Are you concerned about the consequences of a termination without cause in Ontario? Termination of an employee without cause occurs when an employer terminates an employee for no reason and could be completely unrelated to the employee’s performance.

An employer is allowed to terminate an employee without cause for a variety of reasons including budget cuts, company reorganizations, bankruptcy and insolvency.

But doing so could have negative consequences and land your company in court fighting a wrongful dismissal lawsuit launched by the turfed worker. According to the Ontario government, terminating an employee goes by many names whether you characterize it as “fired,” “discharged,” “dismissed,” or “permanently laid off.”

Without Cause in Ontario: A Useful Guide

No matter what you choose to call it, termination without cause in Ontario triggers certain obligations of the employer under the province’s Employment Standards Act.

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We believe that our services are much better than randomly searching for a lawyer on the Internet. You can fill out your information on the form to get started.

In the meantime, we’ve created a handy guide to consult if you’ve been fired without cause, or if your company is facing the prospect of terminating an employee without cause in Ontario.

Employment Standards Act Minimums: Notice

The Employment Standards Act is one of the statutes that govern employment relationships in Ontario. It requires most employers to give an employee who has been continuously employed for three months or more notice of termination. Notice is a warning of the impending termination.

After giving such notice, an employer may wish to have the employee continue to work during the notice period, or for them to stop working immediately. In that case, the employee may be entitled to termination pay in lieu of reasonable notice.

Best Legal Practices

“In most cases, when an employer ends the employment of an employee who has been continuously employed for three months, the employer must provide the employee with either written notice of termination, termination pay or a combination,” according to the Ontario government (emphasis in original).

But the provincial government warns that employers in Ontario may face certain situations where they cannot fire someone despite giving notice and termination pay.

People can’t be fired for, say, asking about or exercising their rights under the Employment Standards Act, including refusing excessive overtime work or taking a leave of absence for specified reasons allowed under the Employment Standards Act.

So if you’re confused or in need of help with issues related to termination without cause in Ontario, please contact us using the forms provided below.

Notice Of Termination

An employee is entitled to be “kept whole” during the notice period. As such, during a notice period, an employee’s wages and benefits cannot be reduced. Notice pursuant to the Employment Standards Act is approximately one week for every year of employment to a maximum of eight weeks.

Mass termination of a group of employees has its own specific rules. Mass terminations, according to the Ontario government, are defined as terminations of a group of 50 or more employees within a four-week period.

These notice periods are required minimums. An employer can provide a longer notice period if they wish. However, they may not give notice periods shorter than the minimums set out in Employment Standard Act.

This is the case even if you’ve signed an employment contract to the contrary. An employment contract, in other words, cannot contain a provision purporting to allow the employer to opt out of the statutory minimum notice periods set out in the Act.

Navigating the Laws of Ontario for Termination Without Cause

While the Ontario Employment Standards Act sets out statutory minimum notice periods for terminated employees, other factors to consider include common law notice and severance entitlements, which set out other important calculations of notice, and are combined with the statutory minimums set out in the provincial legislation.

Notice periods under common law exist to award a far more generous notice period to employees terminated without cause in Ontario.

But in Canada, unlike certain jurisdictions in the United States, the concept of “at-will” employment does not exist. Under the common law, appropriate notice periods are determined by balancing a number of factors including:

(a)        The length of the employee’s service – the longer the greater the notice period.

(b)        The age of the employee – employees older than 40 are usually granted lengthier notice periods.

(c)        The availability of similar jobs in the industry or region.

(d)       The nature of the employment – managerial and high-level employees may be entitled to longer notice periods.

(e)        The circumstances surrounding an employee’s hiring.

Termination of Employment Ontario

But there is no set rule for determining notice according to common law. Many lawyers argue, for instance, that a court should award one month for every year of employment. However, that is not how the analysis generally plays out. 

Depending on the specific circumstances of a termination without cause in Ontario, outcomes can be different on a case-by-case basis.

Even employees who have been employed for a couple of years could be entitled to six months or more of notice or severance. This would be six months of notice or severance owing under the common law. Under common law, a two-year notice period is a common maximum that will be awarded by a court.

Severance In Ontario

Severance pay under the Employment Standards Act is an entirely different category of payment when it comes to making a terminated employee “whole” following their firing.

The pay entitlements related to the termination of an employee without cause will see, in most circumstances, that employees qualify for severance when:

(a)       Their employment is terminated for no reason.

(b)       They have worked for the employer for five years or more; and

(c)        The employer has a payroll in Ontario of at least $2.5 million or the employer has let go of 50 or more employees in a six-month period, also known as a “mass termination.”

Severance pay is calculated as approximately one week for every year of employment, but there is often a cap on how much, up to a maximum of 26 weeks. Employees not given written notice as required by Ontario’s Employment Standards Act “must be given termination pay in lieu of notice,” the Ontario government points out.

