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jeff@goldsteinlawyers.ca 647-838-6740

Termination for Cause – High Threshold

We are often contacted by employees that have been terminated from their employment for cause.  Employers give any number of reasons to form the basis for a just cause dismissal; however, a Court will only uphold a decision to terminate an employer for just cause in the most extreme situations.

In many cases, where an employees performance is below average, if they have been subjected to limited discipline in the past, or if an employer policy indicates that they will be terminated for cause if you engage in “X, Y, or Z” behavior, the employer attempts to rely on these factors to justify a dismissal for cause.  Courts will assess the facts of each particular case and are not overly concerned with the specific employer policy.  Court precedent and its application to the particular case at bar determine whether there is just cause for termination; not the employer’s arbitrary policy.

It is critical that you consult an employment lawyer following a termination for cause to ensure your right are protected. At Goldstein Law, we offer a free consultation to assess your severance package and termination letter to determine whether the employer has provided for your full legal rights on the termination of employment.  Please contact us today for an employment law consultation.

Employment Considerations in the Sale of a Business

The liabilities of vendor and purchaser for employee entitlements upon termination can become a major issue in negotiating the sale of a business.

Section 64 governs statutory severance pay, which is payable only to an employee severed without cause, as defined, who has five or more years’ service and is either employed by an employer which has a payroll of $2.5 million or more or where there is a permanent discontinuance of all or part of the employer’s business at an establishment which results in 50 or more employees having their employment terminated within a six month period. Statutory severance pay is equal to one-week per completed and partial year of service, up to a maximum of 26 weeks.

Share Purchase Agreement

There is no termination of employment upon the sale of shares of a company.

Asset Purchase Agreement

Where a purchaser expressly recognizes past service in its new employment contract with the employee, no issue arises. An employer may make the choice to recognize past service in consideration for the valuable skills and experience it is receiving with a long-service employee. In the case of such an explicit recognition by the purchaser, the vendor would normally have no further liability at common law.

A purchaser can avoid liability for the employees’ prior service by requiring the vendor to provide common law reasonable notice of termination or pay in lieu thereof before the purchaser hires the employees.  Therefore, a purchaser wishing to try to insulate itself from employee termination liabilities should include a provision in the purchase and sale agreement requiring the vendor to provide reasonable notice of termination at common law, as well as require the vendor to indemnify it for any future termination payments for those employees, or at least for that portion of future termination payments attributable to the employees’ pre-sale service. Of course, if the purchaser declines to offer employment to the employees of the vendor, the vendor remains liable to the employees for common law reasonable notice.

Negotiating Business Purchase and Sale

As legal counsel for a purchaser, it is important to ensure that the vendor is contractually obliged to disclose as much information as possible about the employment aspects of the business and the age, tenure, compensation terms and character of employment of the employees. Potential common law and statutory employment liabilities must be considered in full and financially accounted for, through payment and/or indemnities, in any purchase and sale negotiation by both parties.

Employee Rights After Wrongful Dismissal in Ontario

As many people experience, losing a job is never easy.  We are called by employees’ on a weekly basis that are terminated from their employment without cause.  Many people believe that they have been ‘wrongfully dismissed’ from their employment, without understanding what actually constitutes a wrongful dismissal in Ontario.  Under the Employment Standards Act (ESA) in Ontario, an employee that is terminated without cause is entitled to certain minimum obligations, including the right to advanced notice of termination of payment in lieu thereof.

Advanced notice of termination, otherwise referred to as working notice, occurs when an employer advises an employee that their employment will terminate at a specific point in time in the future. During a working notice period, the employee has the obligation to continue working until the notice period expires. It is often a challenge for an employee to stay motivated to work for a company that has terminated them but forced to continue working.

Why Would an Employer Give Working Notice Rather than Payment in lieu Thereof?

