Termination of one’s employment can be incredibly stressful. This stress can be even further augmented when the termination is “without cause”, when employees are left confused as to why their employment was terminated or even wondering if the termination was legal.
A without cause termination is the most common type of termination employees face in Ontario. Despite its prevalence, the impact, entitlements, and legalities surrounding this kind of dismissal are often misunderstood by employees.
The below will set out the basics of without cause termination for employees, with the aim to add clarity to an already overwhelming time. The obligations for employers administering a without cause termination can also be found summarized below.
What are the ways an employee can be terminated in Ontario?
There are two streams of termination – with cause, and without cause.
When an individual’s employment is being terminated without cause, it means that while they are being dismissed from their role, the reasoning is not due to significant workplace misconduct.
The termination of employment for serious misconduct is instead known as termination for cause. This type of termination does not have any attached termination entitlements.
Who can be terminated without cause, and why?
In Ontario, any employee who is non-unionized can be terminated without cause (keeping in mind the exceptions listed below). This dismissal can happen at any point during their employment.
The theory behind this is that employers have the right to determine the makeup of their workforce, and therefore can unilaterally decide whether they would like to retain an employee. Employers are not typically obligated to provide reason when terminating an employee’s employment without cause.
Some reasons for the termination of an employee on without cause can include the following:
- Company restructuring
- Financial reasons
- Realignment of a team
- Poor work performance
Regardless of the above, employers do have legal requirements they must adhere to when dismissing an employee.
Is it legal for an employee to be terminated without cause?
In short, yes. An employer can terminate an employee’s tenure with them without cause legally – with caveats. To make this type of termination legal, there are some rules they must adhere to, including:
- The termination must come with notice. This notice is further explained below.
- The termination cannot be a reprisal. This means that an employer cannot dismiss an employee as a recourse against an employee who enforced their workplace rights, such as the right to safe work.
- The termination cannot be discriminatory. This means that an employer may not terminate an employee for reasons that would contravene the Ontario Human Rights Code.
What does it mean if an employee is terminated without cause?
If an employee is terminated without cause, their employment relationship with their employer has then ended.
If an employee has been terminated without cause, their employer is required to provide them with “reasonable notice of termination”. Notice can be provided as:
- Working notice,
- Pay in lieu of working notice, or
- A combination of working notice and pay in lieu of notice.
Working notice can be explained as the amount of time an employee must continue working until the date set by the employers, which the employment is then terminated. Working notice is a notification from the employer that an employee’s employment will end on a determined date. There are typically no additional financial obligations to the employee in these scenarios, as long as this working notice is of sufficient length.
In contrast, pay in lieu of notice is a payment that is provided after termination. Here, an employer does not wish for the employee to continue active employment. Typically, the employee’s tenure will end on the day the termination of employment occurred.
What am I entitled to if I am terminated without cause?
When an employee is terminated on a “without cause” basis, employers are required to provide the employee with the appropriate amount of termination notice (the working as described above) or pay in lieu of this notice.
When employment is terminated, potential entitlements will be governed by the minimum requirements outlined in Ontario’s Employment Standards Act or by common law otherwise noted in the relevant employment contract.
Ontario’s Employment Standards Act
Ontario’s Employment Standards Act lists the minimum amount of notice (or pay in lieu of notice) that an employee is required to receive upon dismissal without cause. A chart setting out the minimum notice periods for without cause termination in Ontario may be found here. The amount of notice pay required will heavily depend on the length of time the employee worked for the organization.
Further, depending on an employee’s length of service and the employer’s payroll, the terminated employee may also be entitled to severance pay upon their termination without cause. Severance pay is specifically compensation for long-term employees whose employment has been “severed”, to address losses that come with terminating a significant employment relationship.
The following employees are eligible for severance pay:
- Employees who have worked for an employer for five or more years, IF
- The employer has a payroll of at least $2.5 million, OR
- The employer has severed the employment of 50 or more employees in a six-month period because all (or part) of their business permanently closed.
An employee’s severance pay will be based on the number of years they were employed with the relevant employer, up to a maximum of 26 weeks of pay. In many cases, this will be more than the termination pay to which the employee will be entitled.
An employee may also be entitled to higher amount of pay pursuant to common law findings. It should be noted that an employment contract between the dismissed employee and the employer may restrict the employee from accessing these amounts, described below.
Common Law Notice
Employment agreements between employers and employees may contain termination provisions that prohibit employees from benefitting from common law notice entitlements.
An important consideration for dismissed employees is that these termination provisions are often no longer valid after recent legal developments. This can mean that employees who have been terminated without cause, even with termination provisions that limit their common law entitlements, may be able access these higher termination payments.
If an employee can successfully argue that they are entitled to common law notice, then a court will provide what is “reasonable” to assist them in finding alternative employment.
While there is not a precise formulation to calculate the content of this type of package, there are a few factors that would be considered. These factors include the following:
- Employee’s age
- Length of employment
- Character of employment (although this is less of a factor since recent case law)
- Availability of similar employment
While it is not a set rule, it is common to be awarded 1 month per year of service for common law notice.
An employee should keep in mind that this is subject to deduction if they were to earn income during the “reasonable notice” period. Further, an employee is expected to take reasonable steps to find alternative employment during the post-termination period. An employee may also be required to pay back part or all of Employment Insurance received during the post-termination period.
What should an employee do if they feel they were terminated unfairly?
If an employee is concerned that they have been wrongfully dismissed, they would likely benefit from consulting with an employment lawyer for related legal advice. Ideally, an employee would seek this advice prior to signing any documentation provided by the employer, including a release.
Contact Us
Sultan Lawyers provides comprehensive wrongful dismissal support to employees. This includes services such as advice on termination packages ranging to a full wrongful dismissal claim and related proceedings. For further information and assistance, please contact the Toronto employment lawyers, Sultan Lawyers at 416-214-5111 or here.
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