Termination of Employment: With Cause, Without Cause and Reasonable Notice
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.
