Category: Wrongful Dismissal

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Wrongful Dismissal

Can an Employee Claim Damages if They are Fired and Rehired by the Same Employer

If an employee is terminated and later rehired in a different capacity by the same employer, have they really been terminated? Is the employee entitled to claim damages through an action commenced for wrongful dismissal or constructive dismissal?

This article will set out basic principles of wrongful dismissal and constructive dismissal before analyzing a recent decision of the Ontario Superior Court of Justice in which an employee claimed damages for wrongful dismissal after being terminated and then rehired by the same employer at a lower position with a reduced salary.

Has the employee been wrongfully dismissed?

If an employee is terminated by an employer that does not assert its legal justification for terminating the individual’s employment without notice, or compensation in lieu of notice, the employee is deemed to have been terminated without cause. If an employee does not receive either reasonable notice of termination or reasonable compensation in lieu thereof, they may have a claim for wrongful dismissal.

A court may make a finding that a terminated employee has been wrongfully dismissed even if they are later employed by the same employer in a demoted position.

Has the employee been constructively dismissed?

An employee that has been demoted may be able to make a claim for constructive dismissal. If the employer unilaterally and fundamentally changes one or more of the existing terms and conditions of the employment relationship it may amount to a breach of contract, or constructive dismissal.

Constructive dismissal disputes can be complex and challenging for the employee to prove, therefore guidance is generally sought from a knowledgeable employment lawyer. It is imperative to speak to a lawyer early because failure to resign within a reasonable timeframe could be viewed as passive acceptance of the circumstances by the employee.

Is the employee required to accept the new position in order to mitigate their damages?

Employees that have been wrongfully dismissed or constructively dismissed have a duty to mitigate their damages by attempting to secure alternative employment.

It is possible that an employee may be required to mitigate their damages by returning to work for the same employer if the employer offers the employee an opportunity to do so. However, the courts will not require the employee to do this in every circumstance, for example, if continuing employment with the same employer would result in working in “an atmosphere of hostility, embarrassment or humiliation”.

Employee worked in a new position for the same employer after termination

In Amerato v TST-CF Solutions LP, the plaintiff employee began working for the defendant in 2005. She was later promoted to Customer Service Supervisor before going on short-term disability leave in June 2020. The initial short-term leave transitioned to long-term disability in December and she began receiving benefits equivalent to 60% of her pre-leave salary.

In January 2021, the employer said that the employee’s employment was terminated effective on February 1, 2021, and subsequently confirmed this in a letter. The employer claimed that the termination was due to a merger of the company and challenges related to the COVID-19 pandemic. That same day, the employer issued another letter to the employee offering her a job change to Senior Customer Service Representative with a 20% salary reduction.

The plaintiff’s lawyer wrote to the defendant, taking the position that the employee had been wrongfully terminated. The lawyer later stated that the plaintiff would work in her new position to mitigate her damages without waiving her legal rights. The employee continued to work for the defendant for four hours a day, three days per week, with a top-up income paid from her long-term disability insurer.

Court finds employee wrongfully terminated

Justice Chalmers found that the letters from the employer were clear – the employee was first terminated and then offered a job change. His Honour rejected the employer’s argument that the employee was presented with two options, termination or job change, and selected the latter.

As an aside, his Honour noted that:

“If I had not found that [the employee] had been terminated from her employment, I would have found she had been constructively dismissed. There is no dispute that the new position is a demotion from her previous position as a supervisor and pays a lower salary.”

As the plaintiff had been dismissed, his Honour went on to apply the Bardal factors to assist in determining a reasonable notice period which the employee should have been entitled to, and ultimately decided that a reasonable notice period of 18 months was appropriate in the circumstances.

Damages reduced by income earned in notice period, but not by amount of disability benefits

At the date of termination, the employee was receiving long-term disability benefits. Justice Chalmers explained that the issue of whether the disability benefits received during the notice period ought to be deducted from the award of damages was to be determined by the terms of the employment contract and the intention of the parties.

The employee had paid a portion of the premiums for her disability coverage, therefore his Honour held that the employer was not entitled to a deduction of the long-term disability benefits received by the plaintiff during the notice period. Whether the insurer would require reimbursement of the benefits paid during a period when the employee was receiving damages for wrongful dismissal was a separate issue between the plaintiff and the insurer.

However, Justice Chalmers noted that income earned by the employee during the notice period is generally treated as mitigation of loss. As the employee had accepted the demotion and was working for the employer 12 hours per week, the employer was entitled to a credit for the amount the employee had earned in income during the notice period. As a result, the Court awarded damages to the employee in the amount of $88,000 (18 months of pre-termination salary), reduced by the income she earned through her employment during the notice period.

