Termination in Ontario: What 'Wrongful Dismissal' Actually Entails
As an employment lawyer, wrongful dismissal claims are a very significant part of my practice. I represent employees whose employment has been terminated and also defend employers against such claims. (Or more preferably, assisting employers in avoiding such a claim in the first place.)
Why Employment Termination Entitlements Are Complex
What a wrongful dismissal / termination claim is, and what an employee’s entitlements upon termination are is surprisingly (and in my view, unnecessarily) complicated, because there are two primary sources of termination entitlements, which do not have the same requirements, and one of which (common-law notice) is undefined.
It also does not help that the way the law in Ontario conceives of termination entitlements is not how they work in practice, and the term itself, “wrongful termination” is misleading in most cases.
In this article, I hope to explain the basics of wrongful dismissal law in a straightforward and comprehensible manner. I will be using the terms “wrongful dismissal” and “wrongful termination” interchangeably – they are synonymous with each other.
Important Distinctions: Unjust Dismissal and Unionized Positions
It should be noted, however, that the term unjust dismissal is not the same thing as a wrongful dismissal.
An unjust dismissal is a specific provision in the Canada Labour Code for federally regulated workplaces, such as banks or airports, that gives most federally regulated employees very strong protection against termination, similar to that of a union.
Unjust dismissals are beyond the scope of this article, but if you have been terminated from a federally regulated workplace recently and are reading this, please contact me or another employment lawyer very soon, as unjust dismissals have a very short 90 day period in which they can be claimed.
Most other termination entitlements have a two year period in which they can be claimed, although certain human rights claims have a one year period.
This article also does not cover unionized positions, which are covered by a related, but distinct branch of law known specifically as Labour Law. If you are an employee in a unionized position, your legal remedies will generally be available only through your Union and their grievance procedures. Furthermore, much of what I’m writing is not applicable to unionized positions, which tend to have stronger protections against dismissal, and where an employer usually cannot simply terminate an employee’s employment at any time for any reason.
People often refer to the various possible entitlements on termination as “severance pay”, although “severance pay” is technically a specific entitlement under the Employment Standards Act that some, but not all, employees are entitled to upon the termination of their employment (it depends on payroll size and years of service), in addition to the advance notice discussed below.
How the Law Views Termination Entitlements: The Concept of Advance Notice
In trying to understand what an employee’s entitlements are upon termination, it helps to know that the law does not see employees as entitled to a cash payout, but advance notice that their job is ending. This underpins everything about termination provisions, even though this is rarely how employment termination works in practice.
The law is built around the idea that an employer will tell an employee something akin to “Your job is ending in five months, we will continue to pay you and provide benefits through to the end of the five months, and hope you are able to find employment in the interim, but after that, we will have no more work and no more pay for you.”
Theory vs. Practice in Terminations
While this is how the law treats employment termination, this is rarely how terminations occur in practice. Sometimes an employer will actually give advance notice of termination and continue to pay the employee and give them work through to the end of the advance notice period, this is known as “working notice”, where the employee continues working after being informed their job will end, until they either find something new, or the advance notice period ends and they are on their own.
However, while this is how the law imagines an employment termination will go, it is much more common that an employer does not want an employee who knows their job is ending to continue to work for them until they either find something new, or the advance notice period ends and they are on their own.
I'm using the term 'advance notice period' throughout this article – it's usually just called 'notice period' in legal documents and court cases, but I find 'advance notice' better conveys what's actually happening here: the law isn't expecting the employer to pay the employee, but warn them in advance their job is ending so they have time to find something new. The only reason most employment terminations result in a lump-sum payout is because few employers actually want to do this, and would rather just pay the terminated employee out and not have them show up for the next few months.
Put simply, an employer may tell someone ‘today is your last day,’ but only if the employee also receives every dollar and benefit they would have earned had they been given the proper amount of advance notice.
When given as a lump-sum cash payment, this is often called “pay in lieu of notice”, because it is the pay the employee is receiving instead of (in lieu of) the advance notice the employer was legally expected to give them.
Wrongful Dismissals Are Not (Usually) About the "Wrongness" of Firing
The term “wrongful dismissal” is one of the most confusing aspects of employment law, because it does not mean that the employer was outside their rights to terminate the employee’s employment. For the most part, in Ontario, employers are permitted to terminate an employee's employment for any reason, at any time, so long as they give them enough advance notice, or pay them the proper amount of money instead.
