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

 

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.

Frustration of Employment

If you are off work on disability benefits or otherwise are unable to return to work due to a medical illness or injury, after a certain period of time elapses whereby you do not return to work and your medical practitioners conclude that you will not return anytime in the foreseeable future, the employer can deem your employment contract to be frustrated.

The frustration of the employment contract occurs when an employee is unable to uphold his or her terms of the contract on account of being off work due to disability. In such a scenario, an employer is, in fact, permitted to terminate an employee on the basis of frustration of contract (i.e., they will be protected from a claim for human rights damages in connection with discrimination based on disability, if the termination based on frustration is carried out properly). If properly terminated from employment on account of frustration, an employer is only obligated to pay to the employee their minimum statutory termination and severance pay (if applicable) under the Employment Standards Act.  Reasonable notice of termination or pay in lieu thereof is not required to be paid to the employee in such circumstances; as such, an employer can avoid a large severance package obligation when terminating an employee for the frustration of contract.

If you are on medical leave from your employment, please contact our law firm to discuss your options.

Pension Benefits At Termination

As we have discussed in other blog postings, terminated employees are entitled to all forms of compensation for the duration of the reasonable notice period, including salary, bonuses, incentive compensation, stock options, RRSP contributions, employee benefits, and pension benefits.

When an employee is terminated, the employer is obligated to continue pension contributions for the duration of the statutory notice period as prescribed by the Employment Standards Act  (i.e., one-week per year worked, up to a maximum of 8-weeks).  Following the expiration of the statutory notice period, many employers will attempt to cut-off contributions to the employee’s pension plan, which can result in a substantial reduction in value of your pension.

Some pension plans require that the employee be ‘actively employed’ in order to qualify for employer contributions. Accordingly, if a severance package is negotiated whereby you continue to be employed by the employee by receiving severance pay on a salary continuance basis, this is generally sufficient to meet the definition of active employment for the purposes of qualifying for pension plan contributions.  Alternatively, some employers may wish to pay-out a one-time lump sum at termination on account of the pension loss, equivalent to the value of the lost pension contributions and the loss of the value of the pension at retirement.  A specialist actuary or valuator may be required to value the pension loss.

If your employer has not provisioned for pension payments in your termination package, please contact us today for a free review of your severance package and pension plan policy to ensure that you protect your rights.

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.

Severance Pay and Inducement

When an employee is terminated from their employment, the severance pay calculation is based on a number of factors, including but not limited to age, years of service, job titles, availability of replacement employment, and inducement.

Inducement refers to a situation where an employee was recruited from a previously stable job posting in order to join a new company with the expectation of reasonably secure employment. A reasonable employee would not forgo years of service with a company, in order to join a new company for a short period of time, only to be terminated thereafter. Accordingly, be re-signing your rights from a previous employer, your severance entitlements will increase upon hiring at the new job.

One of the exceptions to a longer severance period resulting from inducement was argued in the case Nagribianko v. Select Wine Merchants (ONSC 2016 490), wherein an employee was recruited from a previous job posting but his new employment contract contained a probationary period, which expressly indicated that the “first three months of employment were probationary in nature, meaning that they would be a trial period to determine whether the employee was suitable for permanent employment thereafter.”

The Court found the wording in this probationary clause in the employment contract to be inconsistent with a finding of inducement. Where an employee reviews and employment contract and understands that they will not be hired on past the probationary period if they are not deemed suitable for the job, the argument will fail that they were induced to leave their previous job for long-term employment.  A probationary clause will not always negate an inducement argument, however, as it depends on the precise wording of the clause and other circumstances around the hiring decision.  Accordingly, it is imperative that an experienced employment lawyer is consulted if you have been recruited to sign a new employment contract or if you have been terminated from your new employment after being induced by to leave your previous employer.

What Are Your Employers’ Obligations on Termination?

Employers have various obligations upon terminating an employee from employment, including but not limited to complying with the Employment Standards Act, 2000, S.O, 2000, c.41 in Ontario.

If you have been terminated from your employment without cause, your employer is required to pay a minimum number of weeks of compensation in accordance with the Employment Standards Act in Ontario, equivalent to one-week of pay per year worked, up to a maximum of 8 weeks’ of termination pay. It is illegal for an employer to pay a termination package that does not comply with at least the minimum standards set out in the Employment Standards Act.

The minimum standards include a requirement to pay termination pay, severance pay, and continue employer benefits through the statutory notice period.  Termination pay must be paid on the basis of one-week per year worked, up to a maximum of 8 weeks.  Severance pay is different than termination pay.  Only those employees that have been employed for longer than 5 years for an employer with a payroll of greater than $2.5M will be entitled to severance pay upon termination of their employment. The Employment Standards Act governs the formula to calculate severance pay should you be entitled.

Employers are required to pay terminated employees their base minimum statutory entitlement 7 days after termination or on the employees’ next pay date, whichever is later.  This statutory pay must be distributed irrespective of whether the employee has executed a signed release, which an employer will typically require in order to formalize the severance.

Employees that are employed in certain designated, federally regulated sectors (i.e., telecommunications, banks, airlines, etc.) are entitled to benefits as outlined in the Canadian Labour Code, which codifies a set of employer obligations upon terminating employees in the designated sector.  Many of the rights and obligations therein are similar to those enumerated in the Employment Standards Act.

If you have been terminated from your employment, consult with an experienced employment lawyer to determine if your employer has upheld its obligations on termination.