Contact Baker & Company Employment Lawyers in Toronto for Guidance on Employee Termination

The employment lawyers at Baker & Company in Toronto regularly work with both employees and employers with respect to managing risk, and enforcing rights, related to wrongful dismissals. It is vital that these documents be kept up to date to ensure that they comply with all relevant legislation and that an employer’s obligations have been satisfied while also mitigating an employer’s liability and risk. To speak with a lawyer about a wrongful dismissal, or other employment law issue contact us online or by phone at 416-777-0100.

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Employment Law Wrongful Dismissal

What to Know When You Have Been Fired Without Cause

Being fired without cause can be a very confusing and upsetting experience. This blog explains what termination without cause means, how much notice an employee should receive before being let go, and how all of these entitlements may be affected by an employer’s insolvency. 

What is dismissal without cause?

Dismissal without cause is when an employer terminates an employee without workplace misconduct. However, the employer may be liable for wrongful dismissal if done improperly.

To terminate an employee without cause, an employer must give the employee notice (or pay in lieu of notice). The Employment Standards Act of Ontario sets out the minimum notice periods that must be provided to an employee terminated by the employer. (However, it is essential to note that not all employees fall under the Employment Standards Act, including those employed in federally-regulated industries.)

Employers must give notice to employees dismissed without cause

The required notice period is the amount of time an employer must provide an employee before terminating their employment. Not all employees are entitled to notice under the Employment Standards Act, including those fired for willful misconduct, neglect of duty, or disobedience. 

If eligible, the required notice period depends on the employee’s length of service. For example, employees with less than three months’ service would be entitled to a one-week notice period, no matter how many hours per week they work.

Notice for employees hired for a fixed term

For employees who are hired for a specific amount of time or a standalone task, their contract may stipulate a specific notice period. However, statutory notice under the Employment Standards Act is required for these employees if:

  • Employment is terminated before the date work was specified to end; or
  • It has been more than 12 months since the employment started, and the term or task is incomplete; or
  • Employment is ongoing after the term or task is completed.

Notice for mass terminations

When 50 or more employees are terminated within four weeks (a “mass termination”), the amount of notice is based on how many employees are being terminated:

  • For employers terminating 50 to 199 employees, they must give eight weeks’ notice;
  • For employers terminating 200-499 employees, they must provide 12 weeks’ notice; and
  • For employers terminating 500 or more employees, they must give 16 weeks’ notice.

It is important to note that notice for some employees is governed by other laws, particularly those who work for federally-regulated employers. In many cases, federally-regulated employers only need to give the employee two weeks’ written notice.

Termination pay

If an employee has worked for their employer for at least three consecutive months and is terminated without cause, they are entitled to termination pay. The amount of termination pay is one week’s wages for every full year of employment. This is paid in a lump sum and includes vacation pay. This must be paid the later of the employee’s next payday or within seven days after termination.

Firing employees due to bankruptcy

Earlier this year, the Ontario Court of Appeal released its decision in Antchipalovskaia v. Guestlogix Inc., wherein an employee was found not to be entitled to a longer notice period because she had a break in employment due to the employer’s bankruptcy. Five years into her employment, the technology company she worked for had obtained creditor protection under the Companies’ Creditors Arrangement Act. 

When claims against the company were approved, a plan was put in place that absolved it of any liability to employees who submitted claims before a certain time. The employee’s termination was part of the plan to address these affected claims, which also involved immediately offering to re-hire her under a new employment contract. She was also informed that she could submit a proof of claim in the creditor protection proceedings for severance and termination pay. 

The employee was given a new start date in the employment contract

The employee submitted her claims, which were accepted in part. The employee was subsequently formally re-hired. The offer stipulated that her start date would be “the first day following the implementation of the [creditor protection] plan[.]” In a later letter to the employee, the employer stated:

“Further to your new employment agreement dated September 13, 2016 and the implementation of the [Companies’ Creditors Arrangement Act] plan of arrangement and compromise (the “CCAA Plan”) effective September 21, 2016, this letter will confirm that your start date (the “Starting Date”) with the Company has been reset to today’s date, September 22, 2016. From today forward this will be your effective Starting Date for all employment related matters including but not limited to seniority, benefits, vacation, etc. For certainty, there will be no interruption in your benefit coverage or other program participation as a result of the transition from your past employment agreement to the new one herein.”