For employers, it can make financial sense to provide advanced notice of termination instead of payment in lieu thereof, subject to the employee actually completing their work and assisting the company during the working notice period. Given that the working notice period counts towards an employees severance entitlements when the period expires, the employer may have no more severance obligation to the terminated employee.  Accordingly, the employee’s employment will end with no actual cash outlay required by the employer.

Conversely, when payment in lieu of notice is provided by an employer, a large lump sum or salary continuance payment is typically required, which typically can be expensive for the employer, and in exchange for which the employee’s employment will terminate immediately, and no additional value will be provided to the company.  Employers typically try to balance the uncomfortable nature of working notice with the financial constraint associated with paying severance by way of payment in lieu of notice.

What is a Wrongful Dismissal?

A wrongful dismissal does not relate to the fact the employee was terminated from their employment (unless the employee was wrongfully terminated for cause without a justifiable reason). In fact, an employer can terminate your employment at any time, for any reason, so long as it is not a discriminatory ground protected by the Ontario Human Rights Code (i.e., disability, pregnancy, age, gender, sexual discrimination, etc.).  Rather, a wrongful dismissal occurs when an employer does not satisfy its severance obligations to a terminated employee.  An employer must provide advanced notice of termination or payment in lieu thereof in accordance with the ESA and the common law in Ontario (in certain cases); otherwise, the termination will be deemed a wrongful dismissal.

With respect to ESA entitlements, an employee is entitled to, among other things, termination pay equivalent to one-week per year worked, up to a maximum of 8 weeks termination pay.  In addition, if the employee has worked for a period of 5 or more years for an employer with a payroll over $2.5 million, they will also be entitled to severance pay under the ESA, which is calculated at approximately one-week per year worked.

For example, an employee with 10 years of service for a company that is eligible for both termination pay and severance pay under the ESA, would be entitled to a minimum advanced notice of termination or payout in lieu thereof 18 weeks pay (8 weeks of termination pay and 10 weeks of severance pay).  If the minimum entitlements under the ESA are not offered to an employee that has been terminated without cause, then the termination would be deemed a wrongful dismissal.

Employment Standards Act (ESA) Entitlements Are Minimum Obligations

Terminated employees in Ontario are often entitled to common law or reasonable notice in Ontario, which exceeds those entitlements as designated in the ESA.  By default, an employee is entitled to reasonable notice of termination or payment in lieu thereof, unless an enforceable termination clause is contained in a duly executed employment contract that limits the amount of severance to the statutory (ESA) minimum.  If no such enforceable termination clause is contained in the employment contract, the terminated employee would be entitled to reasonable notice of termination, which can often vastly exceed the minimum obligations under the ESA.

If you have been terminated without cause from your employment in Ontario, it is important that you have received your minimum entitlements. In addition, you ought to consult with an employment lawyer in Ontario to determine whether you are also entitled to reasonable notice of termination or payment in lieu thereof and whether the employer has sufficiently accounted for your rights to a severance package.

If you believe that your former employer has violated your rights, you may have been wrongfully dismissed from your employment. Goldstein Law will be able to analyze your case, including the severance package, employment contract, and other relevant documents, to determine whether you have a case for wrongful dismissal.  Call 647-838-6740 to speak to a lawyer to discuss a potential wrongful dismissal suit.

What Termination Notice Period Are You Entitled to in Ontario?

An employee that has been employed in Ontario for more than three months in an indefinite employment relationship (separate from a fixed-term contract), is entitled to a statutory minimum amount of advanced notice of termination or payment in lieu thereof in accordance with the Employment Standards Act in Ontario, should the employer opt to terminate the employment.

The exception to the general rule is when an employer terminates the employee for cause, in which case the employee is not entitled to any notice of termination. The notice is either provided (1) by way of advanced notice by the employer, during which time the employee continues to work for the company until the end of the notice period; (2) by a payment in lieu of notice equivalent to the value of salary and benefits the employee would have received has they continued working through the notice period; or (3) a combination of advanced notice of termination and payment in lieu thereof.

