An employee who is dismissed without cause is entitled to reasonable notice of termination. Where an employer provides “working notice”, the employee is given advance notice as to their last day of employment. In the interim, they continue to be employed and are paid for their work. In theory, the period of working notice operates to cushion the transition from one employer to the next by providing the employee with income while they look for work.

However, it is rare that an employee is actually given working notice. The norm is that an employee is terminated effective immediately. In these circumstances, and where cause is not in issue, the employee is entitled, both by operation of the Employment Standards Act (the “Act”) and at common law, to pay in lieu of notice. The Act speaks of an entitlement to “regular wages” over the notice period. At common law, the Courts calculate remuneration owing based upon what the employee would have received over the appropriate notice period.

In many cases, the employer will offer minimum Employment Standards payments or marginally greater than such payments in exchange for a full and final release. Is this all an employee is entitled to?

Take, for example, a waitor, 52 years of age, with just under five years of service who is receiving an hourly rate of $11.00 for a 40-hour workweek. In addition to his base salary, the employee earns tips and is enrolled in the employer’s group benefits plan. The individual is entitled to two weeks’ paid vacation. According to the Act, that individual would be entitled to a minimum of four weeks’ notice. The employer offers to provide termination pay in the amount of 4 weeks’ base salary or $1,760.00 and nothing more.

The first and perhaps most important point that needs to be made with respect to the above example, is that 4 weeks’ notice represents the employee’s entitlement under the Act and is a minimum entitlement only. At common law, and based upon decided cases with similar fact situations, the employee in our example would be looking at “reasonable notice” of approximately 3-4 months of total earnings.

Secondly, both at common law, and under the Act, the employee has a right to more than base pay upon termination. Under the Act, the employee is also entitled to continuation of benefits over the notice period and vacation pay calculated as a percentage of the termination pay owing. In the above example, the individual would be entitled to vacation pay at 4% of $1760.00 or $70.40. The employee would also be entitled to any wages and vacation pay owing at the time of termination.

In the calculation of reasonable notice, the Courts have held that an employee receiving gratuities as part of their remuneration has a right to damages for the loss of both base pay and tips. This may even be the case where the employee has failed to declare the value of tips received for tax purposes. Where group benefits are not continued by the employer, the employee will also be entitled to damages for the loss of benefits.

In the example noted above, the employer, whether deliberately or not, was not meeting its obligations either under the Act and at common law. An individual faced with this situation and knowing their rights both by statute and at common law, would have been in a position to negotiate or fight for more. As always, individuals facing dismissal are well advised to seek legal counsel to know where they stand. This will especially be true where the employer requires the employee to sign the offer or a Release indicating their acceptance of the offer in satisfaction of all legal obligations owing by the employer upon termination.

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EMPLOYMENT STANDARDS ACT PAYMENTS AND COMMON LAW DAMAGES - WHAT IS THE DIFFERENCE?

Termination can be one of the most traumatic experiences in one’s life. An added stressor in a termination meeting may be a demand by the former employer that the employee agree to terms of a severance package. The easy response is to sign on the dotted line, accept whatever the employer is offering, and move on. However, like most things in life, the easiest option may not always be the best.

Having practised employment law for more than 18 years, I can say without hesitation that the biggest mistake that a terminated employee can make is to sign the initial offer either because it is easy, or there is pressure placed on them by the employer to do so. The best advice I can give is to seek legal advice on the offer before you sign. If the offer is reasonable, it will likely be there after you have obtained advice. The more pressure that is put on you by the employer to sign, the greater is the likelihood that the offer is unreasonable. It is understood that seeing a lawyer is as much fun as going to see a dentist. However, in both cases they are necessary “evils”.

Many people assume that any severance package received is reasonable, and that their employer would never try to take advantage of them. Such theory ignores the fact that the employer is running a business and it makes business sense to pay less rather than more. Using that basic principle, it is rare that the opening offer will be its best offer. There is however a certain level that an employer cannot go below, which I will refer to as base payments. These base payments are referred to as statutory termination and severance pay pursuant to the Employment Standards Act (the “Act”). Termination pay is equal to one week per year of service up to a maximum of eight weeks, and severance pay is the equivalent of one week per year of service (or part thereof) up to 26 weeks. Severance pay under the Act is only paid if the payroll of the employer exceeds $2.5 million and the employee has more than five years of service.

An employer cannot offer less than minimum statutory payments or base payments. But what if the employer adds a few weeks to the “base” payment? To the layman, it may appear that the employer is being generous, when in fact it is not. To use an example, take a five-year employee who is entitled to severance and termination pay in the equivalent of 18 weeks. In that situation, the employee is entitled to 18 weeks’ pay at an absolute minimum and without signing a release. If the employer seeks a release of common law entitlements in exchange for 20 weeks, the employee would receive only two weeks over Employment Standards minimum payments and in exchange for giving up rights to common law damages which could represent 12 months’ pay or more. Common law entitlements to notice are based on several factors including the person’s age, position, years of service, and the availability of alternate employment taking into consideration the employee’s education and training. Unlike statutory notice, common law notice is not fixed but is based on what a Court believes is reasonable in the circumstances. In monetary terms, an employee could be leaving tens of thousands of dollars on the table.

It should be understood that Employment Standards minimum payments are payable without an employee having to sign any release whatsoever. In other words, the employer would be obligated, in the above example, to pay 18 weeks pay and the employee would retain the right to bring a civil claim.

It is therefore extremely important that an employee understand what minimum (base) payments they are entitled to. The closer the offer is to the base, the worse the offer. The quantification of common law damages is in most cases significantly greater than base payments and which can only be assessed by a qualified lawyer.

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An employer who dismisses an employee without cause is obliged by law to provide notice of termination which must include either a period of working notice after which the termination will take effect or pay in lieu of such notice if termination is to take effect immediately. The purpose of such notice is to alert the employee that his employment is either at an end or fast approaching so that he/she can begin to look for new employment and as it were, land back on his feet while income is still coming in.