Regular wages for a regular workweek

In turn, that termination pay is handed out in a lump sum equal to the employee’s “regular wages for a regular workweek” that they’d be paid had the company given the proper written-notice period, which includes vacation pay earned as a percentage of their wage.

The Ontario government’s online guide to provincial employment standards provides a hypothetical example of a “regular work week” for a fictional employee named “Sarah” whose job gets eliminated, her job terminated without regular notice.

In her imaginary case, for three years she worked 40 hours a week for $17 an hour, with four percent vacation pay, entitling her to three weeks of wages due to getting no notice of her termination.

At $680 a week, including her vacation pay, her employer would be on the hook for $2121 and change, while also ensuring her benefits and pension plan coverage continues for that three-week period.

“Employers must also continue to make whatever contributions would be required to maintain the benefits the employee would have been entitled to have they continued to be employed through the notice period,” the Ontario government adds.

Termination Without Cause Ontario

All payments under the common law are subject to the employee’s duty to mitigate their losses after their termination. This duty means that an employee must try to find alternate employment to reduce the damages suffered as a result of losing their job. However, the employee has no obligation to accept a job that is “substantially different” or pays less money.

But fired workers are only obligated to make “reasonable efforts” to secure comparable employment. If the employee finds alternate employment, any amount earned during the notice period will be deducted from the employee’s damages.

If they find another job right away after being fired, they can’t claim to have suffered damages as a result of being terminated since it didn’t take a long, arduous job search to be “made whole” again.

Wrongful or constructive dismissal

With that in mind, employees shown the door and thrust into a hostile job market where opportunities are few and far between, such as in a recession or a worldwide pandemic, may claim increased damages should they sue a former employer for wrongful or constructive dismissal.

As well, employees in highly-specialized positions from niche industries may also face tougher job searches, potentially entitling them to greater damages awards should they take a company to court over their firing.

But hopefully, for both the employee and the employer, it doesn’t come to that because the time and cost of going to court in employment-related disputes can be long and high, and perhaps needless if the company followed the letter of the law.

Employment Contracts

A well-drafted employment agreement protects and benefits both the employer and the employee. However, important provisions to the benefit of the employer can be included in exchange for possibly greater compensation being offered.

Employment agreements, no doubt, can provide useful clarification about the treatment of executive compensation, for example. In the event of a termination of the executive’s employment on a without-cause basis, the need for clarity is paramount to protecting a company’s business interests, especially when it comes to protecting trade secrets and maintaining a competitive edge.

For both high-level executives and low-level employees, employment agreements can include protections such as restrictive covenants that favour the employer, though it may be to an employee’s benefit to avoid a termination clause altogether.

This is because the common law is typically generous to employees who get terminated without cause. If an employment agreement doesn’t include clear and unambiguous provisions about termination with or without cause, a company may find itself in legal trouble for breaking its deal with the fired worker.

Lay-offs and terminations

Canadian courts during the COVID-19 pandemic, for example, have been inundated with wrongful and constructive dismissal claims arising from mass lay-offs and terminations related to the pandemic.

Since so many businesses were ordered closed to comply with public health orders, vast swaths of Canadian workers found themselves out of a job through no fault of their own.

Meanwhile, employers who characterized mass lay-offs as “temporary” are now finding themselves accused of breaching employment contracts since many of those temporary lay-offs became permanent during the prolonged closure period as provinces were hit with wave after wave of COVID-19.

As well, vaccine mandates that saw workers turfed for refusing to get the shot have also spurred waves of litigation that remain outstanding, winding their way through courthouses across the nation awaiting decisions from judges which could take years to resolve.

Ontario Termination Clause

That’s why, if certainty is the goal, establishing an employee’s entitlements upon termination is important from the get-go when drafting an employment contract.

At the time of negotiating the contract, clear and unambiguous terms in the agreement can negate the uncertainty and difficulty in dealing with common law entitlements.

An employer cannot simply opt out of the Employment Standards Act. However, with carefully drafted language they can avoid onerous obligations to pay an employee common law damages should they be fired without cause.

Termination without cause in Ontario is no doubt serious business, which is why you should speak to a law firm to find out your rights and the best way to protect yourself from potentially costly litigation.

Termination Without Cause

As long as the employment contract does not undermine or purport to opt out of the Employment Standards Act minimums, the employment contract usually rules the day should it get put to the test in a court of law.

In negotiating the notice entitlements, special attention should be given to the specific entitlements that will be terminated or continued during the fired employee’s reasonable notice period.

For their part, employees should be mindful of their interests to have those benefits continued during the notice period as required under Ontario’s Employment Standards Act.

Expert Advice on Termination Without Cause in Ontario

Here at ClearWay, we understand how confusing and stressful it can be trying to understand and comply with employment-related rules and regulations. We can help you find a lawyer to provide legal advice about termination without cause in Ontario.

So if you need to find a lawyer in Ontario, don’t hesitate to reach out to us.

With that in mind, the choice is easy, and the choice is yours, so choose wisely by choosing ClearWay!

Author: Alistair Vigier is the CEO of ClearWay Law