Termination Without Cause (Ontario): Explained

In Ontario, an employer can fire an employee without cause at any time, through no fault of the employee. Under Ontario employment law this means an employee does not have to do something wrong to be dismissed. Most employees are terminated without cause in Ontario. However, employers can only proceed with a termination without cause in Ontario by providing the employee advanced notice and/or severance pay.

What Is Termination Without Cause?

Termination without cause refers to the practice of an employer ending an employee’s employment contract without specific or justifiable reasons. In this situation, the employer is not alleging any wrongdoing or misconduct on the part of the employee, but rather, they are choosing to sever the employment relationship for reasons such as restructuring, downsizing, or changes in business needs. Termination without cause typically entails providing the employee with notice or payment in lieu of notice, which is designed to mitigate the impact of the job loss and help the employee transition to new employment. In Ontario, Canada, employment laws govern termination without cause, specifying the rights and entitlements of both employers and employees in such situations.

The reasons for an employee termination without cause can be company-wide restructuring, shortage of work, cost-cutting, or poor work performance. However, employers do not have to tell the employee the reason, and in some cases, it could be as simple as a “bad fit”.

While an employer may fire or lay off an employee as they see fit, there are risks of carrying out the termination improperly or with unlawful motives. For example, terminating an employee for discriminatory reasons or in retaliation to a workplace health and safety complaint could open an employer to further legal liabilities.

An employee termination without cause might seem straightforward, but there are a lot of ways to do it wrong. The article below will explain in depth what an employee is entitled to upon termination without cause and what an employer should consider before proceeding with a termination without cause. It will also discuss why you should seek legal advice from an employment lawyer to protect your interests as an employer or seek your entitlements as an employee.

Employees Entitlements For a Termination Without Cause?

Under Ontario employment law, an employee facing a termination without cause is entitled to reasonable notice of termination. The employer must provide the employee notice their employment will end at a future date or provide severance pay in lieu of notice. Therefore, the employer may provide the employee:

• Working notice – It enables the employee to work up to a future termination date;
• Pay in lieu of Notice – It compensates the employee for the notice period their employer should have provided; or
• A combination of working notice and pay in lieu of notice.

The Ontario Employment Standards Act, 2000 (the “ESA”) specifies the minimum notice or pay employees must receive. An enforceable employment contract can limit an employee’s notice entitlements to the ESA minimum of one (1) week per year of service up to a maximum of eight (8) weeks. The Canada Labour Code (the “CLC”) governs the minimum entitlements owed to federally regulated employees.

Further, an employee may be entitled to statutory severance pay upon termination without cause. The Employment Standards Act entitles an employee to severance pay after the employer severs their employment if they were employed for five (5) years or more, and:

• The severance occurred due to the permanent discontinuance of all or part of the employer’s business at an establishment, and the employee is one of fifty or more employees who had their employment relationship severed within a six-month period as a result; or
• The employer has a payroll of two and a half million dollars or more.

Under the Employment Standards Act, an employee can get statutory severance pay equal to one week per year of service up to a maximum of twenty-six (26) weeks. However, this is not the entirety of an employee’s total severance entitlements upon firing them without cause.

If there is no enforceable termination clause in an employment agreement, then an employee is entitled to common law reasonable notice. This includes their minimum entitlements under the ESA, but could is statistically awarded at approximately one (1) month per year of service. While the general cap on reasonable notice is twenty-four (24) months, there have been cases where employees were exceptional cases where employees were awarded twenty-eight (28) months.

The surrounding context and the way an employer fires an employee without cause may result in additional damages for the employee. Some examples include aggravated damages, punitive damages, and Human Rights damages. How much a court would award for these damages will depend on the facts of each specific case.

What to Consider Before Firing Employees

Minimizing liabilities and risks are important for any business. Terminating employees is an unavoidable cost of doing business. However, that cost can be minimized for employers who tread carefully when firing their employees.

How much severance an employer owes an employee when firing them without cause will depend on a variety of factors, including but not limited to:

• The phrasing of an employment contract’s termination clause;
• The employee’s age;
• How many years of service the employee has;
• The character of the employee’s role;
• The employee’s compensation;
• The economic climate; and
• Other factors relevant to determine how long it would reasonably take for an employee to find a comparable job.

