9 Most Popular FAQ about Wrongful Dismissal

 1. Does my written employment contract encompass all my rights?

In Ontario, all employment relationships are contractual, but a written contract is not required. There does not even need to be a verbal agreement; when the conducts of both parties constitute an employment relationship, an agreement is deemed to have formed.

When there is an implied employment agreement, the terms and conditions of employment will be governed by both the statutory law such as the Employment Standards Act and the Human Rights Code, and the common law. The Employment Standards Act and the Human Rights Code also prescribe fundamental rights that a written agreement cannot contract out of.

 2. What is “just cause” for dismissal?

In R. v. Arthurs, Ex parte Port Arthur Shipbuilding Co., a case decided by the Ontario Court of Appeal dated back to 1967, an employer many terminate an employee’s employment for just cause if the employee is “guilty of serious misconduct, habitual neglect of duty, incompetence, or conduct incompatible with his duties, or prejudicial to the employer’s business, or if he has been guilty of wilful disobedience to the employer’s orders in a matter of substance.”

The employer bears the burden of proving that just cause has been constituted. It is a high threshold. For example, as recently affirmed in Render v. ThyssenKrupp Elevator (Canada) Limited, 2019 ONSC 7460, termination for just cause is “generally reserved for the most extreme of cases. It has been described as the ‘capital punishment’ of employment law.”

 3. What is a “wrongful dismissal”?

The termination of an employee without cause by the employer, is permitted by law in Ontario only if the employer provides notice of termination ahead of time, or payment in lieu of notice. This payment is often referred to as severance pay or termination pay. In theory, the severance package should include a lump-sum of money to put the employee in the same position they would have been if they had been given reasonable working notice, rather than fired without notice. Generally, the amount of severance pay that a terminated employee is entitled to is the minimum pay prescribed by Employment Standards Act, 2000, plus common law severance pay.

On the other hand, where an employer terminates an employee without providing them advanced notice of termination or appropriate severance pay in lieu of notice, a wrongful dismissal is constituted. In terms of severance package, other factors affecting the employee’s entitlement include the terms of the employment contract and the employer’s motivations in the termination.

 4. I have been dismissed; am I entitled to my bonus?

The answer can vary depending on circumstances. Companies often require their employees to be “actively employed” as of the payment date to be eligible for bonus payments. Nevertheless, Paquette v. TeraGo Networks Inc., 2016 ONCA 618 illustrates that a requirement of “active employment” alone is not sufficient; the Court stated that entitlement to bonus payments shall not depend on whether employee was actively employed after employment was terminated, rather on compensation and benefits to which he would have been entitled but for wrongful termination. This was recently affirmed in Matthews v Ocean Nutrition Canada Ltd., 2020 SCC 26, where the Supreme Court explained that employees have a common law right to their bonuses during the notice period. The language limiting or removing an employee’s common law rights must be “absolutely clear and unambiguous” in order to be effective.

One recent example of employer’s success in terminating an employee’s entitlements to bonus is Dawe v. The Equitable Life Insurance Company of Canada, 2019 ONCA 512. The Court stated that the contract went beyond stipulating that “active employment” was a precondition for receiving a bonus. Alternatively, the employer “anticipated the very event that occurred”, which is the employee’s dismissal without cause. Therefore, the clause was able to restrict the employee’s common law rights on termination.

 5. Am I entitled to be paid overtime pay during the notice period?

In general, the answer is affirmative. As per Olivares v. Canac Kitchens, 2012 ONSC 284, overtime pay “had become an integral part of the anticipated income of the terminated employee and should be considered as compensable damages. If overtime has been paid in years immediately preceding the termination, it is appropriate to take that overtime into account when assessing damages for wrongful dismissal.”

 6. What is a “constructive dismissal”? What should I do if my employer is changing my job a lot? What if I am asked to relocate?

A constructive dismissal occurs if an employer makes a substantial change to the terms of an employee’s employment without the employee’s consent or demonstrates an intention to no longer be bound by the terms of the employment contract the employee has the option of treating his or her employment as having been terminated.

To be considered a constructive dismissal, the change to the terms of employment must be very fundamental to the employment contract. The burden is on the employee to establish that a constructive dismissal has occurred. The line between a fundamental change and a reasonable modification to one’s duties can be difficult to draw. Likewise, in terms of relocating, considerations include whether the job is the type where relocation is expected or common, whether the employee has a history of relocating, whether the employee has worked in the same location for a considerable period of time, and the distance of relocation. When an employee is uncertain about their situation, it is advisable to obtain legal advice.

 7. If I am suing my employer for wrongful dismissal damages, what do I have to do in terms of finding a new job?

Once an employee has proven wrongful dismissal, the onus shifts to the employer to demonstrate that some or all of the losses incurred by the employee were avoidable or avoided. The employee shall take reasonable steps to try to find a roughly equivalent job. For the employee to be able to present evidence on their active job search, the employee shall document their efforts in finding a new job, which can be done by keeping documents showing searches, interviews, applications etc.

If a court finds that the employee has failed to do so, deduction will likely be applied towards the employee’s entitlements. Nevertheless, if an employee rejects a subsequent job offer that provides manifestly lower compensation, it is unlikely that the courts will consider that employee as having failed to mitigate.

 8. If I am fired, what happens to my stock? Are stock option losses recoverable in a wrongful dismissal action?

In general, when the employee has been wrongfully dismissed, the option survives until the end of the notice period determined by the court. Although it is not unusual for employers to provide in the option agreement that the employee’s entitlement to exercise the option is eliminated upon termination, courts tend to interpret such clauses as only applicable to termination on just causes. The leading case on this issue is Veer v. Dover Corporation (Canada), 1999 CanLII 3008 (ONCA); the Ontario Court of Appeal interpreted the phrase “terminated for any reason” in the agreement as that, whether voluntary or involuntary, termination that extinguishes the right to exercise stock options must be “termination according to law”.

 9. Can I commence a legal action against my employee for wrongful dismissal while still working?

Such scenarios are possible. In Potter v. New Brunswick (Legal Aid Services Commission), 2015 SCC 10, the Supreme Court affirmed that there are circumstances in which an employee could commence litigation against the employer for constructive dismissal and still not be deemed to have voluntarily resigned. These circumstances may occur in a situation where the employee has commenced the legal action but has continued to work under protest for the employer.

Stacey Reginald Ball is an experienced employment lawyer with Ball Professional Corporation.  Our office is located in Toronto, Ontario, and handles various employment law matters, including wrongful dismissal.  If you have questions regarding wrongful dismissal issues, please call our office at (416) 921-7997 ext. 225.