It has become increasingly commonplace for individuals to be told by their employers that as a result of corporate restructuring or re-organization, shortage of work or cutbacks, they are being terminated. Under these circumstances, the employer is obliged by the Employment Standards Act (the Act) of Ontario to provide a departing employee who has three or more months service with notice of termination so that he may have the time and resources needed to look for alternate employment.
An employee’s rights upon termination under the Act include the following:
(1) The employer must provide notice of termination in writing;
(2) Notice may take one of two forms. The employer may provide written notice to the employee that termination will occur at some future date. In this situation, the
employee will continue his employment until that date is reached. This is commonly referred to as “working notice”. The length of working notice that an employee is entitled to, will increase with years of service up to a maximum of 8 weeks for an employee who has been employed for 8 years or more years. During the period of working notice, the employee will continue to receive regular salary and participate in the group benefits plan provided by the employer;
(3) Alternatively, where an employee is advised that his employment is being
terminated effective immediately, he will be entitled to pay in lieu of notice quantified on years of service, up to a maximum of 8 weeks;
(4) An employee is entitled to vacation pay on any amount provided as termination pay under the Act;
(5) Where an employee has five or more years of service and is either part of a group of 50 or more employees facing termination or works for a company with a payroll at or exceeding $2.5 million, that employee when terminated, will be entitled to severance pay in addition to termination pay. The amount of severance will depend upon years of employment, up to a maximum of 26 weeks’ pay for an employee who has completed 26 or more years of service;
(6) An employee is entitled to receive termination and severance pay owing in a
lump sum, within seven days of termination or by the next scheduled pay date;
(7) An employer is obligated to provide the departing employee with any wages and/or reimbursement of expenses owing at termination; and
(8) An employee is entitled to receive a Record of Employment upon termination,
which document is needed in order to apply for Employment Insurance benefits.
Many employers and employees believe that the legal obligation to a departing employee ends with an employer’s obligations under the Act. This is incorrect as the Act establishes minimum entitlements only. The Courts have long recognized that an employee who has been terminated without cause and has not signed an employment agreement limiting his right to notice, will have a right to reasonable notice. Such notice almost always exceeds entitlements under the Act. Factors taken into consideration by the Courts in determining the length of reasonable notice include the age of the employee, position with the company, years of service and the availability of alternate employment.
In Ontario, reasonable notice awards or damages for wrongful dismissal, can exceed 24 months’ pay. Such awards however, are by no means automatic. The dismissed employee must make a diligent search for alternate employment and accept comparable employment when offered. Income received from alternate employment during the reasonable notice period will be deductible from damages otherwise owing.
Dismissed employees who are contemplating bringing a claim to enforce their rights upon termination at common law, must do so within 2 years of the date of termination. It is important to note however, that an employee who files a complaint alleging entitlement to termination and/or severance pay under the Act, cannot subsequently commence a civil proceeding for wrongful dismissal. An employee who first brings an action for wrongful dismissal is similarly prevented from then filing a complaint under the Act.
Employers will sometimes offer a departing employee a “package” at termination and request that the employee sign a Release in exchange for the package offered. Where the offer fails to meet or only meets entitlements under the Act, a signed Release will not be binding upon the employee. However, where an offer exceeds entitlements under the Act, a signed Release will likely absolve the employer from any further obligation to the departing employee. Given the serious consequences which may result, individuals who are presented with a termination package and are asked to sign a Release, are strongly advised to obtain independent legal advise before signing such an agreement. Only by doing so, will an individual facing termination, be able to evaluate the employer’s offer in relation to his rights upon termination and determine the best course of action including whether he might be better off bringing a civil action against the employer for wrongful dismissal. In no circumstances should any terminated employee accept a severance package without speaking with a lawyer.