The minimum notice period to which an employee is entitled is established by the Employment Standards Act (the “Act”) and will vary from one to eight weeks or the equivalent pay in lieu depending upon the employee’s length of service with the employer. An individual who, on the other hand, brings a civil claim for wrongful dismissal to the Courts, may expect, if successful, an award for reasonable notice which exceeds his/her statutory entitlements. Depending upon an employee’s age, position, length of service, availability of alternate employment, and the circumstances surrounding the termination, he/she can obtain a notice award of as much of 24 months’ pay and in some cases, even more.

Does this mean that all employees who are wrongfully dismissed, are entitled to reasonable notice? The answer is: many but not all. Where there is no written contract, the employment relationship is governed by an oral agreement between the parties. The Courts have recognized an implied term in such agreements providing for reasonable notice upon termination.

The rights of unionized employees regarding notice, on the other hand, are strictly governed by the terms of their collective agreement. These terms may be or less generous than what the Courts would have awarded as reasonable notice. In the non-union workplace, where there is a written agreement which contains a provision or provisions concerning termination, the parties may have agreed to limit or restrict an employee’s right to notice with the effect that an employee may have given up his/her right to reasonable notice. Where the employer has done its homework, it may be difficult if not impossible to overturn such a contract. Such agreements however, will be enforceable if and only if,
(1) The notice agreed to, satisfies the minimum entitlements under the Act; and
(2) The provisions regarding termination are clear and unambiguous.

The difference between reasonable notice and employment standards minimums can be significant and even life altering. Employers rarely provide written contract terms which are more favourable than the employee’s common law right to reasonable notice. Typically, employees will be asked to sign a contract of employment which restricts the right to notice without understanding what they are giving up and without having the opportunity to consult with a lawyer first. It is always in the employee’s best interest to request an opportunity to obtain legal advice before signing such an agreement. Armed with the information provided by counsel, the individual may be able to negotiate the contract terms dealing with termination. Where the employer refuses a request to obtain legal advice, the employee may be able to rely on such conduct to have the termination provisions of the contract set aside should the issue of notice later be disputed. At the very least, with proper legal advise, the employee will know what he/she is getting into before making the commitment which the employment relationship necessarily involves.


Marvin A. Gorodensky has over 16 years experience in Employment Law. He can be reached at (416) 323-9395, or at www.dismissed.ca.

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It has become increasingly commonplace for individuals to be told by their employers that as a result of corporate restructuring or re-organization, shortage of work or cutbacks, they are being terminated. Under these circumstances, the employer is obliged by the Employment Standards Act (the Act) of Ontario to provide a departing employee who has three or more months service with notice of termination so that he may have the time and resources needed to look for alternate employment.

An employee’s rights upon termination under the Act include the following:

(1) The employer must provide notice of termination in writing;

(2) Notice may take one of two forms. The employer may provide written notice to the employee that termination will occur at some future date. In this situation, the
employee will continue his employment until that date is reached. This is commonly referred to as “working notice”. The length of working notice that an employee is entitled to, will increase with years of service up to a maximum of 8 weeks for an employee who has been employed for 8 years or more years. During the period of working notice, the employee will continue to receive regular salary and participate in the group benefits plan provided by the employer;

(3) Alternatively, where an employee is advised that his employment is being
terminated effective immediately, he will be entitled to pay in lieu of notice quantified on years of service, up to a maximum of 8 weeks;

(4) An employee is entitled to vacation pay on any amount provided as termination pay under the Act;

(5) Where an employee has five or more years of service and is either part of a group of 50 or more employees facing termination or works for a company with a payroll at or exceeding $2.5 million, that employee when terminated, will be entitled to severance pay in addition to termination pay. The amount of severance will depend upon years of employment, up to a maximum of 26 weeks’ pay for an employee who has completed 26 or more years of service;

(6) An employee is entitled to receive termination and severance pay owing in a
lump sum, within seven days of termination or by the next scheduled pay date;

(7) An employer is obligated to provide the departing employee with any wages and/or reimbursement of expenses owing at termination; and

(8) An employee is entitled to receive a Record of Employment upon termination,
which document is needed in order to apply for Employment Insurance benefits.

Many employers and employees believe that the legal obligation to a departing employee ends with an employer’s obligations under the Act. This is incorrect as the Act establishes minimum entitlements only. The Courts have long recognized that an employee who has been terminated without cause and has not signed an employment agreement limiting his right to notice, will have a right to reasonable notice. Such notice almost always exceeds entitlements under the Act. Factors taken into consideration by the Courts in determining the length of reasonable notice include the age of the employee, position with the company, years of service and the availability of alternate employment.

In Ontario, reasonable notice awards or damages for wrongful dismissal, can exceed 24 months’ pay. Such awards however, are by no means automatic. The dismissed employee must make a diligent search for alternate employment and accept comparable employment when offered. Income received from alternate employment during the reasonable notice period will be deductible from damages otherwise owing.

Dismissed employees who are contemplating bringing a claim to enforce their rights upon termination at common law, must do so within 2 years of the date of termination. It is important to note however, that an employee who files a complaint alleging entitlement to termination and/or severance pay under the Act, cannot subsequently commence a civil proceeding for wrongful dismissal. An employee who first brings an action for wrongful dismissal is similarly prevented from then filing a complaint under the Act.

Employers will sometimes offer a departing employee a “package” at termination and request that the employee sign a Release in exchange for the package offered. Where the offer fails to meet or only meets entitlements under the Act, a signed Release will not be binding upon the employee. However, where an offer exceeds entitlements under the Act, a signed Release will likely absolve the employer from any further obligation to the departing employee. Given the serious consequences which may result, individuals who are presented with a termination package and are asked to sign a Release, are strongly advised to obtain independent legal advise before signing such an agreement. Only by doing so, will an individual facing termination, be able to evaluate the employer’s offer in relation to his rights upon termination and determine the best course of action including whether he might be better off bringing a civil action against the employer for wrongful dismissal. In no circumstances should any terminated employee accept a severance package without speaking with a lawyer.

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An employee who is terminated without just cause has a legal entitlement to reasonable notice of termination or pay equal to the appropriate notice period. The intention of this legal principle is that a terminated employee should not suffer financially for the period they require to find alternate work (or more appropriately, the period a Court believes it should take that person to find comparable work). An individual who is not provided with appropriate notice (or payment in lieu) can enforce their right to reasonable notice by bringing a civil action for wrongful dismissal.

