Wrongful Dismissal - When You Are Fired Without Cause

Breface:

Losing a job is a very unpleasant experience. It is always worse when it is done without cause. You became redundant for financial or other business reasons unrelated to your performance. The common law cannot give you your job back but it does provide some relief. It is called “reasonable notice”. The following discussion is about the dismissal of non-unionized employees in Ontario from workplaces governed by provincial law. If you work at a workplace governed by federal legislation or are a unionized employee the rules are different.

Reasonable Notice:

Your employer must give you a notice of termination and provide remuneration in some manner for a period of time known as “reasonable notice.” There are three methods of doing so which are:

1. Give you working notice such that you continue working, and being paid, from the time of receiving your notice to an actual departure date in the future;
2. Give you pay in lieu of notice, a lump sum payment at the time of notice and ask you to depart immediately;
3. Give you notice and ask that you depart immediately, without a lump sum payment but with a promise to pay you for a set period of time;
4.  A combination of the above.

For What Period of Time:

There are no hard and fast means of calculating the period of reasonable notice. It is not a formula such as a month of pay for every year of working. It is a judgment call based on how long you worked, your age, the type of position you held, your compensation (salary and benefits) and the what other jobs are available in other workplaces. This is a matter for negotiation, or to be determined by an arbitrator or a judge.

Is There A Minimum Time Period:

The short answer is yes. The Employment Standards Act (ESA), at s. 57, calls for minimum (reasonable) notice periods which vary from one week to eight weeks depending on the length of your employment. This is a minimum requirement on termination. The common law period of reasonable notice is almost always longer.

The ESA, under s. 64, also specifies a formula for calculating notice for large layoffs or in larger companies. The formula is one week's wages times the number of years and any additional months of employment. So if you earned $1,000 a week and worked for 10 years and six months the severance would be $10,500.

The Duty to Mitigate:

As a dismissed employee you have a duty at common law to mitigate your losses. This requires you to take reasonable steps to find alternate employment. If you do a reasonable notice period remains the same but the amount you are paid is reduced by your new income. If you do not take reasonable steps, then to the extent the employer can prove that, and show available alternate work, your losses will be reduced by the potential income you should have earned.

Can These Minimum Periods Be Made Shorter By Contract:

Employers are aware of the law. They often insist on a written contract of employment. Those contracts invariably specify a contractual period of notice on termination. Those clauses cannot reduce the ESA time frames but they can substitute a severance formula in place of your common law rights to reasonable notice.

Are Reduced Termination Clauses Enforceable:

The Supreme Court of Canada (SCC) has decided that any termination clause that calls for a payment less than the minimum standards set by the ESA is void. At the same time it stated that as long as the minimum was provided, a termination clause could alter the common law presumption of reasonable notice on termination. Therefore such clauses must be compliant with the ESA and they must unambiguously exclude the right to common law reasonable notice.

The decision set off a maelstrom of conflicting decisions. Reconciling them is nearly impossible. The struggle is human. Judges are loathe to exclude the right to common law damages and this often leads to some tortured contractual interpretations. 

A recent example is the case of Amberber v. IBM Canada Ltd. IBM brought an unsuccessful motion to dismiss the claim. The Ontario Court of Appeal (ONCA) reversed the decision. The termination clause read as follows:

TERMINATION OF EMPLOYMENT

If you are terminated by IBM other than for cause, IBM will provide you with notice or a separation payment in lieu of notice of termination equal to the greater of (a) one (1) month of your current annual base salary or (b) one week of your current annual base salary, for each completed six months worked from your IBM service reference date to a maximum of twelve (12) months of your annual base salary. This payment includes any and all termination notice pay, and severance payments you may be entitled to under provincial employment standards legislation and Common Law. Any separation payment will be subject to applicable statutory deductions. In addition, you will be entitled to benefit continuation for the minimum notice period under applicable provincial employment standard legislation. In the event that the applicable provincial employment standard legislation provides you with superior entitlements upon termination of employment (“statutory entitlements”) than provided for in this offer of employment, IBM shall provide you with your statutory entitlements in substitution for your rights under this offer of employment.  

Principles of Interpretation:

The ONCA reviewed the usual principles of interpretation in dealing with employment contracts as set out in Wood v. Fred Deeley Imports Ltd. Those principles are:

1.    Such contracts are most often written by the employer, usually as a condition of employment, so the contra proferentem rule would apply. In English this means interpretation against the draftsman so that where the contract is ambiguous, the version or reading which most benefits the employee would be used;

2.      Further, as the employee usually has little or no bargaining power where a termination clause can reasonably be read in more than one way, the version that benefits the employee is to be preferred.

Ambiguity:

There must be a genuine ambiguity before these principles are applied. Ambiguity means the existence of more than one possible meaning which leads to confusion as to which meaning was intended. In common law, it means more than just two competing interpretations as in any dispute that would always be the case. Rather it is to be determined by an objective evaluation.

The OCA read the termination clause as a whole-they did not sever it into parts as the motions judge did. Read as a whole the meaning was plain. There was no ambiguity and a court should not strain to find one where none exists.

Sum & Substance:

1. You can expect to see this termination clause, or similar versions, in employment contracts going forward;
2. The ONCA appears to be moving towards a common sense approach to such contracts and away from  a strained approach to finding ambiguity;
3. The impact of the clause being enforceable is significant. The employee received some working pay and then the sum of $24,121.59 on termination. This was the minimum amount under the ESA. His common-law entitlement would certainly have been greater.

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