by eruditelaw | Mar 6, 2024 | Blog Post, Employment Law
Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029: Employers may not have “sole discretion” in terminating an employee without cause.
In recent years, employers have been dealt blow after blow as Ontario Courts continue to find ways to void termination provisions in employment contracts. Last month, the Ontario Superior Court of Justice continued this trend by finding that an employment contract was unenforceable because, among other reasons, it allowed the employer to terminate the employee’s employment in its “sole discretion” and “at any time”.
The employee, Karen Dufault, entered into a fixed-term employment contract of two years with the defendant employer, The Corporation of the Township of Ignance. The employer subsequently terminated her employment, without cause, two months into the employment relationship.
Ms. Dufault then brought an action against the Township for salary and benefits for the remaining term of the employment contract. She argued that the termination clauses in the employment contract violated the Employment Standards Act (“ESA”). Specifically, Ms. Dufault argued that:
- the “for cause” termination clause allowed for termination without notice in broader circumstances than permitted by the ESA;
- the “without cause” termination clause suggested that the employer could pay less payment in lieu of notice than would be required by the ESA; and
- the “without cause” termination clause opened the door to allow the employer to terminate employment in its “sole discretion” and “at any time”.
The Court accepted Ms. Dufault’s arguments and held that the employment contract was not enforceable because:
- the employment agreement would have allowed the employer to terminate the employment relationship “for cause” for reasons that did not meet the standards under the ESA for termination without notice;
- the employment agreement attempted to limit the payment in lieu of notice to “base salary”, which is less than the requirement amount pursuant to the
Finally, and perhaps most problematic of all for lawyers and employers is that the Court held that the termination “without cause” provision was invalid because it allowed the employer to terminate an employee in its “sole discretion” and “at any time”:
[46] Thirdly, the plaintiff submits that Article 4.02 misstates the ESA when it gives the employer “sole discretion” to terminate the employee’s employment at any time. I agree with this submission. The Act prohibits the employer from terminating an employee on the conclusion of an employee’s leave (s. 53) or in reprisal for attempting to exercise a right under the Act (s. 74). Thus, the right of the employer to dismiss is not absolute.
The Court reasoned that this would allow an employer to terminate an employee even if they were returning from protected leave or due to reprisal for the employee exercising their legal rights.
As a result, Ms. Dufault was entitled to her salary and benefits for the remainder of the fixed term employment contract.
Takeaways
While it remains to be seen whether this decision will be appealed, the growing body of case law voiding termination provisions are becoming increasing strict. Employers and their lawyers should be mindful of these new developments and review their employment agreements regularly to determine whether their contracts require revisions for both new and existing employees.
A copy of the decision is linked here: Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029
The contents of this blog is not legal advice. If you would like your employment contract reviewed, contact our team of lawyers at Erudite Law LLP for a consultation.
by Jimmie Chen | Sep 10, 2020 | Blog Post, Employment Law
In Ontario, an employee can be dismissed in one of two ways:
- Termination for cause; or
- Termination without cause.
Termination for cause
When an employer terminates an employee for cause the employee will not be entitled to any compensation with regards to the dismissal. At law, this form of compensation is typically referred to as “reasonable notice”, “common law notice” or “termination pay”. Given that termination for cause is extremely prejudicial to the former employee, it has been labelled as being an extremely severe and punitive measure to be taken only in the most serious circumstances. As such, the courts have established a very high standard for an employer seeking to terminate an employee for cause.
Standards for terminating an employee with cause
There are two different standards that can be applied to determine if “just cause” for termination has been established:
- Under the Employment Standards Act: the employee was guilty of “wilful misconduct…that is not trivial and has not been condoned by the employer” ; or
- Under Common Law: the employee was guilty of basis prolonged incompetence and/or serious misconduct which led to “just cause” for termination.
The standard applied depends on whether or not there is an enforceable termination clause in the employment agreement.
If there is an enforceable, binding employment agreement, with an enforceable termination clause, that is in compliance with the Employment Standards Act, the standard of “willful misconduct” will apply. Alternatively, in the absence of an enforceable employment agreement, the common law standard of “just cause” will apply.
