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Can an Employer Terminate My Employment Due to a Business Down-Turn Resulting from the Coronavirus (COVID-19)?

In Ontario, it is a well-established principle of employment law, that an employer can terminate an employee at any time without cause for any reason, so long as the reason is not discriminatory or a breach of a human right. Typically, where an employee is terminated without cause, they are not provided with any advanced notice of dismissal. With ongoing concerns associated with the COVID-19 pandemic, large contracts and business relationships have been terminated that will inevitable result in a paring down of the workforce without advanced notice.

At law, there is no difference between the right of an employer to provide working notice (i.e., advanced notice of termination) or payment in lieu of notice of termination (i.e., a lump sum severance payout). Accordingly, in many cases businesses will prefer to immediately terminate an employee without cause while providing pay in lieu of notice to avoid the potential morale drain, transfer of confidential information, solicitation of clients or colleagues, or other potential implications of providing working notice to a disgruntled employee.

If you have recently been terminated from your employment in Ontario, it is likely that you have received a termination letter from your employee which outlines the specific severance package. The employer does not need to provide any specific reason for the dismissal, though more recently many employers are terminated employees due to the business realities caused by the global COVID-19 pandemic.

An employer who terminates an employee without cause is required to make the employee whole during the period of reasonable notice. In other words, at common law, the employee is entitled to continue to receive all the compensation (including commissions, bonuses and stock options) and benefits that he or she would have enjoyed if still actively employed with the employer throughout the notice period.

If you have been terminated from your employment, contrary to what most employment lawyers will tell you, it is generally a very straightforward and simple process to negotiate an enhanced severance package, and where litigation is required – the substance is simple (i.e., it does not require a law degree, let alone a high school diploma to determine how much severance you may be entitled to) – it is merely the unfortunate procedure that lawyers have developed in order to protect their profession and demand unjust and punitive hourly rates that make the process challenging.

If you are contemplating hiring a lawyer, be very careful in understanding the retainer agreement. Under no circumstances, unless for senior executives with potentially 100’s of thousands of dollars of severance pay outstanding, you should not pay more than $2,000.00 as an up-front retainer to a lawyer. Again, these matters are very simple and straightforward. The work is typically done by template and the system is often designed to enrich the lawyer to your benefit. At Goldstein Law, we believe that we put the client first by acting transparently and only taking on cases where there is a real economic benefit to be realized by all parties involved. Thanks for reading.

Fixed Term Contracts – Termination Clauses

Employers may wish to enter into fixed-term employment contracts for various reasons, most commonly where the employee is hired to complete a specific project or task for the employer with a defined deadline or where the employee has been hired during another employees leave of absence (i.e., maternity leave, sick leave, disability-related absence, etc.). When the full-time employee returns from leave, the services of employee that is working on a fixed-term contract will no longer be required.

Substantial litigation in Ontario has surrounded the early termination of fixed-term employment contracts. In other words, how much is the fixed-term employee owed if the employer opts to terminate their employment prior to the end of the expiry of the fixed term? In some cases, a clear and unambiguous termination clause will obligate the employer to only pay the amounts indicated in the clause (i.e., typically, 2 weeks of advanced notice of early termination or payment in lieu thereof); however, where these restrictive early termination clauses are ambiguous, they will be interpreted and construed in favour of the employee, in accordance with the principle of contract law referred to as contra preferentem.

As noted in Howard v. Benson 2015 ONSC 2638, in the absence of an enforceable (i.e., unambiguous) contractual provision, a fixed term employment contract obligates an employer to pay an employee to the end of the term and the obligation will not be subject to mitigation.  Where the language of a termination clause is unclear or can be interpreted in more than one way, the court should adopt the interpretation most favourable to the employee (Wood v. Fred Deeley Imports Ltd. 2017 ONCA 158).

Ambiguity can relate to any number of factors. In one case, our clients fixed term employment contract stipulated a minimum notice requirement but not a maximum. In other words, there was no language that clearly indicated that the 2 weeks notice represented all obligations of the employer to the employee on termination.In addition, it is a complete contradiction in terms to suggest that a contract is for one-year and then say it may be for just two weeks, at the whim of the employer. 

It is arguable that all fixed term contracts that purport to allow early termination for unspecified reasons ought, in principle, to be considered ambiguous, and interpreted contra proferentem.   However, there does not yet appear to be any jurisprudence which goes quite so far.  The point wasn’t raised in Benson, which looked instead for technical ambiguities in the wording of the termination clause itself.  It seems to me to be a contradiction in terms to state that you have a contract for a year, and then say that it might be a contract for just two weeks, at the whim of the employer.  

In any event, if you are an employee that has been terminated prior to the end of a fixed term contract, it is in your interest to have the severance package reviewed by an employment lawyer to determine whether the employer has provided you with your full entitlements based on the wording of your employment contract.