EMPLOYMENT STANDARDS

Employment Standards payments (commonly referred to as severance or termination pay) are prescribed in the Employment Standards Act and are owing to an employee without an obligation to execute a release. Unlike wrongful dismissal damages Employment Standards payments are based solely on the years of service and the payroll of the employer and are not in any way related to an employee’s entitlement to “reasonable notice”. In fact, reasonable notice, with few exceptions, will always be significantly greater than Employment Standards minimums. To illustrate, take the example of a middle management employee, age 40, who is employed with a small company (payroll less than $2.5 million) for 12 years and earning $50,000.00 per year. Statutory minimums would total 8 weeks’ termination pay plus outstanding vacation pay. If you are asked to accept 8 weeks’ pay or $7,692.30 in exchange for executing a release the employee may be precluded from seeking reasonable notice which could range from 8 to 12 months or $33,330.00 to $50,000.00. It is no wonder that employers typically ask terminated employees to sign a release in exchange for the minimum payments under the Employment Standards Act. To do so, in most cases, would be a grave mistake and therefore any offer should be reviewed by a lawyer prior to acceptance of same.

BAD FAITH

In its decision in Wallace v. United Grain Growers, the Supreme Court of Canada observed that the involuntary loss of one’s job can be a traumatic event and that when employment is terminated, the employee is vulnerable and in need of protection. Thus, employers are held to an obligation of good faith and fair dealing in the manner of dismissal. Where there has been a breach of that duty, the Courts may order compensation in addition to damages for wrongful dismissal.

While Wallace specifically stated that injured feelings and emotional upset resulting from the fact of the dismissal do not provide a basis for compensation, injuries such as humiliation, embarrassment and damage to one’s self-esteem or sense of self-worth caused by the manner of termination may be worthy of compensation. The following are but a few examples of conduct by an employer which, according to Wallace, could result in bad faith damages:

(1) False allegation that termination was due to the employee’s inability to do his job;

(2) False allegation that termination was for cause;

(3) Spreading word through the industry that the employee was terminated for dishonest conduct;

(4) Refusal to provide a letter of termination after termination;

(5) Firing an employee immediately upon return from disability leave; and

(6) Replacing an employee shortly after he had been told that he was being laid off due to a shortage of work.

More recent case law provide further examples of the type of conduct that would constitute bad faith on the part of the employer and justify increased damages. In Noseworthy v. Riverside Pontiac-Buick Ltd., the Ontario Court of Appeal recognized that additional damages were warranted based upon a finding that the employer had confronted the plaintiff with false allegations of forgery and threatened to lay criminal charges if the employee did not sign a letter of resignation.

In Marshall v. Watson Wyatt & Co., the employer had claimed that it had cause to terminate the plaintiff because of insubordination, inability to deal with subordinates, failure to achieve expected performance and generally unprofessional behaviour. These allegations were maintained until shortly before trial and then withdrawn. The Court also found that the employer failed to pay commissions it admitted were owing to the plaintiff and failed to provide a Record of Employment required by the Employee to claim unemployment insurance benefits. The Court of Appeal in Marshall upheld a jury award for bad faith damages and noted that the employer “practiced the kind of hard ball the Supreme Court of Canada warned against in Wallace.”

In Antonacci v. Great Atlantic & Pacific Co. of Canada, the trial judge found that bad faith damages were justified because of unfounded allegations against the employee of poor performance, harassment, intimidation and threats that cast a shadow on him that would make it virtually impossible for him to find another position.

In Prinzo v Baycrest Centre for Geriatric Care, the Ontario Court of Appeal found that the plaintiff was entitled to bad faith damages as a result of phone calls from the employer prior to the plaintiff’s termination and while she was on disability leave, inferring that she was exaggerating or feigning illness and letters to the plaintiff falsely suggesting that her doctor had indicated she was fit to return to work. This conduct caused the plaintiff loss of self-esteem and disability for several months following her dismissal.

Where will the Courts draw the line between employer conduct which is permissible at termination and that which constitutes bad faith or unfair dealing? The test a plaintiff must meet to be awarded bad faith damages was recently clarified by the Ontario Court of Appeal in Gismondi v. The Corporation of the City of Toronto. Bad faith damages will be available where it can be shown that the employer’s conduct demonstrates something akin to intent, malice or blatant disregard for the employee. It is employer conduct which amounts to callous or insensitive treatment of the employee or as the Court put it in Watson, playing hardball.

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In a recent decision of the Alberta Provincial Court in Locke and Chandos Construction Ltd., a number of interesting legal issues were addressed.

Mr. Locke was employed as a Construction Superintendent with Chandos Constructions Ltd. (“Chandos”). Mr. Locke was 63 years of age and had been involved in the construction industry for over 35 years. After a brief period of unemployment, Mr. Locke found employment with Chandos as a Superintendent renovating and constructing a school commencing in early April 2002. Mr. Locke was responsible for completing the 7 million dollar project and was Chandos’ main representative at the job site. After the project was completed approximately one year later, Mr. Locke was asked to be a Site Superintendent for a theatre complex in Lethbridge, Alberta necessitating a move to the Lethbridge area. Mr. Locke did not receive a change in his remuneration although he did receive a living allowance as a result of the move.

Mr. Locke was introduced to co-workers at the new job site on September 2, 2003. By that time, Mr. Locke had moved to Lethbridge and had incurred liability with respect to a residential lease.

Approximately one week after commencing employment at the new site, Mr. Locke was terminated for “not being capable of doing the job” and replaced with a new Superintendent. Mr. Locke was not provided with any severance or offer of other work. Mr. Locke was replaced with a Superintendent with greater seniority with Chandos and who had just finished another project.