This is where a great deal of confusion lies, and where clients who are paying hourly, unnecessarily expend legal fees (I try to keep everyone focused on the legal issues at hand). Employees often spend a great deal of time explaining to me why their employer’s decision to terminate their employment was wrong – for instance, that their boss was unfairly blaming them for someone else's mistakes. This is understandable – employment terminations are incredibly difficult, stressful and emotional events. When people are not incurring legal fees to do so (i.e., when they are on contingency agreements), I am happy to listen to and understand the background about what happened.
However, for the most part, whether an employer’s reasons for termination are good, bad, unfair, etc., do not matter. In the vast majority of circumstances, the employer had the right to end their employee’s employment, so long as they gave them enough advance notice or paid them the proper amounts.
Thus, for the most part, Wrongful Dismissal cases are not about whether the dismissal was wrongful, but whether the employer paid the proper amounts of money, or gave the proper amount of advance notice.
Exceptions: When the "Wrongness" Does Matter
There are exceptions, which I’ll address below.
When an employer claims they are terminating an employee “for cause” and tries to pay them nothing whatsoever, a wrongful termination case is about whether the termination was wrongful or not.
Additionally, while an employer is generally permitted to terminate an employee's employment for any reason whatsoever, even if that reason makes no sense or is based on personal feelings, they are not permitted to terminate an employee if their reasons are based at all on a protected human rights ground, such as race, religion or most commonly, disability.
‘For Cause’ Dismissals: An Incredibly High Standard
As mentioned above, the only time an employer is allowed to simply terminate an employee’s employment immediately, without advance notice and without paying them anything is when it is for cause, that is, when the employee has done something so wrong, that the employer is allowed to simply get rid of them right then and there, with no further obligations or warning.
This is not “made a mistake at work” level reasons. The standard for a “for cause” termination is incredibly high, and no matter what an employee has done, it is almost never enough to justify a for cause termination. Ontario regulations define the standard as “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”
In practice, the conduct needed to meet that requirement is on the level of “stole significant amounts of money from the employer”, “repeatedly outright refused to do work” or “actively and deliberately attempted to damage the employer’s business”. Almost anything less than that is insufficient, and there are circumstances where even those examples may not be enough to legally justify a for cause termination.
A Case in Point: The Ditchburn Standard
As a practical example of what I mean here, the case I frequently cite to clients as an example of just how high this standard is, is Ditchburn v. Landis & Gyr Powers Ltd.
In that case, an employee went out to a strip club with a major client after work, got drunk with the client, and beat the client up. The employer dismissed their employment “for cause”, not paying them anything. The employee sued for wrongful dismissal. The employee won. The judge ruled that, while very bad, even that was insufficient to justify a for cause termination, and they were entitled to 24-months of pay for the lack of advance notice of termination. (Reduced to 22 months on appeal.)
Sometimes employers will try to rely on an employee’s sense of guilt or remorse and terminate their employment ‘for cause’, hoping that they will not pursue the compensation they are likely entitled to. If you are an employee in that situation, consider the above case, and know that, no matter what the circumstances of your termination were, the employer was unlikely to have sufficient cause to justify terminating your employment without notice and without compensation. I encourage you to book a free consultation with me and we can discuss what your options may be.
In contrast, if you are an employer and reading this, and considering terminating an employee’s employment, I encourage you to contact me to discuss how best to do so in a way that follows all legal requirements, and doesn’t end up costing you more in the long run by exposing yourself to a costly and almost inevitable wrongful termination lawsuit, should you go forward with a for-cause termination in most circumstances.
Protected Grounds: A Critical Limitation on Employer Rights
While human rights are beyond the scope of this article, I will briefly mention that one of the few circumstances where an Ontario employer is outright forbidden from ending an employee’s employment is where their reason for terminating touch upon a protected ground, such as race, religion or disability.
This is a far broader protection than an employer simply being unable to say “I’m firing this employee because they are black”, or some other, cartoon-villain type scenario. Actual, real-world workplace human-rights violations are usually much more subtle. It is an employer who has to downsize, choosing between two equally performing employees, one male and one female, and laying off the woman because, at the back of the employer’s mind, they are weighing the cost that the woman is more likely to take time off for pregnancy and parental leave.
