In general, an employer is permitted to terminate employment without just cause, provided they give an employee reasonable notice or compensation instead of reasonable notice. An exception to this is if an employer has violated an employee’s human rights or violated certain parts of the Employment Standards Act (i.e. failure to reinstate an employee after pregnancy leave).
There is an implied term in every contract of employment that an employer will provide an employee with reasonable notice of termination. This presumption may be rebutted with a valid and enforceable termination clause (this will be expanded on below). Absent an enforceable and valid termination clause, an employer must provide an employee with reasonable advance notice of termination or payment in an amount equivalent to all salary and benefits that would have been earned by the employee during the reasonable notice period. The ‘wrongful’ in wrongful dismissal, refers to the failure of an employer to provide an employee with reasonable notice and does not refer to the dismissal itself.
The Employment Standards Act only provides minimum notice periods, which is different depending on the province. An employee can be entitled to a notice period beyond the statutory minimum, depending on a number of factors which the courts will consider in determining the appropriate notice period. These factors include: length of employment; training and experience required to fill the position; responsibility attached to the position; availability of equivalent alternative employment; employee’s relevant education, training and experience; the employee’s age; and if there was inducement to leave another job. If an employer has acted unfairly or in bad faith at the time of termination, an employee may be entitled to an increase in the amount of notice they are entitled to.
Employers are increasingly looking to minimize their exposure to common law notice periods (i.e. notice periods that are awarded by the Courts depending on the factors listed above) by inserting a termination clause in their employment agreement with their employees. A termination clause is an unambiguous, statutorily compliant, clause that outlines the amount of notice an employer will provide an employee if they are terminated without cause. For example, the Ontario Court in its decision in the case of Lloyd v. Oracle Corp. Canada [2004] O.J. No. 1806 upheld a termination clause that read as follows: “Oracle may terminate your employment at any time, without cause, upon giving prior written notice in accordance with the Ontario Employment Standards Act, or any similar legislation which is in force in the province within which Oracle’s offer of employment is accepted”. The Court reasoned that the termination clause was sufficient to rebut the common law presumption of reasonable notice and the clause met the minimum requirements of the Employment Standards Act.
In the majority of instances when a termination clause is present, the termination clause will provide for a notice period that is less than what an employee would have received under the common law presumption of reasonable notice. It is for this reason that many employees seek to challenge the validity and enforceability of these clauses. Some arguments that are usually put forth to challenge these clauses include, misrepresentation, lack of consideration, duress and unconscionability. Employees also tend to challenge the specific content of these clauses. In this regard, the employee will argue that the clause is too vague and ambiguous or that it fails to comply with the minimum notice periods required by the applicable employment legislation in the province.
In the event an employer has not provided an employee with reasonable notice and/or severance in accordance with their minimum entitlements under the Employment Standards Act, the employee has the option of pursuing a claim under the Employment Standards Act or through the civil courts. An employee cannot elect to pursue a remedy under both. If an employee elects to pursue a remedy under the Employment Standards Act, any award will be limited to the maximum allowed under the Act. Alternatively, if the employee feels that they are entitled to a reasonable notice period beyond the statutory minimum, the employee would have to pursue a claim in the civil courts.
Example:
Kevin Keays was fired from a Honda assembly plant in Alliston, Ont., in March 2000. Three years earlier, he had been diagnosed with chronic fatigue syndrome, which led the 13-year employee to take time off work.
His employers at Honda recommended he apply for a program — run under the Ontario Human Rights Code — that would exempt him from being penalized for repeatedly missing work. Keays also saw a company doctor. After more workplace absences and a breakdown in his relationship with his employer, Honda Canada cancelled Keays' enrolment in the provincial program and ordered him to see another company doctor.
Keays, acting on his lawyer's advice, refused unless Honda officials first told him more about the purpose of the visit with the doctor. Honda fired Keays for insubordination.
The Ontario Superior Court ruled Keays was fired without cause and awarded him 24 months of salary in lieu of formal notice, and $500,000 in punitive damages for violating his human rights. It was the largest award of punitive damages in a Canadian employment case.
Honda, a rather large organization took a rather large risk and it was costly. Can your small business afford to take a risk?
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