Chandos relied upon custom or usage in the industry for the proposition that it had no obligation to provide Mr. Locke with any notice. The Court held that in order for custom or usage to be binding it “must be notorious, certain and reasonable and not contrary to the law”. The Court held that the employer showed no evidence of custom or usage in respect of (i) the right of termination without notice or compensation; or (ii) even as to how such custom/usage might impact reasonable notice. The Court relied upon the common law principle that reasonable notice of the termination of employment must apply. The Court then went through an analysis of the amount of notice that Mr. Locke would be entitled based on the standard factors, including age – 63 and length of service – 16 months. The Court held that notwithstanding the short duration of employment, the Plaintiff was a senior employee and entitled to six months’ pay. The Court further added one additional month’ notice on account of bad faith conduct of the employer. The Court relied upon the following bad faith conduct:

“it is clear that Mr. Locke was dismissed because the company wished to have another employee take over the superintendent’s position that he had been given on the Lethbridge theatre project. The company was not forthright in this regard and was misleading when, in advising the Plaintiff of his dismissal, they told him that he was being dismissed because, “he was capable of doing the job”.

The Court also stated:

“The Defendant company was insensitive to the fact that they had only days before placed the Defendant in the position, introduced him as the superintendent of the job, and had otherwise given him their full confidence. They were insensitive to the fact that dismissing him on the basis of being incapable of performing the job, which was not the basis at all, could clearly impair his ability to get a job. Indeed, the Plaintiff was afraid to put on his resume his dismissal, as he feared that could impact his ability to find similar employment…

It is of further note that the Plaintiff’s dismissal was abrupt, without any warning or indication to him and without regard to the fact that he had been required to move to Lethbridge by the Defendant company, when he had been appointed to handle the Lethbridge project. In this regard, he had entered into a one year residential lease and the Defendant company had no regard whatsoever for the fact that he would be liable under the terms of this lease even after his termination of employment.

Further indicative of the Defendant company’s bad faith is the fact that although it was clear that they had no grounds for dismissal, instead of giving the Plaintiff even nominal notice, they chose to proceed on the basis that they could dismiss without any notice whatsoever, regardless of whether that was fair or not”.

This decision emphasizes two paramount principles of employment law. First, an employee is entitled to reasonable notice of the termination of employment, save and except where the parties clearly contracted to the contrary. This Court had very little patience for the company’s defence based on custom or usage where no evidence was available to substantiate such proposition. Second, this case demonstrates the Court’s requirement that a company act in good faith in the manner of termination.

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Rare will be a termination of employment which does not cause an employee to suffer emotionally and psychologically from the loss of work and associated loss of income, the loss of self-esteem and the disruptions to one’s life which result. The question considered here, is under what, if any circumstances can an employee sue for damages which result from the loss of employment.

“Aggravated” damages are awarded to compensate for aggravated injury. They are meant to take into account intangible injuries and are awarded in addition to damages that are otherwise available for wrongful dismissal. As one Court has observed:
“The aim of aggravated damages is to ‘soothe a plaintiff whose feelings have been wounded by the quality of a defendant’s misbehaviour’. They are a “balm for mental distress’ which is brought about by the wrongful ‘character of the defendant’s wrongdoing’. There must be evidence of damage of this type to the plaintiff.”

The leading case on aggravated damages in the employment context is Vorvis v. Insurance Corp. of B.C. In Vorvis, the plaintiff had returned to school to study law, after a successful career as a sales manager. Upon graduation, he went to work for the defendant and over the course of seven years, received a promotion and several merit pay increases.

Difficulties arose for the plaintiff upon the defendant’s decision to hire a new general counsel who became the plaintiff’s immediate supervisor. The mandate of the general counsel was to improve the productivity of the corporation’s legal department. The general counsel became increasingly dissatisfied with the pace of the plaintiff’s work, and instituted weekly productivity meetings to review the plaintiff’s performance. The trial judge noted that these meetings became “an inquisition” and “as the pressure increased the plaintiff became tense, agitated and distressed, finally requiring medical attention and a tranquilizer.”

A little more than year after the general counsel’s hire, the plaintiff was terminated simply because, according to trial judge, the plaintiff no longer fit into counsel’s plans for the legal department.

The plaintiff brought suit seeking damages for wrongful dismissal and damages for mental distress arising from his termination of employment. The courts at all levels concluded that the mental distress experienced by the plaintiff as a result of his termination, did not give rise to aggravated damages in addition to the damages he sought for wrongful dismissal.

The Supreme Court of Canada noted that where a claim is based upon breach of an employment contract, damages are limited to the financial loss suffered by the innocent party and cannot include damages for injured feelings. In the employment context, such financial damages would result from the employer’s failure to provide reasonable notice.

To found a claim for aggravated damages where an employee has been terminated, there must be evidence of a wrong committed by the employer separate and apart from its failure to provide appropriate notice. According to Vorvis, in the absence of such an “actionable wrong”, the employer’s conduct, even though offensive and hurtful to the plaintiff, would not give rise to aggravated damages.

When have the Courts awarded damages for mental distress in the context of a termination of employment? What will the Plaintiff need to show in order to establish an independent actionable wrong? These questions will be the subject of further articles touching on the issue of mental distress.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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Where an employer terminates an employee without cause and fails to provide reasonable notice, the employee can sue for wrongful dismissal to obtain damages equal to the notice that ought to have been provided by the employer. Where the circumstances surrounding the termination have caused the employee mental or emotional suffering, he or she will not be able to sue for “aggravated damages” on account of mental distress unless the employee can establish that the employer committed a legal wrong separate and apart from its failure to provide reasonable notice.

One such “wrong” is the tort of intentional infliction of mental distress. In order to succeed on such a claim, the employee must show that:
(i) The employer engaged in conduct which was flagrant and outrageous;
(ii) The employer engaged in such conduct seeking to cause the employee harm
or with reckless disregard as to whether such harm would occur; and
(iii) The employer’s conduct resulted in a visable and provable injury.

In Rahemtulla v. Vanfed Credit Union, the plaintiff was dismissed from her position as a bank teller on the basis of unfounded accusations of theft. She suffered severe emotional distress as a consequence of her summary dismissal and the accusations of the defendant. The Court held that the accusations of theft, even if motivated by a desire to extort a confession and solve the mystery of the missing funds, amounted to an act with reckless disregard as to whether or not shock would ensue from the accusation. The Court further found that in order to establish the tort, the plaintiff did not have to show that the defendant’s conduct was caused by malicious intent to cause harm or any motive of spite. The Court further found that the employer’s conduct was outrageous and observed:
“While the financial institution has the right to dismiss a suspect employee without investigation, the proper conduct of its affairs does not require that it be given the right to make reckless and very possibly untruthful accusations as to the employee’s honesty which will foreseeably inflict shock and mental suffering. Considering all of these circumstances, I am satisfied that Mr. Flack’s conduct can fairly be described as flagrant and outrageous.”

