Provincial employment law generally applies to employment relationships (although there are exceptions for federally regulated industries such as banks, transportation/trucking companies, radio/television, railways, and airlines). In Ontario, an employee who has been terminated without cause can claim for the statutory minimum amount of termination pay (and in some cases severance pay) under the Employment Standards Act (“ESA”), or claim for “common law” wrongful dismissal damages in the courts. Pursuant to both the ESA and common law an employer has the option of providing working notice or pay in lieu of notice, however, a terminated employee will have different entitlements with each type of claim therefore it is important to understand what those entitlements are.
In Ontario, the ESA provides for a statutory minimum notice period equal to one week of advance notice of termination per year of service to a maximum of eight weeks. The following chart specifies the amount of notice required if an employee has been continuously employed for at least three months:
|Period of Employment
|Less than 1 year
|1 year but less than 3 years
|3 years but less than 4 years
|4 years but less than 5 years
|5 years but less than 6 years
|6 years but less than 7 years
|7 years but less than 8 years
|8 years or more
Under the ESA some employees may also qualify for severance pay in addition to termination pay. In most situations an employee will qualify for severance pay upon termination if: (a) the period of employment was five years or more (regardless of whether this time was continuous or active employment); and (b) the employer has a payroll in Ontario of at least $2.5 million or terminated the employment of 50 or more employees in a six-month period because all or part of the business permanently closed. If an employee is entitled to severance pay, the amount payable will be equal to one week of regular wages for a regular work week per year of employment (a pro rated amount applies for an incomplete year of employment) up to a maximum of 26 weeks pay. Ultimately a complaint under the ESA may be a better option if an employee has found a new job quickly after termination. Under the ESA an employer must pay the full amount of termination pay (and severance pay, if applicable) regardless of whether the employee started a new job right away. At common law, anything earned from new employment during the notice period is deducted from the amount payable to the employee.
Common Law Damages – Wrongful Dismissal in the Courts
An employee is generally entitled to a significantly longer notice period at common law compared to the ESA statutory minimum notice period. Instead of determining notice periods with a precise formula the Courts will base its decision on several factors such as the employee’s years of service, position, salary, availability of comparable jobs and age. Other factors can be relevant such as whether the employer had induced the employee to leave secure employment to join its workforce. In some cases Courts will be able to award notice periods as long as 12 to 24 months. A wrongful dismissal claim will often provide an employee with a greater potential recovery especially for longer tenured, older and/or managerial/specialized employees. It is important to note that an employee’s entitlement to common law damages can be eliminated or reduced in situations where a written employment contract exists and limits the amount which an employee is entitled to upon termination. Further, all terminated employees are required to mitigate (minimize) their financial loss by seeking comparable employment promptly upon termination and throughout the notice period. As noted above, anything earned from new employment during the notice period is deducted from the amount payable to the employee.
Jamie Pereira advises employers and employees on all aspects of employment law in Southern Ontario and the GTA. If you have any questions, you can contact him directly at email@example.com or 519-426-6763.