Reasonable Notice Periods on Termination

Age and tenure of services are typically positively correlated, and they are two of the key factors considered by a Court in determining a terminated employee’s reasonable notice entitlement.  It has been recognized in case law that the availability of similar employment opportunities diminishes as the prospective employee ages.  As a result, recent decisions have that the Courts are more willing to extend the reasonable notice period beyond the previous maximum of 24 months.

O’Reilly v. Imax Corporation – after 22 years of employment, the Plaintiff was dismissed without just cause at the age of 54.  The employee was a commissioned salesperson and lost a substantial book of business as a result of the termination. In this case, the Plaintiff did not establish that there were exceptional circumstances to justify a reasonable notice period beyond 24 months.

Beattie v. Women’s College Hospital – two Plaintiff doctors commenced an action against the Hospital for wrongful dismissal. The co-Plaintiffs were 64 and 65 years of age and had been employed for 21 and 30 years by the hospital, respectively. The Plaintiffs were awarded greater than 24 months of notice irrespective of the fact that alternate employment was available to them.

Dawe v. Equitable Life Insurance Company  – Employee was part of the senior management team, he was 62 years of age at the date of dismissal and had worked for the employer for 37 years. The Plaintiff was found entitled to 30 months of notice given that there was no comparable employment available and the termination was tantamount to forced retirement.

Recent case law is clear that courts in Ontario are willing to extend the reasonable notice period beyond 24 months. The demographic shift is changing the age composition of the workforce and expectations regarding retirement. As such, notices awards in excess of 24 months are likely to become more common.

 

 

 

Notice Periods for Long Service Employees

In order to terminate an employee for cause, an employer must demonstrate that the employee engaged in serious misconduct (i.e., theft, physical harassment or sexual harassment) or that the company placed the employee on a progressive disciplinary plan that sets various performance targets that were not met. In a progressive disciplinary plan, the employee is provided with the opportunity to perform in a satisfactory manner that enables him or her to maintain employed. However, if the plan objectives are not met and the employee continues to engage in poor performance, this may constitute grounds for a just cause termination.

In a recent case called Saikaly v. Akman Construction Ltd.an Office Manager was found to have been wrongfully terminated for cause.  It was found that the employee did not commit any wrongdoing that would rise to the level required for a just cause termination; as such, the employee was entitled to notice of termination or payment in lieu thereof.  In awarding severance pay, the employee received over $150,000.00 plus almost $10,000.00 towards legal costs, representing 24 months of pay.

The employee denied that he ever engaged in any wrongdoing or that he was notified by the employer of the reason for the termination of employment.  The Plaintiff commenced a Court Action for wrongful dismissal and the Defendant did not respond. Later, the Defendant was noted in default, the consequences of which is that the defaulting party is deemed to admit all allegations in the Claim.

As a 60-year old employee with managerial duties, the Court found that it would be especially challenging for this individual to obtain new employment. If you are provided with a severance package or terminated from your employment for cause, it is important to obtain legal advice to ensure that you take the proper steps to obtain the compensation you deserve.

At Goldstein Law Firm, we have expertise in obtaining severance packages for wrongfully dismissed employees.

Severance Pay for Long-Term Employees

With the aging of our population, a number of workers that have been employed by the same company for a long-period are either entering into retirement or oftentimes, are terminated due to a restructuring, as companies seek to bring on new, younger employees. In determining how much severance is owed to a long-term employee at an advanced age, reviewing precedents (i.e, other cases in Ontario employment law where judges have granted severance pay to employees in similar circumstances), is the best guide to determine how much you are entitled to.

In determining what is fair and reasonable in the circumstances, a Court will consider a number of factors, including but not limited to the employee’s age, the length of service with the company, and the level of job specialization. The main consideration underpinning this assessment is ‘how long is it expected to take for the terminated employee to obtain alternate comparable employment after the termination?’

Employees that have spent a long period of time with one company are not well-versed in the contemporary means available to apply for jobs; and accordingly, may have more difficulty in their job search. In addition, though employers cannot discriminate against employees on the basis of age, it is a common understanding that employees of a more advanced age typically find it more challenging to obtain a job as they approach 65 years of age. Accordingly, employees that have been terminated without cause with a long length of service and at an advanced age will be entitled to substantial severance packages.

The case of Lalani v. Canadian Standards Association is an example of a case whereby a 60-year old employee with 30+ years of service was awarded two-years of severance.

Please note that the vast majority of severance packages are inadequate. As a senior employee with a long length of service, you may be entitled to 100’s of thousands of dollars. It is imperative that you contact a qualified employment lawyer to discuss your termination prior to signing back any severance package.

Is the deadline in my severance package enforceable?