The Court awarded the Plaintiff $5,000.00 for mental distress.

An employer by communicating an employee’s termination in a reckless fashion, may cause the employee mental distress. Such communications may also constitute the tort of intentional infliction of mental suffering. In Bohemier v. Storwal International Inc., the employee had been employed for 35 years when his discharge was delivered on a Friday evening by taxi. The letter expressed no gratitude for service, offered no proposal to aid in obtaining new employment, and did not specify the basis for payment in lieu of notice. The Court, in awarding damages for mental distress, held:
“The evidence discloses that the usual practice of Storwal on dismissals was to call the employee into the office of a superior at the end of the last day of work. There is no explanation of why this was not done in the case of the plaintiff. Hughes believes that it was due to inadvertence and that the plaintiff left the plant before his superior had an opportunity to speak with him. The reason for departing from the usual practice does not matter. Someone in authority at Storwal must have arranged that the notice be delivered by taxi cab. In my opinion, it was reasonably foreseeable that such an action would aggravate the mental suffering of the plaintiff that would inevitably caused by the act of dismissal and the inadequate period of notice.”

The decision of the Trial Court was upheld by the Court of Appeal.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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Being terminated can be one of the most traumatic experiences in one’s life. In the normal course, and when cause is not alleged, the legal issue to be resolved is whether the payment offered by the employer is appropriate. This is routinely resolved through negotiation with or without the assistance of a lawyer. But what if the employer alleges cause, and offers nothing? What does one do?

Whether “appropriate cause” exists is a legal issue and should be discussed with a lawyer. There are some cases where cause is obvious. There are some cases where there is doubt which way a Court would rule. Finally, there are cases where it is obvious that no cause exists and the employer makes the allegation simply to make life more difficult for the employee. In the latter situation, a Court can award additional damages for bad faith.

If the employer does not have appropriate cause to terminate, the employee is entitled to minimum payments (or base payments) of up to eight weeks’ termination pay and up to 26 weeks’ severance pay.
The termination/severance provisions of Employment Standards Act (the “Act”) are set out below:

Termination Pay
(a) At least one week notice (or pay in lieu of notice) if the employee’s period of employment is less than one year;
(b) At least two weeks notice (or pay in lieu thereof) if the employee’s period of employment is one year or more and fewer than three years;
(c) At least three weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is three years or more and fewer than four years;
(d) At least four weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is four years or more and fewer than five years;
(e) At least five weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is five years or more and fewer than six years;
(f) At least six weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is six years or more and fewer than seven years;
(g) At least seven weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is seven years or more and fewer than eight years; or
(h) At least eight weeks’ notice (or pay in lieu thereof) if the employee’s period of employment is eight years or more.

Severance Pay
An employer that severs an employment relationship shall pay severance pay to the employee if the employee was employed by the employer for five years or more and,
(a) the severance occurred because of permanent discontinuance of all or part of the employer’s business at an establishment and the employee is one of 50 or more employees who have their employment relationship severed within a six-month period as a result; or
(b) the employer has a payroll of $2.5 million or more.

Severance pay shall be calculated by multiplying the employee’s regular wages for a regular work week by the number of years (or part years) of employment the employee has completed to a maximum of 26 weeks.

SHOULD I FILE AN EMPLOYMENT STANDARDS CLAIM?

If terminated for cause and without any payment whatsoever, it is a natural instinct to contact the Ministry of Labour. The Ministry of Labour will be able to provide information as to the statutory severance and termination payments owing if appropriate cause cannot be proven. However, there are several reasons why filing a claim with the Ministry of Labour could prove to be a disaster.

WHAT YOU SEE IS NOT WHAT YOU GET

Assume that during the initial communication with the Ministry of Labour one is advised that they are entitled to 20 weeks severance/termination pay commensurate with a 12-year employee in a company with a payroll in excess of $2.5 million. Assuming an annual salary of $52,000.00, this payment represents $20,000.00. Common sense would dictate that if you bring a claim with Employment Standards and there is found to be no validity to the employer’s allegations of cause, that one would be entitled to payment of $20,000.00. This assumption is wrong. The Employment Standards Act contains a provision which limits the amount of any Order for wages (which term includes severance and termination pay) to $10,000.00. Therefore, unless the employer voluntarily pays severance/termination, the Labour Board only has authority to Order it to pay up to $10,000.00.

ADDING INSULT TO INJURY

To make matters worse, if an employee files a claim with Employment Standards for severance or termination pay, there is also a provision of the Act which would then preclude the employee from bringing a civil action for wrongful dismissal. Given that wrongful dismissal damages are almost always significantly greater than Employment Standards minimums (base payments), one can see the significant prejudice in filing an Employment Standards claim. Not only would the employee be limited to $10,000.00, but the employee would also be giving up a right to common law damages which can be tens of thousands dollars more than base damages.

It appears that the Employment Standards Act gives with one hand and takes away with the other. In fact, the Employment Standards Act as is presently formulated, is designed to deter individuals from filing claims for severance or termination and directs them to the civil courts. If one pursues a claim with Employment Standards, that person must understand that they are limiting their claim for wages to $10,000.00 and are giving up any claim for wrongful dismissal damages. For these reasons, few people in fact file Employment Standards claim for severance and termination. When an employee does file such a claim, they may in fact be helping the employer by limiting their liability to $10,000.00 from what would otherwise have been a significantly greater sum.

With that in mind, one should understand that filing an Employment Standards claim should only be made in very limited circumstances. It is important in all cases to seek legal advice before any action is taken.