Employee terminated three years after new contract signed

The newly signed employment contract excluded her entitlement to notice of termination. Three years after the commencement of the employee’s new employment contract, she was terminated. The employer provided the minimum termination pay in the amount she would have been entitled to under the Employment Standards Act if there had not been a break in her employment. This worked out to 9.5 weeks’ pay. It took the employee 12 months to find a new job.

Employee successfully claimed wrongful dismissal before motion judge

The employee brought an action for wrongful dismissal, which was decided in a motion for summary judgment. The motion judge found that the employment contract’s provisions on termination were invalid for not complying with the minimum requirements in the Employment Standards Act. The motion judge also decided that the employee’s employment should be treated as if it were continuous and held that the employee was entitled to 12 months’ notice.

Court of Appeal deemed employment not continuous, shorter notice period owed

The Ontario Court of Appeal set the motion judge’s decision aside. It disagreed with her decision because she did not give effect to the employee’s termination during the creditor protection proceedings. Instead, the employee’s employment period started when the new employment contract was signed.

However, the Court held that the earlier years of employment should still be considered because the employee’s previous service had benefited the employer. The Court of Appeal concluded that seven months’ notice was appropriate, explaining:

“This notice period is longer than the notice period the respondent would have been entitled to if she had first started her employment with the appellant in 2016, thereby accounting for the benefit the appellant received from her previous period of employment. At the same time, however, this notice period recognizes and gives effect to the intent of the court ordered release in the [creditor protection] proceedings, which was to release the appellant from liabilities arising prior to the implementation of the [CCAA] Plan.”

Contact Baker & Company in Toronto for Skilled Advice on Employee Termination

The knowledgeable employment lawyers at Baker & Company represent employees and employers seeking to resolve wrongful dismissal claims. We provide pragmatic and practical guidance and represent clients through negotiations or mediation, working towards a beneficial solution that is in our client’s best interests. Our team provides trusted advice and skilled representation in various employment matters, including drafting and reviewing employment policies, contracts, and severance packages. To schedule a confidential consultation, call 416-777-0100 or reach out online.

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Compensation Design, Employee Contracts & Agreements Employment Law Wrongful Dismissal

Employers Cannot Rely on ‘Saving Clause’ to Preserve Unfair Contracts

It is common when starting with a new company, or changing roles with an existing employer, to enter into an employment agreement that spells out, among other issues, the terms that will apply upon termination. Every employer is permitted to set out the terms that they wish, so long as they are meeting their obligations under the provincial Employment Standards Act (the “ESA”) with respect to notice.

If an employment contract does not meet those minimum standards, the employee is then tasked with a) noticing this, and b) enforcing their rights against their employer in court. Relying on the fact that some employees may not know their statutory rights when it comes to termination, many employers have taken to including non-compliant terms, while also including what is known as a ‘saving provision’ in the agreement to preserve the validity of the termination clause in the event that they are challenged on their notice requirements.

A savings provision will generally state that should the provisions within the termination clause fail to meet statutory minimums, that the employee will receive what they are entitled to under the ESA. In a recent decision, the Ontario Court of Appeal has definitively stated that this practice will not be tolerated.

Termination Clause Was in Direct Violation of the ESA

The plaintiff employee had been with his employer, a solar panel manufacturer, for a number of years. He began in the role of Regional Sales Manager and was eventually promoted to a project management role a few years later. At the start of both roles, he was provided with an employment contract containing similar terms with respect to termination.

The contract itself provided for a notice period of two weeks and stated that benefits would cease after four weeks. This language was followed by a clause that stated as follows:

In the event the minimum statutory requirements as at the date of termination provide for any greater right or benefit than that provided in this agreement, such statutory requirements will replace the notice or payments in lieu of notice contemplated under this agreement.

Under the ESA, the statutory notice period is dependant on the length of employment. Depending on how long an employee is with an employer, they may be entitled to a minimum of 8 weeks’ notice upon termination without cause. The contract signed in the case at hand was intended to apply for an indefinite period of employment, meaning that the notice and benefits clauses were in conflict with the minimum standards under the ESA once the employee had been with the company for more than three years. Even if the provisions in the contract happened to satisfy the minimum in one particular case, they were intended to apply no matter how long the employee was with the employer.

Certainty and Fairness Must Extend to All Employees

The Court of Appeal found that a saving provision is, on its face, unfair to employees and advantageous to employers. As stated earlier, it relies on the employee to notice that the termination clause does not meet ESA minimums and to enforce their rights against their former employer. Further, there is an unequal bargaining power inherent in the signing of employment contracts. It would not be right to allow employers to exploit that fact.