However, at all times an employer must provide an employee with their Employment Standards Act minimum entitlements upon firing them without cause. An employee cannot voluntarily waive these basic guarantees. It is up to the employee to negotiate or sue for any severance amounts greater than their ESA minimum entitlements.

The way an employer terminates their employee matters. Dishonest, disrespectful, unprofessional, and otherwise unreasonable behaviour may open an employer to liability for additional aggravated and punitive damages.

Some examples of such improper behaviour in the manner of dismissal include:

• Denying the employee their statutory entitlements upon termination;
• Screaming at the employee;
• Embarrassing and humiliating the employee, especially in front of their co-workers;
• Terminating the employee to deny them some benefit;
• Making it more difficult for the employee to find another job;
• Trying to mislead the employee;
• Falsely or unreasonably alleging just cause, job abandonment or frustration of contract in an attempt to deny the employee their severance entitlements; and
• Falsely or unreasonably accusing an employee of misconduct or poor performance.

There are other laws that can result in significant damages for an employer’s failure to comply, even if you pay your employee severance. For example, under the Ontario Human Rights Code or the federal Canadian Human Rights Act an employer cannot terminate an employee based on prohibited discriminatory grounds or in retaliation for trying to enforce and address workplace health and safety issues.

It is particularly important that an employer does everything they can to comply with Human Rights legislation, as an employee can seek lost wages from the date they were terminated up to the date of hearing for violations. In theory, this could result in an employee who would only be entitled to three (3) months of severance pay instead of being entitled to three (3) years of lost wages.

Another important point for the employer to consider is that they may actually have cause for an employee’s termination. Terminating an employee with cause would deny them some or possibly all their severance. However, terminating an employee with cause is hard to fight in court, and can sometimes result in additional damages if a court determines there was no cause for an employee’s termination. It is especially important to consult with an employment lawyer if an employer wants to explore terminating an employee for cause.

The devil is in the details. Every case is different, and what needs to be done to terminate a particular employee may require a tailored approach. Consulting with an employment lawyer is the best way to determine what an employer’s legal risks and an employee’s legal entitlements are.

How an Employment Lawyer Can Help

If you are an employer, an employment lawyer has the knowledge and experience to help you minimize your legal risks when terminating an employee. An employment lawyer can assist by working with you to negotiate severance with your employee and prepare the documents you need to fully protect your business after settlement.

If you are an employee facing a termination without cause, an employment lawyer can advise you on your best next steps. They will assess the facts of the case, discuss your legal options, and negotiate on your behalf with your employer.

A demand letter is usually the first step in negotiations. The demand letter briefly explains the facts, your legal position and the remedy being sought. If the employer fails to respond to the demand letter or their response is unfavourable, you may have no choice but to sue for wrongful dismissal and other damages.

Whether you are an employer defending an employment-related legal claim or an employee looking to sue your employer for terminating you, it is best to consult with an employment lawyer to help navigate the process and maximize your chances of success.

Conclusion

In Ontario, most terminations of employment are without cause. While an employer may dismiss employees for any reason, they generally must pay the employee severance in accordance with employment law.

An employee could be entitled to up to twenty-four (24) months of severance pay. They may also be entitled to other damages depending on the unique factors of their case. There are many things for an employer to consider when terminating an employee without cause, including but not limited to:

• How severance is generally calculated for employees;
• They must comply with the ESA and other statutes even when terminating an employee;
• How they terminate an employee may result in legal liability; and
• They might have grounds to actually terminate an employee with cause.

Whether you are an employee who was recently terminated or an employer planning to lay off employees, you should consult with an experienced employment lawyer as soon as possible. Employment lawyers have the knowledge and expertise to determine your legal risks, your entitlements, and what your next steps should be.

Related Topics

Dismissal Without Cause In Ontario

Wrongful Dismissal Vs. Termination Without Cause

Employment Litigation: How To Get The Most Out Of Litigation

 

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