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It is difficult enough for an individual to be suddenly told that his or her employment has come to an end. It is doubly so when the employer informs the employee that he/she has been terminated for “cause” or that there is “just cause” for termination. The classic statement regarding “cause” was provided by the Ontario Court of Appeal in Port Arthur Shipbuiding v. Athurs as follows:

“If an employee has been guilty of serious misconduct, habitual neglect of duty, incompetence, or conduct incompatible with his duties or prejudicial to the employer’s business, or if he has been guilty of willful disobedience to the employer’s orders in a matter of substance, the law recognizes the employer’s right to summarily dismiss the delinquent employee.”

If just cause does not exist, the employer has an obligation to give reasonable advance notice of termination or compensate the employee in lieu of notice. Where cause exists, however, the employer may terminate the employee immediately without any further obligation. As serious consequences to an employee flow from a finding of cause, the law places the burden on the employer to prove that it has cause for termination.

Not every act of misconduct will give rise to cause for termination. The conduct in question, must be serious enough to constitute a repudiation by the employee of the employment relationship upon which the employment agreement is based. The types of conduct which the law recognizes as giving rise to cause for termination have included: incompetence, insubordination or disobedience, abusive language or behaviour, absenteeism, lateness, intoxication, dishonesty, theft and sexual harassment.

In the future, we will take a look at some of the leading cases in these areas and the approaches taken by the Courts. The Courts overall have noted that the employment relationship is a different contractual relationship than commercial contracts based primarily on a difference in bargaining power between the parties. In such circumstances, the Courts will not easily find that the relationship has been severed by the conduct of the employee. As one commentator has put it, “the punishment must fit the crime” for just cause to be found.

In their determination as to whether cause exists, the Courts will look at the employee’s employment history and consider among other things, his or her length of service with the employer, and whether there have been similar instances of misconduct in the past or previous disciplinary action taken against the employee. The Courts may consider personal circumstances or health-related issues which may impact on the conduct in question. The Courts may also inquire as to whether the employee has admitted his error or at least been given the opportunity to tell his side of the story.

In certain cases, an employer will not be able to rely on cause where it has not previously warned the employer with regard to the conduct in question or given him the opportunity to deal with ongoing performance-related issues. The employer may also not able to establish cause where it has excused or overlooked similar conduct in the past.

As we pointed out earlier, where there is cause for termination, the employer has no obligation to provide the employee with notice or termination pay. It is therefore not uncommon for an employer to allege cause, even where it will difficult to prove, in order to discourage an employee from bringing an action for wrongful dismissal. In addition, an employee’s entitlement to Employment Standards payments upon termination, and even eligibility for EI benefits may be affected by allegations of cause for termination. Given all that is at stake, employees, in such circumstances, are urged to consult with a lawyer to determine their rights going forward and the strength of any case for wrongful dismissal they may have against the employer.

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Not every employee who faces termination of employment will have an action for wrongful dismissal. A termination is “wrongful” when an employee is terminated without cause and is not provided with reasonable notice of his or her termination.

A discussion of the types of conduct which the courts have held to constitute “cause” is beyond the scope of this article. However, it has long been accepted that acts of dishonesty may provide cause for termination. The leading case in this area is McKinley v. B.C. Tel. In its decision, the Supreme Court of Canada disagreed with the Appeal Court’s ruling that dishonesty was always cause for termination regardless of the degree. Such an approach, the Court observed, would entitle an employer to dismiss an employee for cause after a single act of dishonesty, no matter how minor, fostering results that were both unreasonable and unjust. The Court concluded that employee dishonesty must result in a breakdown of the employment relationship in order to justify dismissal.

In the recent case of Misty Rae v. Attrell Hyundai Subaru, the defendant employer alleged cause for termination based upon dishonesty. The defendant operated an auto dealership. The defendant alleged that the plaintiff had created fictitious work orders to cover up the fact that she was having work done on family members’ vehicles and not paying for the work done. The Plaintiff conceded that she had brought her sister’s car to the dealership for inspection by a technician. Parts were required but were not available at the dealership. The plaintiff took the car away with the intention of bringing the car back at a later time to have the parts installed. The plaintiff did not make payment for the inspection undertaken by the technician.

The plaintiff acknowledged that she owed the defendant for the work done on her sister’s car and the Court so ordered. While it is not always clear where the Courts will draw the line in determining whether the conduct in question constitutes cause for termination, the facts of this case, even with the admission by the plaintiff, did not establish that the plaintiff had acted dishonestly or establish cause for termination. The trial judge noted: “when just cause consists of allegations of dishonesty there must be clear and cogent proof.” The evidence in this case did not supply the degree of proof required.

Once a Court establishes that the employer did not have cause for termination, the Court will turn to the issue of determining the appropriate notice period. In the circumstances of this case, the Court awarded the plaintiff, a four-year employee, seven months pay in lieu of notice including a component for bad faith damages. In reaching its decision, the Court considered the fact that the plaintiff had been terminated two weeks before she was scheduled to give birth. In confirming that an extension of the notice period was warranted, the Court of Appeal stated that where it can be shown that the employer’s conduct in the manner of termination demonstrates “something akin to intent, malice or blatant disregard for the employee”, bad faith damages are warranted. The Court of Appeal in Rae observed:

“With respect to Wallace damages, the trial judge took into account that the appellant sent the notice of termination of employment two weeks before the respondent was to give birth. Given the context, this was the kind of conduct that may properly be stigmatized as a blatant disregard for the employee.”

This case demonstrates the high burden placed on an Employer should it wish to rely on cause to terminate without notice or pay in lieu of notice. Although not impossible, a Court will look to the evidence that an Employer has to substantiate its claim of cause, as well as analyze whether the act complained of, even if true, produces the requisite breakdown in the employment relationship.

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“Dishonesty” encompasses not only theft or fraud but any form of untrustworthy conduct. Just cause based on dishonesty may arise whether the conduct in question occurs prior to the commencement of employment, during the course of employment or in relation to matters unconnected with the employment relationship. In determining when just cause for dishonesty exists, the Courts are primarily concerned with whether the conduct of the employee is such that he or she can no longer be trusted or relied upon by the employer.

