Notice and Severance under the Employment Standards Act / The Minimum Standards
The Employment Standards Act, 2000 (the “ESA”) provides the minimum standards of employment with respect to, among many other things, overtime, hours of work, minimum wages, holidays, pregnancy and parental leave, and termination of employment in Ontario.
Under the ESA, employers are required to give their employees advance notice of termination in writing or, in the alternative, pay wages and continue benefits for the statutory notice period (commonly referred to as termination pay). With respect to the termination of a single employee (as opposed to mass firings or lay-offs), the minimum length of notice depends on the length of the terminated employee’s service:
Length of Service
|More than 3 Months but less than 1 year||1 week|
|1 year or more but less than 3 years||2 weeks|
|3 years or more but less than 4 years||3 weeks|
|4 years or more but less than 5 years||4 weeks|
|5 years or more but less than 6 years||5 weeks|
|6 years or more but less than 7 years||6 weeks|
|7 years or more but less than 8 years||7 weeks|
|8 years or more||8 weeks|
In addition to notice or termination pat of notice, the ESA also entitles employees to severance pay if they have been employed 5 years or more and either:
- the severance occurred because of a permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
- the employer has a payroll of $2.5 million or more.
If entitled, terminated employees are to be paid severance in a lump sum amount equivalent to one week of non-overtime wages per completed year of employment up to a maximum of 26 weeks, within 7 days of termination.
Willful Misconduct, Just Cause and other Exceptions to the Requirement to provide Notice of Termination
If an employee has engaged in willful misconduct or the employer has other “just cause” for termination, they are not required to provide reasonable notice or payment instead of notice. However, termination for cause has been described by the Ontario courts as the “capital punishment” of the employment relationship. It is typically very difficult for an employer to prove willful misconduct or cause. The employer must show that there was employee misconduct and that such misconduct was sufficient to dismiss the employee without notice, such as theft or dishonesty.
In determining the nature and degree of misconduct the courts consider whether there has been a total breakdown in the employment relationship, by either a violation of an essential condition of the employment contract, or destruction of the employer’s inherent faith in the employee. The courts consider the employee’s seniority, whether warnings were given, and whether such conduct had previously been tolerated.
Often, an employer is required to implement progressive discipline, in other words, give warnings and take other steps prior to firing an employee for just cause. If they have not done so then, in all except the most serious of cases, an employer will have a difficult time establishing cause.
Grounds for cause include insubordination, dishonesty, theft, unjustified absenteeism, repeated and persistent lateness, breach of trust, harassment of another employee and workplace violence. In addition, where a single act on its own is sufficient to warrant a just cause dismissal, courts may find that several smaller incidents of misconduct can amount to just cause. In such a situation, an employers’ record of documented misconduct and incidents, proof of warnings and other progressive disciplinary steps are critical.
Other exceptions to an employer’s obligation to provide notice include where an employee is laid-off (we note, however, that in many situations employers may not be permitted to layoff employees), an employee was employed only for a definite term or task, where the employment has become frustrated by some unforeseeable event or circumstance, or where its performance has become impossible.
Wrongful Dismissal and Reasonable Notice
If there is no cause for termination, then the employee is entitled to reasonable notice of termination or termination pay in lieu. The law in Ontario aims to balance the rights of both employees and employers in this respect. While an employer does not have to justify the termination except in limited circumstances, the employee must be given reasonable notice. An employee is wrongfully dismissed if they’ve been fired without reason or just cause and have not been given reasonable notice of termination or pay in lieu, commonly described as a severance package.
Wrongful dismissal also includes situations where an employee’s pay or benefits are reduced, or an employer substantially changes the type and nature of an employee’s work. This is called constructive dismissal.
The purpose of reasonable notice is to provide an employee with enough time to find comparable employment.
Where there is no written employment contract restricting rights at termination or the employment contract is void because it is in breach of the ESA, the appropriate notice period can be much greater than the minimums set out under the ESA. An employee’s entitlement to reasonable notice is dependent on four factors set out by the Ontario courts: (1) age, (2) length of service, (3) character of employment and (4) availability of similar employment. Typically, very short periods of employment or very long periods of employment entitle employees to longer notice periods. Older employees and those in more senior positions are also entitled to more notice.
Where there is a valid employment contract, which provides for notice equal to or in excess of the ESA minimums, then an employee’s entitlements are those set out in the employment contract.
Unlawful dismissal must also be distinguished. A termination because of discrimination under the Ontario Human Rights Code or as retaliation for reporting or enforcing a provision of the ESA or the Occupational Health and Safety Act, may be unlawful. A dismissal may also be unlawful if it occurs during or immediately after a leave of absence (such as maternity leave or medical leave). Where a termination is unlawful, the legal remedies that may be available to an employee are more extensive.
Contact Justin W. Anisman
Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning Zibarras LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.