Employees need to know the conditions, including entitlements, of their employment with certainty. This is especially so with respect to an employee’s termination – a fragile moment of stress and uncertainty.

In this context, saving provisions in termination clauses cannot save employers who attempt to contract out of the ESA’s minimum standards. Holding otherwise creates the risk employers will slip sentences, like the four-week benefits clause, into employment contracts in the hope that employees will accept the terms. This outcome exploits vulnerable employees who hold unequal bargaining power in contract negotiations. Moreover, it flouts the purpose of the ESA – to protect employees and to ensure that employers treat them fairly upon termination.

The ONCA held that when a termination clause fails to meet the minimum standards under the ESA, it will not be preserved via a saving provision. Instead, the clause will be deemed unenforceable, and the employee will be entitled to common law minimums, which are often considerably more than the minimums provided under the ESA.

At Baker & Company, we take the time to meet with you and understand your unique needs in order to offer solutions to the diverse problems you may encounter in the workplace. The highly skilled Toronto employment lawyers at Baker & Company can review your employment policies and contracts to ensure that you are meeting your legal obligations while addressing and mitigating risk. Protect yourself, your workplace, and your employees. We rely on our broad base of experience and expertise to provide clear, pragmatic legal advice, and representation in litigation. Call us at 416-777-0100 or contact us online for a consultation.

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Compensation Design, Employee Contracts & Agreements Employment Law Severance Packages And Severance Package Review Wrongful Dismissal

Resignation & Restarting the Clock on Terms of Service

It may be expected that any employee who resigns from their job and then later returns to the same employer will find that their ‘term of service’ is affected. It is unlikely that someone who had worked with a company for 5 years, left for two and then came back, would be entitled to pick up where they left off. However, what would happen in a situation where a long-term employee submits a resignation, and while still employed by the company, wishes to resume their employment?

A recent decision of the Ontario Court of Appeal has come down on the side of the employer in this situation, holding that the resignation must be taken into consideration, therefore creating an interrupted period of employment. This, in turn, affected the reasonable notice the employee was entitled to upon her eventual termination.

Facts of the Case

The respondent employee was a dental hygienist who had been employed with the appellant employer since 1993. In 2005, she decided to move to a new city with her fiance, and find work elsewhere. She submitted her resignation, which was accepted by her employer. While still working at the practice during the notice period, her relationship came to an end and she requested to be reinstated, as she would no longer be moving. Her employer agreed, and the employee signed a new contract of employment. The contract indicated that should she ever be terminated, she would only be entitled to the minimum notice set out in the Employment Standards Act.

Seven years later, the employee was terminated without cause. At the time of her termination, she was provided with notice pay equivalent to one week of employment. The employee brought an action for wrongful dismissal.

The Lower Court Decision

The Superior Court of Justice found that there was insufficient consideration to support the contract limiting the employee’s common law entitlement to reasonable notice. As a result, the court held that the employee had been wrongfully terminated. Further, it was determined that her damages would be based on the full period she was employed, disregarding the brief period during which she had resigned. She was awarded damages equivalent to 15 months’ notice, totalling $71,650.02.

The Appeal

The employer appealed the decision. The Court of Appeal found that there was valid conisderation to uphold the employment contract signed in 2005. The court further disagreed with the finding regarding the period of employment. The court held:

We agree with the appellant’s submissions that Ms. Theberge-Lindsay’s unequivocal resignation and re-hiring in 2005 marked a break in the employment relationship after which an entirely new contract was reached between her and Dr. Kutcher. There was consideration for that new employment contract, that is, Ms. Theberge-Lindsay’s offer to again be employed by Dr. Kutcher and his acceptance of her offer to again employ her. On this basis, the Employment Standards Act, 2000 minimum notice is the maximum amount to which the respondent is entitled, measured from 2005. On this basis, she is entitled to 7.5 weeks of salary at $1,204 per week, less $1,200 severance already paid.

It remains to be seen whether this decision will be appealed any further, but for now, it appears that a resignation, even a situation in which there is no actual break in the employment, will be found to ‘restart the clock’ with respect to an employee’s term of service.

At Baker & Company, we take the time to meet with you and understand your unique needs in order to offer solutions to the diverse problems you may encounter in the workplace. The highly skilled Toronto employment lawyers at Baker & Company will review and draft employment agreements and advise on termination packages in order to protect employers from future litigation. We also provide practical and effective representation for employees faced with wrongful dismissal by their employer. We rely on our broad base of experience and expertise to provide clear, pragmatic legal advice, and representation in litigation.  Call us at 416-777-0100 or contact us online for a consultation.