Right to reasonable notice or wrongful dismissal damages

NOTICE

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. This constitutes a wrongful dismissal. Under these circumstances the employer is obliged by the Employment Standards Act (the “Act”) of Ontario to provide a wrongfully dismissed employee, who has three or more months of service, with notice of termination so that they may have the time and resources needed to look for alternate employment.[1] 

A wrongfully dismissed employee’s rights upon termination under the Act include the following:

(1)    The employer must provide notice of termination in writing; 

• 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. 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;
• 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;

(3)    An employee is entitled to vacation pay on any amount provided as termination pay under the Act;

(4)    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;

(5)    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;

(6)    An employer is obligated to provide the departing employee with any wages and/or reimbursement of expenses owing at termination; and

• 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 dismissed 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 subject to an employment agreement limiting his right to notice, will have a right to reasonable notice or wrongful dismissal damages. Such notice almost always exceeds entitlements under the Act. Factors taken into consideration by the Courts in determining wrongful dismissal damages, otherwise referred to as reasonable notice, include the age of the wrongfully dismissed employee, position within 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. Wrongful dismissal awards, however, are by no means automatic. The wrongfully 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 wrongful dismissal damages otherwise owing.

Wrongfully dismissed employees who are contemplating bringing a claim to enforce their rights upon wrongful 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 wrongfully dismissed 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 advice from an employment lawyer 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 they 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 an employment lawyer.

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[1] Statutory entitlements for employees working for federally-regulated businesses such as Canada’s chartered banks are set out in the Canada Labour Code.  This article however, focuses on employees whose rights upon termination are governed by the Act.