In Ontario, a wrongful dismissal is when an employee is terminated without enough “severance”*.
What is severance?
Employers have to provide advance warning to employees that their employment is going to be terminated otherwise it is a wrongful dismissal. However, employers can just pay employees money in lieu of advance warning of termination. “Severance” also known as “reasonable notice”, “pay in lieu of notice” or “termination pay” is this amount of money provided in lieu of advanced warning.
If the employer does not give the employee enough severance in Ontario, it is a “wrongful dismissal”.
How much severance are you owed?
Severance is measured in two different ways: statutory severance and common law severance. Employees can be entitled to both statutory severance and common law severance. All employees are generally entitled to statutory severance. However, some employees are not entitled to common law severance. Some employees have employment contracts that contain termination clauses which take away the right to common law severance.
Common law severance is generally much more lucrative than statutory notice.
Even if an employment contract limits common law severance by way of a termination clause, an employment lawyer at Dutton Employment Law may be able to strike out that termination clause as unenforceable. Call us to find out more.
Statutory severance is the minimum amount of pay that an employee must receive according to laws made by the government.
Employees must receive 1 week of statutory severance for every year of service as per the Ontario government Employment Standards Act. For example, an employee who has worked for 8 years must receive 8 weeks’ statutory severance otherwise it is a wrongful dismissal in Ontario.
It is always a wrongful dismissal if the employer provided the employee anything less than minimum statutory severance.
Common law Severance is the amount of money an employer must pay a terminated employee according to judge made “precedents”.
Common law severance is the formula for termination pay based on “precedents”, or similar cases from Canadian courts. Calculating common law reasonable notice is an art, not a science. There is no formula like there is for statutory severance. It is not true that employees are usually awarded 1 month common law severance for every year of service. In reality, many employees get much more than 1 month’ common law severance for every year of service.
Calculating common law severance revolves around one key issue: how much time will it take the terminated employee to find comparable employment? Judges usually answer this by examining four non-exhaustive factors:
- the character of employment;
- the length of service;
- age; and
- the availability of similar employment while having regard to experience, training and qualifications.
Therefore, common law severance can vary widely depending on the circumstances. For instance, a Vice President of a bank, who worked for the bank for his entire career, who is 75 years old, and whose high-level skills only apply to positions at just a few other banks would receive the maximum amount of common law severance – around 26-28 months severance otherwise it is a wrongful dismissal. This is because it is virtually impossible for the former Vice President to find comparable employment, considering:
- any job less than VP would be inappropriate;
- his long service with a single employer has tainted him;
- his age is a barrier for the long term plans of another employer; and
- and there are few similar employers in the country, so his pool of target employers would be minuscule.
How will I know if I have been wrongfully dismissed?
Whenever we get a new prospective client, we ask them a series of questions reflecting the four factors noted above (age, salary, years of service, etc…). Thereafter, we compare their answers with a special database of precedents from thousands of Canadian court cases to determine what common law severance they are entitled to. If we determine that they were not provided enough severance, then we know that they have been wrongfully dismissed.
Unless the employment contract states otherwise, it is an Ontario wrongful dismissal if the employer offered anything less than maximum severance according to the common law.
Employees are entitled to salary, bonuses and benefits during the notice period too.
Not only are employees supposed to be paid their usual salary as severance, but they should also be paid the same bonus they would have received during the severance period otherwise it is a wrongful dismissal in Ontario. In addition, they should also be provided the same benefits (i.e. insurance, cell phone reimbursement, etc.) during the severance period otherwise it is a wrongful dismissal in Ontario.
Employees must be given the same compensation they expected to receive over the whole severance period otherwise it is a wrongful dismissal.
Severance may not be the only entitlement to funds an employee has access to following termination.
In Ontario wrongful dismissal law, employees can be awarded significant additional funds if, for example, they were terminated in bad faith, threatened with just cause where no just cause existed, discriminated against or harassed.
In addition, employees are entitled to be reimbursed for their legal costs in demanding or suing for more severance.
Employees should never sign a termination package without consulting an employment lawyer.
Employers usually never offer an employee their full entitlement to severance. Call us to find out if you were provided enough severance or if you have been wrongfully dismissed.
Our Ontario wrongful dismissal lawyers are regularly sought out by employees to provide consultation and advice, and write a demand letter or sue for wrongful dismissal, if need be. Call a wrongful dismissal employment lawyer today. Or fill out the form below and we will call you back or email you back.
*The word “severance” is used throughout this blog post as a method to teach Ontario wrongful dismissal law to laypersons. Dutton Employment Law knows that “severance” is a term of art. Dutton Employment Law does not warrant that “severance” means what it is as described in this blog post at all times.
Jeff is an employment lawyer in Toronto. He is the Principal of the Dutton Employment Law Group at Monkhouse Law. Jeff is a frequent lecturer on employment law and is the author of an employment law textbook and various trade journal articles.