Calculating Damages For Wrongful Dimissal

An employee who is dismissed without cause is entitled to reasonable notice of termination. Where an employer provides “working notice”, the employee is given advance notice as to their last day of employment. In the interim, they continue to be employed and are paid for their work. In theory, the period of working notice operates to cushion the transition from one employer to the next by providing the employee with income while they look for work.

However, it is rare that an employee is actually given working notice. The norm is that an employee is terminated effective immediately. In these circumstances, and where cause is not in issue, the employee is entitled, both by operation of the Employment Standards Act (the “Act”) and at common law, to pay in lieu of notice. The Act speaks of an entitlement to “regular wages” over the notice period. At common law, the Courts calculate remuneration owing based upon what the employee would have received over the appropriate notice period.

In many cases, the employer will offer minimum Employment Standards payments or marginally greater than such payments in exchange for a full and final release. Is this all an employee is entitled to?

Take, for example, a waitor, 52 years of age, with just under five years of service who is receiving an hourly rate of $11.00 for a 40-hour workweek. In addition to his base salary, the employee earns tips and is enrolled in the employer’s group benefits plan. The individual is entitled to two weeks’ paid vacation. According to the Act, that individual would be entitled to a minimum of four weeks’ notice. The employer offers to provide termination pay in the amount of 4 weeks’ base salary or $1,760.00 and nothing more.

The first and perhaps most important point that needs to be made with respect to the above example, is that 4 weeks’ notice represents the employee’s entitlement under the Act and is a minimum entitlement only. At common law, and based upon decided cases with similar fact situations, the employee in our example would be looking at “reasonable notice” of approximately 3-4 months of total earnings.

Secondly, both at common law, and under the Act, the employee has a right to more than base pay upon termination. Under the Act, the employee is also entitled to continuation of benefits over the notice period and vacation pay calculated as a percentage of the termination pay owing. In the above example, the individual would be entitled to vacation pay at 4% of $1760.00 or $70.40. The employee would also be entitled to any wages and vacation pay owing at the time of termination.

In the calculation of reasonable notice, the Courts have held that an employee receiving gratuities as part of their remuneration has a right to damages for the loss of both base pay and tips. This may even be the case where the employee has failed to declare the value of tips received for tax purposes. Where group benefits are not continued by the employer, the employee will also be entitled to damages for the loss of benefits.

In the example noted above, the employer, whether deliberately or not, was not meeting its obligations either under the Act and at common law. An individual faced with this situation and knowing their rights both by statute and at common law, would have been in a position to negotiate or fight for more. As always, individuals facing wrongful dismissal are well advised to seek legal counsel to know where they stand. This will especially be true where the employer requires the employee to sign the offer or a Release indicating their acceptance of the offer in satisfaction of all legal obligations owing by the employer upon termination.