The leading case on dishonesty is McKinley v. BC Tel, a 2001 decision of the Supreme Court of Canada. In McKinley, the plaintiff was a chartered accountant who had been employed for almost 17 years when as a result of high blood pressure and his doctor’s advice, he took a leave of absence. He subsequently indicated that he wished to return to work but, given his medical condition, wanted a position of lesser responsibility. Some three months after the Plaintiff’s leave had begun and without returning him to work, the defendant terminated the plaintiff’s employment. The employer maintained that although it had used its best efforts to find another position for the plaintiff, none was available. At trial, the defendant advanced the defence that no notice was owing as the plaintiff had deliberately withheld medical information, which indicated that he could return to his old job.

The lower Court held that dishonesty of any kind and regardless of its degree, justified termination. The Supreme Court took the position that the misconduct in question must be examined in context, and the question to be decided is whether, in the circumstances, the behaviour was such that the employment relationship was no longer viable.

The Supreme Court held that Mr. McKinley’s conduct, although dishonest, did not justify dismissal. In reaching its conclusion, the Court distinguished the facts of this case from situations which involve theft, misappropriation or fraud where dismissal may be justified without any further inquiry.

In deciding whether the conduct of an employee is of such a degree as to constitute cause for dismissal, a Court will examine each case on its own facts and circumstances and consider whether the nature and seriousness of the dishonesty is such that the employment relationship can be maintained. In doing so, the Courts will seek to strike a balance between the seriousness of the employee’s misconduct and the penalty imposed by the employer. The Court in McKinley summarized this approach as follows:

“Such an approach mitigates the possibility that an employee will be unduly punished by the strict application of an unequivocal rule that equates all forms of dishonest behaviour with just cause for dismissal. At the same time, it would properly emphasize that dishonesty going to the core of the employment relationship carries the potential to warrant dismissal for just cause.”

The Court left it open for trial judges to do what is equitable taking into consideration the specific facts of each case. It is wise to seek a legal opinion in respect of an issue relating to “dishonesty” or any other employment law issues.

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As stated in previous articles, if an employer terminates an employee, its obligation is to provide “notice” or “pay in lieu of notice” except where it can prove cause. Proving “cause” for termination is very difficult and usually reserved for the most egregious situations. Two recent Court decisions show that although cause are not the norm, with the right facts a Court will not hesitate to make such a finding. The cases show both a willingness of the Court to find cause in appropriate circumstances, as well as the type of conduct that the Court (and common sense) dictates should not be condoned.

In Robertson v. Complex Services Inc., Mr. Robertson was employed with Complex Services Inc. (“Complex Services”), a company which supplies staffing for a provincial casino operator. Mr. Robertson was employed with Complex Services for approximately five years, and at termination held the position of Game Supervisor earning approximately $50,000.00 per year.

Mr. Robertson was subject to numerous verbal and written warnings as well as at least three suspensions prior to the final incident.

On June 6, 2002, Mr. Robertson acted in an insubordinate manner to his immediate supervisor when his supervisor attempted to coach Mr. Robertson. In response to the supervisor’s coaching, Mr. Robertson conducted himself in a rude, vulgar, sexually explicit and disrespectful manner, all of which was done in front of patrons of the casino as well as co-workers. The Court found that Mr. Robertson’s actions were derogatory in nature, that he used sexually explicit and vulgar language and further found that this conduct on its own would warrant termination. Alternatively, the Court indicated that the accumulation of previous warnings plus the most recent event would also constitute grounds for termination.

In the Court of Queens Bench of Alberta, in the case of R.T. James Whitehouse v. RBC Dominion Securities Inc., Mr. Whitehouse met with a prostitute in his employer’s offices. The Court also found that Mr. Whitehouse had abandoned the prostitute on the premises where she had access to client and corporate information. The Court also found that Mr. Whitehouse had lied to more senior management the following day when questioned about the incident. The Court found that the above conduct constituted cause and that any perceived tolerance of this kind by the company would negatively impact the employer’s relationship with other employees.

Although cause for termination is not an easy task for an employer to prove, these cases demonstrate that the Courts are not hesitant to find cause where the facts would warrant. It goes without saying that situations where a Court might find cause may also be the type of factual scenario that might offend our own common sensibilities about right and wrong.

The above cases demonstrate that there are clear situations of conduct by an employee that will warrant a finding of cause. The norm however is that unless there is some egregious conduct, “cause” will be extremely difficult to prove. It is important that one understands that whether cause exists, is a matter of fact and law, and every factual situation will be different. If one is in a situation where cause is an issue, it is best to obtain legal advice.

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In our previous article, we introduced the concept of “just cause” and the effect of a finding of cause on the rights of an employee in the aftermath of a termination. We pointed out that various types of conduct or misconduct may give rise to cause for termination. In the next set of articles, we will examine examples of such conduct and the tests set out by the Courts for a finding of cause. We begin with cause for termination based upon incompetence or poor performance.

Employers expect and the law recognizes that an employee is obliged to display a reasonable level of competence. At the outset of the employment relationship, an employee may also indicate his awareness of the duties and responsibilities of the position he is applying for, and his qualifications and/or the experience he possess to do the job. Under these circumstances, where it is clear that the individual demonstrates that he is not up to the task or has misrepresented his qualifications and his ability, the employer may have cause for termination.

Where the employer measures competence/performance by output or results, the outcome is often influenced by a number of factors over which the employee may have little or no control. The difficulty of finding cause in such circumstances is aptly illustrated by one commentator as follows:
“Thus, a salesman who is not achieving sales quotas will, fairly or unfairly, implicate the manufacturing department for defective manufacture or late delivery, the marketing department for poor promotion, the service department for dealer resistance, his largest customer for being the subject of a takeover and the Bank of Canada for raising interest rates. To decide whether, and to what degree, these various factors affected sales results in a particular territory would require the wisdom of Solomon. When you recall that the employer has the onus of proving just cause, take into account the natural sympathy and concern of the Court for a terminated employee and the consequence of a finding of just cause, these extraneous factors can make it next to impossible to persuade a court that acts of incompetence constitute just cause for dismissal.”