In the case of Plester v. PolyOne Canada Inc. 2011 ONSC 6068, the Ontario Superior Court of Justice made the following assertions on the difference between termination for cause under the Employment Standards Act (“wilful misconduct”) and at common law (“just cause”):
“Just cause involves a more objective test, albeit one that takes into account a contextual analysis and therefore has subjective elements. Wilful misconduct involves an assessment of subjective intent, almost akin to a special intent in criminal law.”
In summary, in order for an employer to terminate an employee under the Employment Standards Act, the employer will have to demonstrate that the employee intentionally engaged in serious misconduct. In the absence of an enforceable termination provision or an employment agreement, the burden to establish termination for cause at common law is lowered as the employer is only required to prove the act of serious misconduct.
Termination Without Cause
Termination without cause refers to when an employer terminates an employee without providing a reason for terminating the employee. To put it simply, termination for cause is when an employer dismisses an employee for reasons that are usually not related to serious workplace misconduct.
When an employee is dismissed without cause they are entitled to reasonable notice of termination – that being a reasonable amount of time in which the employee should be notified that their employment will be terminated.
What is reasonable notice?
There are two ways in which reasonable notice can be provided to the dismissed employee:
Working Notice – the amount of time the employee will working prior to the set termination date; or
Pay in lieu of Notice – payment equal to the amount of working notice the employee should have received.
Common law notice or statutory notice
The length of reasonable notice afforded to employees dismissed is determined by whether or not they are receiving statutory notice or common law notice. The length of statutory notice is determined by the Employment Standards Act, whereas common law notice is determined by evaluating several factors, which are discussed below.
Statutory notice is applicable when the employee has a valid employment agreement, with a valid termination clause, which limits the notice period to the notice period provided in the Employment Standards Act.
Reasonable notice under the Employment Standards Act
The reasonable notice periods under the Employment Standards Act are as follows:
Amount of notice required if an employee has been continuously employed for at least three months:
Period of employment Notice required
Less than 1 year 1 week
1 year but less than 3 years 2 weeks
3 years but less than 4 years 3 weeks
4 years but less than 5 years 4 weeks
5 years but less than 6 years 5 weeks
6 years but less than 7 years 6 weeks
7 years but less than 8 years 7 weeks
8 years or more 8 weeks
Reasonable notice requirements at common law
An employee who receives statutory notice may claim that they were wrongfully terminated as they did not receive sufficient notice and seek common law notice as the common law notice period is typically longer. An employee who is terminated without reasonable notice is entitled to damages for breach of contract asserted on the employment income the employee would have earned during the reasonable notice period. The length of reasonable notice is determined by the following principles as listed in the case of Paquette v. TeraGo Networks Inc., 2015 ONSC 4189:
- The character of employment. A longer notice period is provided for senior management or highly skilled and specialized employees and a shorter period is provided for lower rank or unspecialized employees
- The length of employment. Generally, the longer the duration of employment, the longer the notice period;
- The age of the employee at termination. A longer notice period will usually be justified for older long-term employees; and
- The availability of similar employment having regard to the experience, training and qualifications of the employee. Economic factors such as a downturn in the economy or in a particular industry or sector of the economy can also play a factor as they may indicate that an employee may have difficulty finding another position and may justify a longer notice period.
It is important to note that the determination of what period constitutes reasonable notice of termination is a principled art and not a mathematical science that turns on the particular facts of each case. There is no “right” figure for reasonable notice. Most cases yield a range of reasonable figures;
Conclusion
It is crucial for employers and employees alike to understand their rights and responsibilities as set out both in statute and in common law.
Employers should be cautious in drafting their employment agreements as particular language and reference to the Employment Standards Act is required to limit notice period to the statutory minimum. Invalid termination clauses can cause expensive litigation for both parties.
If you have questions regarding your employment contracts, whether or not you have been provided adequate notice, or any other employment issue contact by phone at 905-471-6161 or email us at info@eruditelaw.com.
by Syrah Yusuf | Nov 1, 2017 | Blog Post
What is Probate?
To put it in the simplest terms, Probate is the Court Process by which a Will is authenticated, and through it an executor is issue a “Certificate of Appointment of Estate Trustee with a Will”. This certificate gives the executor the authority to act on behalf of the estate.
