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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.

Working Notice or Notice of Termination – What is preferable?

When an employer wishes to break an employment contract without cause (i.e., for instance, to restructure its business), the company must provide the terminated employee with advanced notice of termination or payment in lieu of notice of termination.

As many callers to our law firm are surprised to find out, an employer is permitted to terminate an employee at any time for any reason whatsoever, so long as it is not a discriminatory reason, as long as sufficient notice of termination or reasonable payment in lieu thereof is provided.

Working Notice

If an employer chooses to provide working notice of termination to the employer (which is often deemed to be more inexpensive from the employers’ perspective), the employee will be given advanced notice that their employment will end at a future date (i.e., the Termination Date) and they will be obligated to continue working until that date. A typical working notice of termination clause is drafted as follows:

“This is to confirm your cessation of employment effective X Date (the Termination Date). During the period up to your Termination Date, you are required to complete all your duties.  You will be paid your regular pay and any outstanding vacation pay owed up to and including the Termination Date, less dedutions.”

 By providing advanced working notice of termination, the employer can keep the employee on staff, contributing to the company during the severance period.  This is typically viewed as more inexpensive than paying the employee a one-time lump sum payment, which immediately ends the employment relationship.  However, in many situations, the employee may sabotage the employer or malinger, which could cause reputational damage to the employer – a scenario which is best to avoid by providing payment in lieu of notice of termination.

How Much Notice to Give? 

  1. An employment contract may contain a restrictive termination provision which limits the employees’ rights on termination to the minimum amounts as prescribed by the Employment Standards Act (ESA). If the termination provision would be deemed enforceable by a Court, the contract governs, and the employee’s entitlement is constrained by the amounts set out in the employment contract.
  2.  Employees are entitled to termination pay under the ESA equivalent to one-week per year worked up to a maximum of 8 weeks. This can be paid as working notice or payment in lieu thereof.  Read the Ontario Ministry of Labour bulletin on dismissals here.
  3. Severance pay is also payable to terminated employees in Ontario that have been employed for a period of 5.0 or more years with the same employer that has a payroll of $2.5 million or greater. The amount of severance payable is one week per year of service up to a maximum of 26 weeks of pay. Severance must be paid as a lump sum and cannot be included as part of the notice of termination.
  4. The common law or judge-made precedents in Ontario set out the terminated employees full entitlement to severance in Ontario unless a restrictive termination provision in the employment contract limits the employee’s entitlement to the minimum amounts prescribed by the ESA.  Common law severance or “reasonable notice,” as it is typically referred to, is calculated based on an employees age, length of service, seniority, specialization in employment, length of time it will likely take to obtain comparable replacement employment, and other relevant factors. The total amount of common law notice payable is highly dependent on the facts of each specific case.

It is important to ensure that the employer is complying with their legal obligations to when providing severance packages. At Goldstein Law Firm, we will review your employment contract, severance package, and other relevant documentation in order to advise you (whether employer or employee), if what has been offered is fair and reasonable in the circumstances and given the above-referenced factors. If you have any questions about severance packages or wrongful dismissal in Toronto, Mississauga or elsewhere in Ontario, feel free to contact our employment law firm today!


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.

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!

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.

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.