We understand that for some employees, professionals or executives, termination without cause might be the most stressful thing that you’ve experienced. You’re might be wondering how your family will react, how you’ll make your next mortgage payment of when you’ll find work again. Individuals may be dealing with the emotional struggles that come with the notion of being rejected or perception that you weren’t needed anymore, the social challenges when you’re out with friends and family and feel shame over losing your job. In our experience, there are two things that are for certain with employment law – the first being that no employer or company is loyal to it’s employees, and the second, if you’re fired, you’re entitled to severance to help you get back on your feet.
An employer can terminate an employee for any reason. Without cause termination is when an employee is terminated, but they are not being terminated as a result of misonduct in the workplace. The employee does not have to be informed of the reason of termination, however, they must be provided with sufficient notice of their termination, or pay in lieu of notice of termination. Conversely,where an employee has committed serious misconduct that amounts to just cause, absent a contractual term to the contrary, that employee can be terminated for cause. The employee will not be entitled to reasonable notice of termination, statutory termination pay or statutory severance pay. This type of dismissal is sometimes referred to as a “summary dismissal” or a just cause termination.
In Ontario, there are three things to consider when an employee is terminated without cause:
Termination Pay – in Ontario employer that terminated an employee must provide written notice of termination if that employee is employed for three months or more or, in lieu of such notice, must pay all wages and benefits to which the employee is entitled during the statutory notice period. The statutory notice period is set out at S.57 of the Employment Standards Act, which prescribes that employers are required approximately one week or notice for every year of employment, up to a maximum of eight weeks. During the notice period, the terms and conditions of employment are frozen; the employer must continue to pay the employee’s wages, which may not be less than his or her regular wages, and must maintain all benefit plan contributions to which the employee is entitled
Severance Pay – in Ontario where 50 or more employees have their employment relationship severed in a period of six months or less because of a permanent discontinuance of all or part of the employer’s business at an establishment, or where an employment relationship is severed by an employer with a payroll of $2,500,000 or more, each terminated employee employed five years or more is entitled to severance pay. Severance pay is calculated by multiplying the employee’s regular week’s wages for a regular work week by the sum of completed years of employment and completed months of employment divided by 12. Severance pay is payable in addition to termination pay – they are not set-off against one another.
Common law presumption of reasonable notice – where the parties have not agreed on without cause termination entitlements, the common law implies into the employment contract a term that the employer will provide the employee with “reasonable notice”. This is a period of working notice intended to give the employee time to find new employment. Depending on several factors, reasonable notice can range from a period of weeks to as much as 24 months.
If you are hired for an indefinite period of employment the law presumes that you will be provided reasonable notice of your without cause termination. If notice is insufficient or is not provided, the employee may claim wrongful dismissal and seek damages for the income they would have earned during the working notice period – as well as any other pecuniary loss that flows from the notice such as:
Commission – Where an employee is compensated solely or in part by commission, they will be entitled to damages for loss of their commission during the notice period;
Group benefits – dismissed employees are entitled to claim the pecuniary value of their lost benefits flowing from the dismissal. You would be entitled to the value of benefits (e.g., insurance), even though they are not replaced. There are different approaches to quantifying the value of replacement benefits. A court can fix the employee’s damages based upon the value of the employer’s contribution to the benefit plan. A court can also fix the value of the loss of benefits by the employee’s cost of purchasing replacement benefits. This amount would normally be much greater than the cost to the employer who has purchased the benefits as part of a group insurance plan. The court can reduce this amount by the value of the employee’s contribution to their employment benefits. Some courts have calculated benefits loss as a percentage of base salary in absence of evidence quantifying the absence of benefits.
Bonus income – when an employee is terminated without cause, he or she is also entitled to bonus income which would have been received during the period of reasonable notice. Damages in lieu of reasonable notice should place the employee in the same position as if notice had been given, damages may include an amount the employee would have received had he or she continued in his or her employment during the notice period, or damages for the lost opportunity to earn a bonus.
