine “reasonable notice” under common law consists of evaluating each employee’s dismissal on a case-by-case basis, including factoring the following considerations:
- character and length of service (“what is the employee’s type of job and level of pay?”)
- the employee’s age (the older the employee, the more notice he or she is generally entitled to receive)
- years of service (the longer the employee worked for the same employer, the more notice they are generally entitled to receive)
- prospects for future employment (the more difficult to find a comparable position, the more notice the employee is entitled to receive)
When terminating employment, the employer can decide whether to give prior “working notice” or end the employment relationship immediately by providing the employee with compensation equivalent to the notice period (pay “in lieu” of working notice).
The employer’s choice to provide pay in lieu of notice (severance package) is intended to compensate for breach of the implied obligation to provide proper notice of termination under common law – and the specific amount of compensation is equal to the required length of working notice of termination the employer should have provided.
It is also important to note that, after a termination of employment, an employee has a duty to take such reasonable steps to replace their lost income by looking for and obtaining a comparable employment opportunity (read more here).
Contact Us
If you are an employer, you should speak with an employment lawyer to discuss your options before making the decision to terminate employment and obtain the proper termination documentation for your employee to avoid a wrongful dismissal claim.
If you are an employee who has been terminated with or without cause, it is important to seek legal advice even if you have a written employment agreement that appears to restrict your severance pay entitlements. You may be entitled to more generous severance compensation under common law.
No matter which side you are on, our employment lawyer is ready to assist with your case. Please feel free to reach out to Bune Law at 647-822-5492.
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