Understanding Wrongful Dismissal in Ontario Employment Law
When it comes to Ontario employment law, the phrase “wrongful dismissal” is generally misunderstood. From a strictly legal perspective, it does not mean that an employer has no right to terminate an employee’s job, or that by terminating an employee’s job, the employer has acted improperly or inappropriately. Instead, when an employee is wrongfully dismissed, it means the employer did not fulfill their legal obligations to the employee in terms of advance notice of termination under common law.
What is a “Wrongful Dismissal”?
A wrongful dismissal occurs when an employer decides to terminate an employee’s job without cause but fails to give them prior reasonable notice of termination under common law, or payment in lieu of notice (often called a financial “severance package“). Alternatively, a wrongful dismissal can occur when an employer decides to terminate an employee alleging just cause for dismissal but is ultimately unable to justify their decision.
In the first scenario above – termination of employment without cause – the amount of “reasonable notice of termination” depends on a few factors. First, did the employee sign an employment contract with a termination clause limiting how much prior notice or severance pay the employee is entitled to receive? If so, then the employee would be limited to what is included in the employment contract they signed as long as it meets the minimum legal standards of the Ontario Employment Standards Act, 2000.
However, in most cases, there is no employment contract the employee has signed to give up their full severance entitlements under common law. In other cases, the employee has signed an employment contract but the termination provision is invalid or unenforceable. As a result, the employee is entitled to a larger financial severance package. In fact, these are some of the main reasons employment terminations in Ontario arise in wrongful dismissal or constructive dismissal claims where employment lawyers negotiate severance packages for employees. In these cases, the employee’s entitlements to a severance package will be determined based on an assessment of the following factors that courts have said will impact an employee’s ability to obtain similar new employment:
- employee’s age
- employee’s job
- employee’s length of service with the employer
- availability of similar employment
What Rights and Obligations do Employers Have in Ontario for Wrongful Dismissal Claims?
When it comes to termination of employment, an employer is not bound to continue an employee’s job indefinitely. In fact, they have rights under basic employment standards legislation, common law and, sometimes, in a written employment contract to determine how and when they can terminate an employee’s job. Generally speaking, an employer can fire an employee either with cause (serious wrongdoing or misconduct, where they do not have to provide prior notice of termination, or a financial severance package), or without cause (for any lawful reason, as long as they provide the employee with prior reasonable notice, or a financial severance package). For example, in a termination without cause where an 52- year old manager is let go from their job after 12 years of service and they never signed an employment contract, an employer may be required to provide them with at least 12 months prior reasonable notice, or a financial payment equal to 12 months of their annual income.
What Happens if an Employee Mitigates or Finds New Employment?
After a wrongful dismissal, an employee has a legal requirement to make reasonable efforts to find new employment. In negotiating a severance package, this is an important rule because it can impact the amount of severance or pay in lieu of notice an employee is entitled to following a dismissal.
Generally, if a wrongfully dismissed employee finds a new job, then she has “mitigated” her wrongful dismissal losses, which means she is entitled to less severance pay in a severance package as the employer will argue she is not entitled to severance pay from the date she starts her new job.
For example, if an employee finds new employment during the period of time that they would have been entitled to notice of termination under the common law, a court would likely reduce how much severance package the employee the employer is required to pay, or otherwise reduce the employee’s earnings from their new job from the wrongful dismissal award. However, it is important to note that an employee’s duty to mitigate and its impact on severance does not apply to the employee’s minimum statutory entitlements under the Ontario Employment Standard Act, 2000.
Take-Home Lessons
Understanding what constitutes a “wrongful dismissal” in Ontario employment law is important for both employers and employees. If you are an employer, it is crucial to ensure that you comply with the laws surrounding termination of employment (as well as any employment contracts. If you are an employee, you should be aware of their rights and the recourse available to you if you face a wrongful dismissal. As always, when dealing with legal matters, it is advisable to seek professional legal advice specific to your own experience.
Call Employment Lawyer Toronto Today
If you are an employee who believes you were wrongfully dismissed from your employment with or without a fair severance package, call today to discuss your options. As an employment law firm in Toronto, Bune Law has reviewed and negotiated improvements to many severance packages. 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.