It is essentially an approval process that checks to determine whether your Will is valid and confirms the appointment of the Estate Trustee that you have chosen. Without a Certificate of Appointment, the Estate Trustee may run into issues when they attempt to transfer the assets as per your instructions on the Will.
Why does this matter to me?
It is likely that you stumbled across this blog specifically searching for the word “Probate”. This process is important for the Estate Trustee of an Estate, as well as individuals completing or revising their Will for effective tax planning purposes. Understanding the process of probate will go a long way in allowing the beneficiaries of your Estate to inherit a more valuable estate.
The Fees
There is a cost associated with probating a Will. This is called the Estate Administration Tax in Ontario, also sometimes lovingly referred to as “Probate Fees”. It is important to note that Estate Administration Tax and income tax is not the same thing. Upon death, the executor of the Will is responsible for accurately reporting your assets for Estates Administration Tax and Income Tax purposes. While this article may touch upon Income Tax issues, the information presented here is focused on the Estate Administration Tax.
With regards to the Estate Administration Tax, the current rates in Ontario are:
- $5 for each $1,000, or part thereof, of the first $50,000 of the value of the estate, and
- $15 for each $1,000, or part thereof, of the value of the estate exceeding $50,000.
There is no Estate Administration Tax due if the total value of the estate is less than $1,000.
You can find a handy Estates Administration Tax calculator here: https://www.attorneygeneral.jus.gov.on.ca/english/estates/calculate.php
Can I avoid paying the fees?
While it is unlikely that you can avoid paying Estate Administration Tax completely, you can minimize Estate Administration Tax by carefully planning how you want to distribute your assets. This is because not all of your assets necessarily need to go through the probate process.
Obviously, a commercial bank will not transfer your entire life savings without some sort of assurance that the Executor of the Estate is who they say they are. However, less valuable assets, such as your vehicle, may be transferable without a Certificate of Appointment to your executor through Service Ontario.
Listed below are some of the ways you can try to minimize Estate Administration Tax. It is important to know that the methods as described below carry significant legal consequences, so we highly recommend you speak to a lawyer before attempting to do this yourself.
- Name beneficiaries in your Life Insurance Plan and/or Registered Accounts.
If you name a beneficiary for your life insurance plan or registered savings plans such as RRIFs or RRSPs, it is possible to bypass probate by directly passing the assets in those plans to your beneficiaries. While your beneficiaries will still be responsible to accurately report the amount for Income Tax purposes, this will allow you to avoid the Estate Administration Tax.
- Joint Ownership of Assets
If the title to a specific asset is jointly owned by you and someone else, such as your spouse, the survivor will automatically receive the title of the asset upon your death. This allows you to bypass probate, as the survivor will have full ownership of the specific asset, and there is no need to prove their right of ownership.
In some provinces, like Ontario, it is possible to have more than one Will. How this usually works is that one Will can be used to distribute assets that will require probate, and the second Will can be used to distribute assets that does not require probate. It is important that the Will is carefully worded so that the there are no conflicts between the two Wills.
This method has been tested in court. In Granovesky Estate v. Ontario, the deceased left two Wills: a Primary Will to deal with assets that required probate, and a Secondary Will to deal with assets that did not require probate.
The court decided that there was no prohibition against asking the court for a limited grant of a Certificate of Appointment on the Primary Will (and all the assets included in it). Furthermore, there was no requirement for the Estate Trustee to submit the deceased’s secondary Will to probate or to pay Probate Fees (as it was called then) on the value of assets listed on the Secondary Will.
If you wish, you can set up a private company or trust to own your assets to avoid the probate process. This is commonly used for Income Tax planning purposes for large estates to minimize the Income Tax paid on the Estate. As this gets fairly complex, we recommend you speak to your lawyer about the costs associated with creating a trust or company. The costs associated with this method may be more than the Estate Administration Tax itself, so avoiding the Estate Administration Tax should not be your sole reason to set up a private company or trust for your Estate.
Conclusion
Every Estate is unique, and different methods will work better for different individuals. Erudite Law can guide you through the probate process and work with you to discover the right plan, allowing you to leave a more valuable estate for your loved ones.
For more information with regards to probating a will, or Wills and Estates in general, please do not hesitate to reach out to us by phone at 905-471-6161 or email us at info@eruditelaw.com.