If payment in lieu of notice is provided to the employee, the payout must be made on the employee’s regular pay date or seven days after the termination, whichever is later.

Employment Standards Act – Notice Periods

The Employment Standards Act in Ontario outlines the minimum termination pay and severance pay obligations of employers. Keep in mind, these are minimum obligations and do not represent an employee’s full legal entitlements on termination of employment. The following is a table outlining the statutory minimums under Ontario’s ESA:

Length of Employment Minimum Notice Required
Under 3 months None
3 months to under 1 year 1 week
1 year to under 3 years 2 weeks
3 years to under 4 years 3 weeks
4 years to under 5 years 4 weeks
5 years to under 6 years 5 weeks
6 years to under 7 years 6 weeks
7 years to under 8 years 7 weeks
8 years or more 8 weeks

The statutorily mandated minimum notice period generally does not constitute a reasonable severance package in accordance with the common law in Ontario; accordingly, if you have only been offered the minimum ESA entitlements, you have a wrongful dismissal claim. Please contact an employment lawyer in Toronto at Goldstein Law Firm for a free consultation to discuss your rights.

Terminating Older Employees

With our aging workforce, there is an increasing need to terminate more senior employees in order to make room for younger, new entrants to the workforce. As has been discussed in other posts, whether an employee has been wrongfully dismissed is dependent on the amount of notice of termination or payment in lieu thereof that was provided. One of the key factors during a terminated employees severance entitlement is their age and seniority. As a general rule, an employee of more advanced age is typically entitled to enhanced severance as compared to younger employees.

The reason for this is that advanced age employees are likely to have substantial difficulty in obtaining alternate employment, especially if they are approaching retirement age. Accordingly, the severance package is intended to bridge the gap for the period of time the terminated employee is off work. In many recent cases, Courts have awarded payments up to 30 months of severance to a senior employee that was terminated without cause in Ontario

In Ozorio v. Canadian Hearing Society, the Plaintiff was a non-executive level employee that terminated at the age of 60 years old. The Court awarded 24 months of severance given the disadvantage she would have in locating alternate employment.

In order to avoid massive severance obligations to senior, advanced age, long-term employees, employers can ensure that well-written employment agreements are drafted to restrict an employees entitlements on termination and/or they are at liberty to provide advanced working notice of termination rather than payment in lieu thereof. In other words, if an employer intends to terminate an employee in the future, they can provide several months advanced notice, in order to avoid the obligation to make a lump sum severance payout.

If you have any questions about a recent termination from employment in Ontario, feel free to contact Goldstein Law Firm today.

Senior Executive Severance Packages

Severance packages for senior executives can often amount to several hundred thousand dollars in entitlements. Accordingly, it is imperative that executives are attuned to the employment law issues that are prevalent in severance packages in Ontario.

A wrongful dismissal occurs when an employee has been terminated without cause from their employment and has not been provided with a reasonable severance package in the circumstances. The basic principle in awarding damages from wrongful dismissal is that the terminated employee is entitled to compensation for all losses arising from the employer’s breach of contract in failing to give proper notice of termination. The damages should place the employee in the same position they would have been had they remained employed.

Accordingly, damages for wrongful dismissal (or severance packages) may include an amount for bonus or incentive compensation that the employee would have received had he/she continued employment during the notice period. This is more typically the case where the bonus is an integral part of compensation. As few as two consecutive discretionary bonus payments have been found to be enough to constitute an integral part of compensation. In Bain v. UBS Securities, the Court considered the following factors in determining whether a bonus payment was an integral component of compensation:

(a) Whether the bonus was received each year;
(b) Whether the bonus was required to stay competitive with other employers;
(c) Were bonuses historically awarded and did the company ever exercise its discretion;
(d) Did the bonus constitute a significant portion of the employees overall compensation.

If you are a senior executive that has been terminated from your employment in Ontario and have been offered a severance package, it is imperative to ensure that the severance accounts for all forms of compensation during the notice period, including bonus entitlements. For a free severance package review, contact the Goldstein Law Firm today!