The short answer is NO. Clients frequently call our employment law firm following a job loss advising that they only have one or two days to return their severance package or they would lose the offer from the company. This is not accurate.

Your legal rights do not expire at some pre-defined and arbitrary date as imposed by the employer. In fact, you are entitled to the minimum Employment Standards Act payments (i.e., termination pay and severance pay) irrespective of whether you sign back the severance package on time, late, or at all. The employer is obligated by legislation (i.e., the Employment Standards Act) to provide an employee that has been terminated without cause in Ontario with the following entitlements:

-One week of termination pay per year worked, up to a maximum of 8 total weeks of termination pay; and
-One week of severance pay per year worked, with an adjustment for the number of weeks worked, if the following conditions are satisfied:
(a) The employee has been employed with the company for 5 or more years prior to the termination of employment; and
(b) The company’s annual payroll exceeds $2.5MM.

Both of the above-referenced conditions must be satisfied in order to be eligible for severance pay under the Employment Standards Act. Nevertheless, the employee is entitled to termination pay in any event. In addition to your statutory entitlements, if the employee has not signed an employment agreement with an enforceable termination clause, then they will be entitled to advanced notice or pay in lieu thereof in accordance with the common law in Ontario, which is a substantially enhanced severance entitlement over and above the Employment Standards Act.

With respect to the severance package deadline, your legal rights only expire after the basic limitation period in Ontario runs out, which is two years. Accordingly, if your employment contract does not nullify your right to common law severance pay, you have up to two years to seek recourse. This does not change if your employer includes a deadline in the severance package – as your years of service and dedication to the company will be recognized by a Court irrespective of any deadline (other than the two-year basic limitation period in Ontario).

If you have any questions about your severance package in Ontario, feel free to contact our employment law firm for a free consultation.

Executive Employment Law

Goldstein Law is an employment law firm with experience in assisting executives of large corporations in negotiating valuable severance packages in the event of a termination of employment. We receive inquiries from employees quite often alleging that they have been wrongfully dismissed from their employment, merely because they were terminated.

Under the Employment Standards Act in Ontario and the common law, employers are at liberty to terminate an employee without cause at any time for any reason whatsoever, so long as it is not a discriminatory reason. In the event of termination on account of discriminatory ground, which are outlined as prohibited grounds of discrimination in the Ontario Human Rights Code, a few examples of which, including termination due to disability, pregnancy, ethnicity, gender, etc. Absent a discriminatory ground for the termination of employment, and assuming a legitimate business purpose for ending the employment relationship, the employer has certain obligations under the Employment Standards Act and common law that must be abided by.

If the employers’ obligations are fully satisfied, which will include the payment of the minimum amounts of termination pay as prescribed by the Employment Standards Act (and severance pay if certain criteria are satisfied), and advanced notice of termination or payment in lieu thereof in accordance with the common law (absent a fully enforceable termination clause in the employment agreement which can serve to nullify the terminated employees rights to an enhanced severance)

Accordingly, if you have been terminated from your employment without cause in Ontario, please call an employment lawyer today to discuss your legal rights and to review your severance package for free.

Termination Clauses in Employment Agreements

The enforceability of termination clauses in employment agreements in Ontario is highly litigated and discussed topic, having significant implications for both employers and employees. The difference between an enforceable and unenforceable termination clause in an employment contract can mean the difference between 10’s of thousands, and sometimes 100’s of thousands of dollars in severance obligations. Of course, if you are an employer, it is imperative to draft an enforceable termination clause to limit a terminated employees entitlements to severance pay. Conversely, employees seek employment clauses which do not restrict their termination entitlements or those where termination clauses are not drafted properly so as to be unenforceable.

What an enforceable termination clause does is limit an employees entitlement to those expressly laid out in the Employment Standards Act, thereby ousting the rights to enhanced common law notice or pay in lieu thereof. There is a presumption of entitlement to common law notice absent an enforceable termination clause. So what clause is enforceable? The case law is checkered on this point.

In a recent case called Nemeth v. Hatch Ltd., 2018 ONCA 7, the Ontario Court of Appeal clarified that termination clauses do not need to contain specific language to oust the common law, as long as the “intention to displace an employee’s common law notice rights can be readily gleaned from the language agreed to by the parties.” The Court also concluded that the termination provision’s silence on severance pay did not make it void and unenforceable.

Where a termination provision is silent with respect to severance pay, this does not denote an intention to contract out of the ESA, and the statutory minimum standards remain in place. The Court referred to the comments in Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, wherein Justice Laskin noted that the absence of language in a termination clause with respect to continued contributions to a benefit plan did not indicate an intention to exclude the obligation.

For more questions on termination clauses in Ontario or general employment law issues, contact Goldstein Law Firm today for a free consultation.