Dismissal Without Cause

• Author: Netta Romano
• Pages: 229-280

229

Dismissal Without Cause

8

Learning Outcomes

After completing this chapter, you will be able to:

• Define “wrongful dismissal.”

• Understand the criteria for assessing reasonable

notice under the common law.

• Identify when an employee may have been

constructively dismissed.

• Identify the types of damages that may be awarded

to a wrongfully dismissed employee and the tax

treatment of damages.

• Explain an employee’s common law duty to mitigate

their damages after dismissal.

• Evaluate the reasonableness of separation packages.

• Outline the procedure relating to wrongful dismissal

actions in Ontario Small Claims Court.

Introduction ........................ 230

How Much Notice Is Reasonable for

WrongfulDismissal? .............. 231

Constructive Dismissal ................ 240

Wrongful Dismissal Damages .......... 248

The Duty to Mitigate ................. 261

Separation Packages ................. 267

Wrongful Dismissal Proceedings ........ 268

Further Reading ..................... 271

Related Website ..................... 271

Key Terms .......................... 271

Review Questions ................... 271

Discussion Questions ................. 271

Appendix 8.1 A Sample Wrongful

Dismissal Claim .................. 273

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230 EMPLOYMENT LAW FOR PARALEGALS

Introduction

As discussed in Chapter 7, unless an employer is able to establish that an employee fun-

damentally breached an express or implied term of the employment contract, any dis-

missal must proceed on a without-cause basis. An employer does not need just cause to

dismiss a non-unionized employee. An employer may dismiss such an employee as long

as the employer provides notice of dismissal or payment in lieu of notice. There is no right

of reinstatement for wrongful dismissal under the common law.

To determine what the notice period or payment in lieu of notice should be, an

employee needs to look to three areas: the employment contract, the termination

provisions in the Ontario Employment Standards Act, 2000,

1 and the common law.

If the employment contract has an enforceable termination provision that sets out

the employee’s entitlements in the case of dismissal without cause, the employer is

required to provide those entitlements.

However, if an employment contract lacks a provision that governs notice of ter-

mination or if such a provision is unenforceable, an employer has an implied duty to

provide reasonable notice of termination or pay in lieu of reasonable notice under the

common law. When the employment contract is oral, the employer also has an implied

duty to provide the employee with reasonable notice. What is “reasonable” in a par-

ticular situation depends on the facts of the case, but courts have developed a number

of factors to consider and weigh in determining the appropriate length of the notice

period. The reasonable notice standard under the common law exists in addition to,

and usually signicantly exceeds, the minimum statutory standards for notice of ter-

mination and severance pay. (See Chapter 2 for a discussion of statutory termination

and severance pay requirements.)

Dismissal for economic reasons is not considered just cause, and reasonable notice

of termination is required if an employee is permanently laid off for lack of work or

other business reasons such as a restructuring or reorganization of the business. The

only exception to an employer’s obligation to give reasonable notice of termination in

the absence of just cause under the common law is frustration of contract, which is

discussed in Chapter 7.

1 SO 2000, c 41 [ESA].

2 2020 ONCA 391 at para 10.

When a Termination Clause Violates the ESA

Termination provisions in an employment agreement will be enforceable only if it at

least matches the entitlements under the ESA. In the 2020 decision of Waksdale v

Swegon North America Inc,

2 the Court of Appeal for Ontario stated that if any part

of a termination clause violates the ESA, the entire provision fails, even if the employer

does not rely on the impugned provision at the time of termination.

FYI

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CHAPTER 8 DISMISSAL WITHO UT CAUSE 231

How Much Notice Is Reasonable for

WrongfulDismissal?

The following discussion relates to dismissals without cause where the employment

contract does not contain an enforceable termination provision. In these circum-

stances, employers must comply with the common law requirement to provide rea-

sonable notice or pay in lieu of reasonable notice. If an employer fails to do so, the

dismissal is wrongful and the terminated employee is entitled to damages based on

the notice that should have been provided. Essentially, the damages should reect the

compensation that would have been earned had the employer given the employee

the required reasonable notice.

Reasonable notice under the common law is not the same as the statutory notice

requirements established in the ESA. If an employee has been terminated without

cause, they are entitled to the minimum notice of termination or pay in lieu of notice

in section 57 of the ESA and possibly severance pay if the employee meets the criteria

in section 64. Payment of the minimum statutory entitlement does not relieve the

employer of any further obligation to the dismissed employee. Remember that employ-

ers have an implied obligation under the common law to provide an employee with

reasonable notice of termination unless the employer has just cause to terminate. What

“reasonable” means under the common law is very different than the one week per

year of service (to a maximum of eight weeks) to which the employee is legally entitled

under the ESA. Each employment situation must be assessed on its own based primar-

ily on the factors established in the leading case of Bardal v The Globe and Mail Ltd:

3

1. length of service;

2. character of employment;

3. the employee’s age; and

4. the availability of similar employment, given the employee’s experience,

training, and qualications.

The principle is that the employee should be compensated for any income that

would have been earned had the employer given the required notice that the employ-

ment would be coming to an end at some future time, thereby giving the employee

time to nd a new position. Reasonable notice is meant to reect the period of time it

should reasonably take the terminated employee to nd comparable employment.

4

The volume of wrongful dismissal case law suggests that while the factors that need

to be addressed may be clear, the end result in terms of what a court might award in

any particular case is less easily predictable. The challenge lies in applying the factors

and determining how they t together in each individual case. The exercise has been

described by courts as “an art not a science and courts should not micro-manage the

reasonable decisions of employers.”

5

3 1960 CanLII 294, 24 DLR (2d) 140 (O nt H Ct).

4 Lin v Ontario Teachers’ Pe nsion Plan, 2016 ONCA 619 at para 54.

5 Duynstee v Sobey s Inc, 2013 ONSC 2050 at para 89.

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