This is a very broad topic and beyond the scope of this article, but if you are an employee and are concerned that you have been terminated for illegal reasons, or an employer concerned about the human rights consequences of your management decisions, I encourage you to contact me or another employment lawyer to discuss.
What is an Employee Entitled to Upon Termination?
To summarize so far:
An Employer in Ontario can usually terminate an employee at any time for any reason, so long as they pay them the proper amounts of money
The law does not see this as a monetary payout, but a certain amount of advance notice the employee’s job is ending
Which brings us to the heart of the vast majority of employment disputes:
“What is the proper amount of money/advance notice?”
I wish this was a straightforward and simple question. It is not.
Confusingly, there are two different sources for how much money/advance notice an employee is entitled to: The Ontario Employment Standards Act (the ESA) and common-law.
1. The Employment Standards Act (ESA): An Absolute Minimum
The ESA is relatively straightforward. It is a written law (a statute) of the Government of Ontario, which you can simply look up and see what an employee’s entitlements are. This is typically one week per year of service time with the employer, up to a maximum of eight weeks. Under certain circumstances, an employee might also be entitled to “severance pay”, in addition to the advance notice.
The ESA is, however, an absolute minimum. The vast majority of employees in Ontario are entitled to more than the Employment Standards Act absolute minimums. Even if an employee has an employment contract which specifically states they get “only the absolute minimum under the ESA”, that is most likely invalid, and they are most likely entitled to what is known as “common law reasonable notice”.
2. Common-Law Reasonable Notice: The Bulk of a Wrongful Dismissal Case
As noted above, while common-law advance notice is typically paid out by employers as a lump-sum payment, what an employee is technically entitled to is advance notice that their job is ending.
The exact amount of “Common-Law Reasonable Notice” (i.e., the amount of advance notice an employer should based on how judges have ruled in previous cases) an employee is entitled to is what most employment disputes come down to, most of the time. This is because unlike the ESA absolute minimums, Common-Law Notice is not written down anywhere and is not a set, specific amount. It is “whatever a judge thinks it should be, but following how other judges have ruled in the past”.
That sounds incredibly vague, because it is. When I talk with clients, I can give them an exact figure for how much ESA advance notice an employee is entitled to, I can only give estimates for how much common-law advance notice they are entitled to. But it is usually a lot more than the ESA absolute minimums.
Comparing ESA Minimums to Common-Law Notice
While the ESA absolute minimums are about one week per year of service, capping out at 8 weeks, common-law advance notice is more typically around one month per year of service, capping out at 24 months (usually).
Frustratingly, while typically in the ballpark of “one month per year of service”, this is not a hard-and-fast number – it could be more or it could be less, depending on a number of factors (age, availability of employment) as well as just a certain amount of variability from judge to judge.
What This Means in Practice: Navigating Termination Offers
In practice, because common-law advance notice is an unclear, undefined amount, this means that when terminating an employee, an employer will pay them the ESA absolute minimums (as they are absolutely required to), but then make them an offer for a certain amount of additional termination pay, representing their common-law advance notice.
While some employers offer close to what a judge might award, more typically, the first offer is on the low end of the spectrum, often only an additional week per year of service. When making an offer like this, an employer is typically hoping their employee simply signs the attached release, and takes the low-ball common-law payment, and signs off their right to demand a more typical amount.
As such, as an employee, you should never sign a termination offer from an employer without discussing it with an employment lawyer beforehand. If you are in this situation, please book a free consultation with me, and I’ll look over your termination offer and discuss it with you for 30 minutes at no charge and no obligation.
Summary: Key Takeaways
This has been a short overview of the basics of wrongful dismissal cases. There is far more that can be said about this topic (and feel free to ask me) but the takeaways are:
“Wrongful dismissal” does not usually mean the dismissal was wrongful, but that the employer did not pay the employee the proper amounts of money
“The proper amount of money” is an undefined amount, but typically works out to about one month per year of service
If you have been terminated do not sign anything without talking to a lawyer first
You can click here to book a no-charge, no-obligation 30 minute consultation with me to discuss what your options might be
