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.
