Termination for Cause

Just cause terminations have been considered the ‘capital punishment’ of employment law.  The employer bears the evidentiary burden to prove that the alleged misconduct satisfies the high threshold of just cause dismissal. The employer must prove that the act(s) or omission(s) of the employee are so significant that the effect was that the employee repudiated the contract of employment; failure to establish such an effect will preclude a Court from finding that the employment has been terminated for cause.

There are several types of misconduct that may be grounds for dismissal for cause. Examples of common grounds for dismissal, discussed in detail below, include the following:

  • dishonesty (e.g. fraud, theft, breach of trust, deception etc.);
  • workplace harassment and violence;
  • insubordination and insolence; and
  • absenteeism and lateness.

A Court will provide a contextual analysis to determine whether, in the totality of circumstances, the misconduct amounts to just cause. In order to satisfy the Court, employers should institute progressive disciplinary and performance improvement plans to provide a guidepost for improvement for the employee.  If the employee continues to perform incompetently or engage in ongoing misconduct, the employers paper-trial and diligence will assist in reaching the just cause threshold.

If you have been terminated for cause by your employer, please contact Goldstein Employment Law to discuss your potential rights and entitlements.

Severance Pay vs. Termination Pay

Under the Employment Standards Act in Ontario, provisions are made for both severance pay and termination pay, two (2) concepts that many individuals are confused by.

With respect to termination pay, an employee terminated without cause, is entitled to one-week of termination pay per year worked up to a maximum of 8-weeks termination pay.  This represents your base minimum entitlements under the legislation and does not represent your full severance package entitlement as determined by the common law.

Severance pay refers to an additional sum payable to terminated employees if they have accumulated over 5 years of service on the job and their employer has a payroll of over $2.5M. To calculate the amount of severance pay you are eligible for, multiply your regular wages for a regular work week by the sum of:

  • the number of completed years of employment;
    and
  • the number of completed months of employment divided by 12 for a year that is not completed.

Your maximum severance entitlement under the Employment Standards Act is 26-weeks.  If your employer has failed to provide the base minimum termination pay and severance pay to you in your severance package, then the payout is illegal and would not be enforced by a Court. It is always advisable to consult with an experienced employment lawyer to review your severance package and determine if you have been offered all of your entitlements, including statutory termination and severance pay.

Lump Sum Severance vs. Salary Continuance

When an employee is dismissed from their employment, the employer will often offer two (2) forms of severance payment – one lump sum payment representing all obligations to the dismissed employee; or a series of bi-weekly payments for a number of weeks.  There are a number of differences between the two forms of payouts, and it is always advisable to consult with an experienced employment lawyer to determine which payment method is more beneficial given your unique situation.

With respect to lump-sum payments, they can be classified as a ‘retiring allowance,’ which is a form of payment classified by the CRA, as on account of the loss of office or employment. Retiring allowances are taxed at a lower rate than regular bi-weekly pay, as CPP and EI deductions are not remitted for these forms of payments; accordingly, they increase the net take-home pay for dismissed employees.

Salary continuance payments may be beneficial, for instance, for employees that need to accumulate a certain number of insurable hours of work prior to termination.  For example, an employee that will be applying for EI Maternity Benefits requires 600 insurable hours of employment in the 52-weeks prior to the maternity leave.  If the employee is terminated with less than 600 hours, they could be paid out on a salary continuance basis, which would add towards accumulating insurable hours for the purposes of receiving maternity benefits.  Other employees may prefer to remain on salary continuance in order to receive some form of retirement benefits, pension vesting, or otherwise.

Accordingly, choosing between a lump sum payout or salary continuance is often dependent on numerous factors that should be considered by an employment lawyer before accepting any settlement offer.