Ultimately, employers do not need a reason to terminate an employee governed by Ontario law. They can do so “without cause” at any time, subject to the employee’s right to receive reasonable notice of termination, or pay in lieu of such notice. However, if an employer terminates an employee for cause, the employer may have no obligation to provide the employee with notice of termination or any pay in lieu thereof. Proving “cause” for termination is a high threshold in Ontario. The Courts routinely scrutinize an employer’s allegation of cause, often finding otherwise. Usually every case is unique and determined based on its own facts.
Generally, an employee in Ontario is entitled to reasonable notice when his or her employer decides to terminate his or her employ without cause. Reasonable notice can be given either by ‘working’ notice (during which the employee remains employed) or by pay in lieu of reasonable notice. The amount of reasonable notice to which any employee may be entitled is case specific and depends on multiple factors, including age and level of responsibility.
Ontario employees terminated without cause are entitled minimum, statutory entitlements, including termination pay, under Ontario’s Employment Standards Act, 2000 (the “ESA”). Generally, most employees are entitled under the ESA to one week’s working notice or pay in lieu of working notice for each full year of service, up to a maximum of 8 weeks working notice or pay in lieu of working notice. This entitlement may vary depending on how many employees are terminated by an employer at any given time. In addition, employees employed for five years or more continuously may also be entitled to “severance pay” under the ESA – usually one week for each year of active service, up to a maximum number of weeks.
These are the minimum, statutory rights only for Ontario employees. If there is no employment contract limiting an employee’s entitlement on termination without cause to the minimum standards under the ESA, or otherwise determining the entitlement, the terminated employee will be entitled to reasonable notice of termination of employment pursuant to the “common law”. Many lawyers refer to the ‘one month per year of service’ rule of thumb, but this is not the law. Rather, common law entitlement to reasonable notice is determined by several of factors, including: the nature of the employment, the level of responsibility, the length of the employment, the age of the employee, the availability of alternative employment and the circumstances surrounding the employer’s decision to terminate the relationship. Usually this is a very subjective assessment.
Perversely, in order to be awarded the full amount of any entitlement to pay in lieu of notice, an employee who is terminated is obliged by law to attempt to limit and/or “mitigate” his or her damages/losses from the termination by actively seeking alternative, comparable employment. Failure to do so may adversely impact the amount of common law reasonable notice to which the employee may be entitled. Only actual damages incurred are granted by the Court. Mitigated earnings during the notice period are usually deducted from the Court’s overall award.
The situation for federally-regulated employees is different. Under the Canada Labour Code, most employees are entitled to two weeks’ notice of termination and, after twelve consecutive months of continuous employment, employees may also be entitled to severance pay equal to two days’ pay for each year of completed service, with a minimum benefit of five days wages.