What is Wrongful Dismissal?

There are many misconceptions when it comes to the term “wrongful dismissal” and what it means. Terminated employees often refer to being wrongfully dismissed in the context of their employer not having a good reason to fire them.  This is not what wrongful dismissal means. Wrongful dismissal occurs where an employer terminates an employee without reasonable notice or pay in lieu of reasonable notice and does not refer to the dismissal itself.  In other words, the employer does not need a ‘reason’ to terminate the employee. The only obligation the employer has upon terminating an employee is to provide them with reasonable notice or pay in lieu of reasonable notice (ie. a severance package).  What is reasonable notice? And how it is determined will be expanded on below. 

An exception to the above would be an employer who has terminated an employee due to any protected ground under the Ontario Human Rights Code or violated certain sections of the Employment Standards Act (i.e. failure to reinstate an employee after pregnancy leave). Employees employed by federally regulated employers such as an airline or bank, may have statutory protection against unjust dismissal, even if notice is given.

How do you calculate how much notice a terminated employee is entitled to?  

Generally, there are a number of ways to determine what length of notice an employee who has been fired without cause is entitled to. 

The Employment Standards Act in Ontario 

The Employment Standards Act  sets out the statutory minimum payments or notice periods that every employee is entitled to when they are terminated  without cause (usually one week for every year of service up to a maximum of 8 weeks plus statutory severance, if applicable). The terminated employee does not have to (and should not) sign a release in order to receive their minimum entitlements under the Employment Standards Act. 

It’s important to note that the ESA sets out the minimum requirements for severance pay and notice of termination. Depending on the specific circumstances, an employee may be entitled to greater compensation based on common law principles (outlined below), such as reasonable notice or pay in lieu of notice beyond the minimums outlined in the legislation. Consulting an employment lawyer can provide more specific guidance tailored to your situation.

Common Law 

In many cases, an employee may be entitled to more notice or severance pay arising from the termination of their employment under the common law than they would be under the Employment Standards Act. Reasonable Notice under the common law is based on similarly decided cases with similar factors.  

Determining common law reasonable notice or severance for wrongful dismissal is more of an art than a science and there is no ‘mathematical formula’. The factors the courts  consider to determine common law reasonable notice  in wrongful dismissal actions are generally accepted as: 

1. The employee’s length of service: Generally, the longer an employee has been with an employer, the longer the reasonable notice period should be; 
2. The employee’s age: Older employees may require a longer notice period to find comparable employment; 
3. The employee’s position: Employees in higher-level or specialized positions may require a longer notice period to find comparable employment; and 
4. The availability of similar employment: The easier it is for an employee to find comparable employment, the shorter the notice period should be.

In determining reasonable notice, the Courts may consider other factors such as if the terminated employee was induced to leave a secure job by the employer.  

Notice periods for termination under the common law tend to be much longer than they are under the Ontario Employment Standards Act, but are inclusive, not in addition to the Employment Standards Act minimums.  It is important to keep in mind that every employee’s circumstances and factors are different leading to different entitlements to reasonable notice.  There is no one size fits all. 

Employment Agreement

An employment agreement containing a valid and enforceable termination clause can limit or set out how much pay or notice in lieu of an employee would be entitled to on termination.  Unsurprisingly, termination clauses are generally written for the benefit and protection of the employer. However, not all termination clauses are created equal or will be enforced by the courts. To be enforceable the termination clause must meet certain requirements  and comply with the Employment Standards Act and case law. If not, the court will not enforce it and reasonable notice for termination shall be determined according to the common law.  An employment lawyer is in the best position to review the employment agreement and the termination clause contained therein to advise the likelihood of a court enforcing it. 

If you have been let go from your job and offered a severance package, it is important  to have it reviewed by an Employment Lawyer to ensure that you are receiving fair compensation before you accept or sign a release. Severance packages and releases can be complex and difficult to understand. It is not uncommon for employers to offer inadequate packages or try to lowball an employee by offering them less than what they are legally entitled to.  Far too often, an employer’s first offer is usually just that, their first offer. Our Employment Lawyer, Karen Zvulony has helped hundreds of terminated employees improve their severance package in a cost efficient manner. Losing a job can be devastating, receiving what you are legally entitled to can help ease the transition.