Inducement in Employment Law

Many employees will voluntarily apply for job positions and obtain employment on their own volition. However, in certain circumstances, a highly coveted employee may be recruited away from a long-term position for a new job with lofty promises.  These promises could include representations of long-term employment, salary raises, incentive compensation, and overall better work-life balance.  If a third-party employer or recruitment agency contacts you and induces you to leave long-term employment for a new job, this could have implications in the event your new position is terminated without cause after a relatively short period of time.

When determining the amount of severance pay an employee is entitled when terminated without cause from their employment in Ontario, the Courts will consider a number of factors, including the length of service the employee has been working with the company, the age of the employee, the level of seniority, and the amount of time the employee is expected to obtain replacement employment. Another factor that is relevant in determining the severance pay calculation is whether the employee was recruited away from previous long-term employment.

If an employee was induced away from a long-term job for a new employment only to be terminated without cause shortly thereafter, a Court may use the entire length of service (previous job + new job) for the purposes of calculating the terminated employees severance entitlement. Accordingly, inducement has the impact of increasing an employees entitlement to reasonable notice. In determining whether an argument of inducement will be successful, the Court looks at a variety of factors, including but not limited to:

-The expectation of the parties when the new employment agreement was entered into. Specifically, were representations made to the employee to suggest that a long-term employment relationship would be reasonably expected?  If a probationary clause is contained in the new employment agreement, this suggests tentative, or a trial employment, rather than permanent employment. Accordingly, a probationary clause in an employment agreement can undermine an argument of inducement;

-The length of time the employee remained employed in the company.  Inducement tends to be weakened the longer the length of time an employee remains employed with a new company.

There are many other factors that are relevant in determining whether an argument of inducement will be successful in increasing the reasonable notice period for an employee that has been terminated without cause in Ontario.  If you have recently been terminated from your employment after being recruited from a long-term position, please contact the Goldstein Law firm for a free consultation to discuss your rights.

Termination for Cause – Recent Example

As we have discussed previously in this blog, terminating an employee for just cause has been considered the ‘capital punishment’ of employment law. As such, the employee ought to have displayed misconduct so egregious to justify such a termination. The onus of proving just cause is on the employer.¹

Absenteeism and lateness, ² fraud, theft, dishonesty, or a series of improper behaviors can justify a termination for cause. The Court will apply a contextual analysis; considering the surrounding circumstances, such as the duration of the employment, the number of previous incidents of misconduct, the age and specialization of the employee, among other things.³

If an employer does not have cause for termination, then the employer is required to pay reasonable notice of termination or payment in lieu thereof. The factors considered by the Court in determining the length of reasonable notice include age, length of employment, seniority, specialization, and any other extenuating factors, as initially enumerated by the Court and as commonly referred to as the Bardal factors. In terms of an employees entitlements to termination pay in the event of a just cause termination, an employee is entitled to the minimum statutory notice as outlined in the Employment Standards Act (“ESA”), and, absent an enforceable termination provision limiting the employees’ entitlements upon termination to ESA minimums, reasonable notice of termination or payment in lieu thereof at common.

With respect to just cause terminations, the Court has held that the standard of conduct required to negate an employees entitlement to reasonable notice of termination at common law is lower than the high threshold of misconduct required to nullify an employees entitlement to ESA entitlements. In other words, employees that display gross misconduct may still qualify for minimum ESA entitlements, which can be rather substantial if a long duration of employment has accumulated, but at the expense of his or her common law entitlement.

If you have been terminated from your employment for cause, it is imperative that you consult with an employment lawyer about your rights and obligations.

 

 

¹Dowling v. Ontario (WSIB) 2004 CanLII 43692
² S. v. H. & D.P.M. Inc.,1999 CanLII 14865 (ON SC
³
McKinley v. BC Tel, 2001 SC 38