Stock Options – When the employee is deprived of the exercise of a stock option he or she would have had, provided reasonable notice had been given, the court will assess and can also award damages based on the loss of opportunity. In assessing damages for stock options, the court will normally determine what probably would have happened and is reasonable in the circumstances but for the wrongful termination of the options, with a view to considering all of the evidence. This may include the past trading and selling history of the dismissed employee. Whether options and restricted share units continue to be issued, vested or exercisable during the notice period will be governed by the precise wording of the relevant plan. Barring clear wording, the plan will be construed as if the termination had been lawful.
Salary Increments – The employer can be liable for salary increases which would have accrued during the period of reasonable notice. If, however, increments were completely at the discretion of your employer, and not an integral part of your wage structure, damages for an increment will not normally be awarded. Salary increments are also not normally recoverable if they are not part of your contract of employment. Increments which are not a matter of course, but would have been a matter of negotiation between the parties, are also not normally awarded.
Overtime – if overtime had become was integral part of your remuneration package, it should be included in the damage award. In fact, our Ontario Court of Appeal has found that if an employee would likely have earned overtime or shift premiums during the period of reasonable notice, then there should be an award for them.
Professional Dues – in the case of lawyer termination, Law Society membership professional accountant dues for the period of reasonable notice have been awarded in the past.
EI & CPP – The value of the employer’s E.I.and C.P.P. contributions which would have been made during the period of reasonable notice have been awarded in cases in Ontario, although not all Provinces are consistent on this point.
Car Allowance – In the past, Courts have awarded plaintiffs the value of the personal use of the company car, as well as associated insurance benefits which would have been enjoyed by employees during the period of reasonable notice. However, if a car allowance or the use of a car is only for business purposes, no loss has incurred and, therefore, no damages would be awarded.
Cell Phone Expenses – If an employee’s cell costs were paid as a benefit of his employment, they will be compensable for the period of reasonable notice.
There is no precise method to determine the period of reasonable notice required for termination of employment upon termination without cause. The common law reasonable notice period may be difficult for counsel to determine in a particular scenario. The assessment of reasonable notice is considered an art, rather than a science. The starting point for determining the reasonable notice period is set out in the seminal case of Bardal v. Globe & Mail Ltd. from 1960, which deals with the following key factors (known as the “Bardal factors”):
The character of the employment – In the past many courts assumed that senior level employees with a high degree of management functions or professional skills would have a harder time finding alternative employment and, as a result, awarded greater reasonable notice for more senior level positions than for lower level or non-skilled positions. However, over the last 20 years, Appeal Courts have considered the character of employment factor as one of “declining” importance or significance in the reasonable notice assessment.
The employee’s length of service – Courts often place an incredible amount of emphasis on the employee’s length of service as a determining factor. Long term employees are typically entitled to longer notice periods than short term employees of the same age, with the same skills and responsibilities.
The employee’s age – although age should not be given disproportionate weight in the Bardal analysis, it is difficult not to, since older employees are generally entitled to longer reasonable notice than younger employees, based on the rationale that it will take an older employee longer to find new employment.
The availability of similar employment, having regard to the experience, training and qualifications of the employee – a court may increase the amount of reasonable notice where there is limited similar employment available in the job market, having regard to the experience, training and qualifications of the employee. On the other hand, where similar employment is widely available, less notice may be awarded.
Bardal lists the most important factors to be considered in assessing the common law reasonable notice period. These factors are weighed and balanced by the courts in their analysis. No single Bardal factor is to be given disproportionate weight. Courts will determine a range of reasonableness in wrongful dismissal cases, from reviewing recent reasonable notice awards looking for similar Bardal factors, and adjusting for differences.
Other factors that courts will consider in assessing the reasonable notice period in a wrongful dismissal case are such things as:
Normally yes you can qualify for employment insurance if you have been terminated without cause. Certain workers cannot obtain EI, however, such as independent contractors.
If you been terminated without cause it’s important that you speak to an employment lawyer with experience, who can help guide you and provide you with the legal advice that you need. Since 2003, we have been representing professionals, executives and employees have handle all types of employment without cause cases in all industries. Contact us today an get the help you deserve by filling out a confidential contact form.