Being terminated can be one of the most traumatic experiences in one’s life. In the normal course, and when cause is not alleged, the legal issue to be resolved is whether the payment offered by the employer is appropriate. This is routinely resolved through negotiation with or without the assistance of a lawyer. But what if the employer alleges cause, and offers nothing? What does one do?
Whether “appropriate cause” exists is a legal issue and should be discussed with a lawyer. There are some cases where cause is obvious. There are some cases where there is doubt which way a Court would rule. Finally, there are cases where it is obvious that no cause exists and the employer makes the allegation simply to make life more difficult for the employee. In the latter situation, a Court can award additional damages for bad faith.
If the employer does not have appropriate cause to terminate, the employee is entitled to minimum payments (or base payments) of up to eight weeks’ termination pay and up to 26 weeks’ severance pay.
The termination/severance provisions of Employment Standards Act (the “Act”) are set out below:
(a) At least one week notice (or pay in lieu of notice) if the employee’s period of employment is less than one year;
(b) At least two weeks notice (or pay in lieu thereof) if the employee’s period of employment is one year or more and fewer than three years;
(c) At least three weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is three years or more and fewer than four years;
(d) At least four weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is four years or more and fewer than five years;
(e) At least five weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is five years or more and fewer than six years;
(f) At least six weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is six years or more and fewer than seven years;
(g) At least seven weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is seven years or more and fewer than eight years; or
(h) At least eight weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is eight years or more.
An employer that severs an employment relationship shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,
(a) the severance occurred because of permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
(b) the employer has a payroll of $2.5 million or more.
Severance pay shall be calculated by multiplying the employee’s regular wages for a regular work week by the number of years (or part years) of employment the employee has completed to a maximum of 26 weeks.
SHOULD I FILE AN EMPLOYMENT STANDARDS CLAIM?
If terminated for cause and without any payment whatsoever, it is a natural instinct to contact the Ministry of Labour. The Ministry of Labour will be able to provide information as to the statutory severance and termination payments owing if appropriate cause cannot be proven. However, there are several reasons why filing a claim with the Ministry of Labour could prove to be a disaster.
WHAT YOU SEE IS NOT WHAT YOU GET
Assume that during the initial communication with the Ministry of Labour one is advised that they are entitled to 20 weeks severance/termination pay commensurate with a 12-year employee in a company with a payroll in excess of $2.5 million. Assuming an annual salary of $52,000.00, this payment represents $20,000.00. Common sense would dictate that if you bring a claim with Employment Standards and there is found to be no validity to the employer’s allegations of cause, that one would be entitled to payment of $20,000.00. This assumption is wrong. The Employment Standards Act contains a provision which limits the amount of any Order for wages (which term includes severance and termination pay) to $10,000.00. Therefore, unless the employer voluntarily pays severance/termination, the Labour Board only has authority to Order it to pay up to $10,000.00.
ADDING INSULT TO INJURY
To make matters worse, if an employee files a claim with Employment Standards for severance or termination pay, there is also a provision of the Act which would then preclude the employee from bringing a civil action for wrongful dismissal. Given that wrongful dismissal damages are almost always significantly greater than Employment Standards minimums (base payments), one can see the significant prejudice in filing an Employment Standards claim. Not only would the employee be limited to $10,000.00, but the employee would also be giving up a right to common law damages which can be tens of thousands dollars more than base damages.
It appears that the Employment Standards Act gives with one hand and takes away with the other. In fact, the Employment Standards Act as is presently formulated, is designed to deter individuals from filing claims for severance or termination and directs them to the civil courts. If one pursues a claim with Employment Standards, that person must understand that they are limiting their claim for wages to $10,000.00 and are giving up any claim for wrongful dismissal damages. For these reasons, few people in fact file Employment Standards claim for severance and termination. When an employee does file such a claim, they may in fact be helping the employer by limiting their liability to $10,000.00 from what would otherwise have been a significantly greater sum.
With that in mind, one should understand that filing an Employment Standards claim should only be made in very limited circumstances. It is important in all cases to seek legal advice before any action is taken.