Even where an employee’s poor performance is as a result of his failure to carry out his responsibilities, just cause for termination may not exist if the employer failed to raise performance issues. Employers are obliged to advise employees if there are performance-related concerns and provide an opportunity to address them. What constitutes a sufficient warning to an employee before an employer can rely on continued poor performance as cause for termination? Courts have repeatedly indicated that expressions of dissatisfaction with an employee’s work are not enough. The employee must be advised of the standard of performance expected of him and notified that he has failed to meet that standard. He or she must be given a reasonable amount of time to improve performance and be advised that failure to do so could result in termination. One court has indicated that criticism of an employee’s performance must be constructive and will only be regarded as such where the employer has provided or offered practical guidance on how to improve.

In determining whether there is just cause for termination based on poor performance, the Courts do not treat all employees alike. A finding of cause in such circumstances will often depend on the employee’s length of service with the company, any prior history of offenses, and the quality of past performance as confirmed, for example, by performance evaluations. In other words, it will be more difficult for an employer to rely on poor performance as cause for termination where the employee has many years of service, and a generally positive performance record.

Most Human Resource departments are well versed in the steps that need to be taken to build a case for cause based upon performance. Given what is at stake, individuals facing performance-related discipline are advised to consult with a lawyer as early as possible in the process, and preferably before the other shoe drops and they are confronted with termination.

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Can an employee who comes to work intoxicated, be terminated for cause? Except where the employee is suffering from alcoholism, the answer may be “yes”. The rationale for terminating an employee for cause in such circumstances has been summarized as follows:
“If an employee is intoxicated while at work, this is a serious breach of the employment contract. Not only is the employee unfit to perform the duties of the employment contract, the employee is often a disruptive or demoralizing influence in the workplace, and an embarrassment to the employer if in contact with the public. There are a number of cases upholding terminations for just cause based upon the intoxication of the employee, although the facts of each case must be carefully scrutinized to assess the magnitude of the breach or the particular contract of employment.


An employer may be justified in terminating an employee without notice based upon a single incident of intoxication. This will likely be the case where the individual is employed in a position where the safety of co-workers and/or the public at large depend upon his decisions and his actions.

The mere fact that an employee exhibits signs of alcohol consumption, while at work, will not in and of itself likely justify dismissal unless it can be shown that the consumption of alcohol negatively impacted upon the employee’s ability to perform his job.

In one case, where safety considerations were not involved, and where a long-term employee had been suffering emotional or personal problems which led to a bout of drunkenness and a brief period of unsatisfactory performance, the Court found that just cause did not exist.

In determining whether the circumstances of the case justify dismissal for cause, the Courts have considered some or all of the following factors:
1. the potential of physical injury to the intoxicated employee and to others;
2. the injury, or potential injury to the employer’s interest or reputation caused by the intoxicated employee;
3. the length and quality of the past service provided by the employee;
4. any personal circumstances which have given rise to the inappropriate conduct; and
5. the extent to which the intoxication was accepted by the employer, particularly where alcohol and entertaining are a normal part of the business day.

The Courts, however, will take a different approach to the issue of intoxication or impairment in the workplace if it is found that the employee is suffering from an underlying illness giving rise to his condition; namely, alcoholism. The distinction between drinking on occasion to excess and alcoholism is of course a medical, and not a legal one. Alcoholism is recognized as a disease marked not by the level of alcohol consumption per se, but by its chronic, uncontrollable use. In such circumstances, it has been observed that the employer’s legal obligation in dealing with an employee who is an alcoholic may be quite onerous:
“The nature of these illnesses is such that there may not be a clear path to a cure and the employer may have to suffer through several relapses of the employee before it can be said that the illness is permanent in nature, thereby ending the contract of employment.”

Alcoholism has been found to be a “disability” and therefore one is protected from discrimination as a result of such disease under the Ontario Human Rights Code. Termination of an employee for alcoholism will likely constitute a violation of an individual’s rights under the Code. Termination in such circumstances will therefore be unlawful and the employer will not be able to rely on the employee’s disability as cause for termination.

An employee who is terminated for cause because of intoxication or substance abuse, may have a case for wrongful dismissal, and may be able to bring a Human Rights Complaint against the employer. In such circumstances, that individual is well advised to seek legal counsel.

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In the discussion that follows, we are concerned with occasional absences from work which an employee may attempt to justify by a telephone call indicating that they will not be reporting to work or a simple statement that he or she is not feeling well. We will not be dealing with lengthy absences which are not the product of a specific, serious illness. Lateness simple refers to reporting for work after one’s shift or daily schedule of hours has begun.

Many employers have in place attendance policies which set out the procedure an employee must follow when not coming in for work or reporting late. This will often require that the employee report his non-attendance before the commencement of his shift, and provide doctor’s notes when absences are illness-related and extend beyond a certain number of days. Non-compliance with an employer’s attendance policy will likely result in discipline and if the conduct continues, be relied upon by the employer as cause for dismissal.

Even where there is no formal attendance policy, persistent lateness without a valid reason will generally be regarded as a serious breach of the employee’s obligation to the Employer. Where the employee cannot offer a valid explanation for persistent lateness, warnings have been issued and the conduct persists, the employer will likely be able to terminate for cause.

An employer will not be able to establish cause for dismissal where an employee is unable to attend work due to illness. In such circumstances, an employer will face the difficulty of securing reliable medical information to determine whether the employee is indeed sick. As one writer has indicated:
“It would be unreasonable to attempt to require that employees consult a doctor for even the slightest ailment. In the absence of some medical evidence, it will be exceedingly difficult for an employer to convince a court that the employee did not, in fact, suffer from the illness claimed. In the typical case, where the employee claims to have remained at home, as a result of some illness, it is virtually impossible to contradict the employee.”

An employee may however be obliged to provide confirmation of illness from his doctor where the absence is of lengthy duration or even in the case of a short absence, where the employee has been absent on a significant number of occasions.

Where the absence is not illness-related, the Court will look at a variety of factors in deciding whether just cause exists. In the Ontario case of Heynen v. Frito-Lay Canada Ltd., the Court determined that an absence from work due in part to a jail sentence did not constitute cause for termination. In reaching its decision, the Court referred to the following excerpt from the English case of Hare v. Murphy Brothers Ltd.:
“In a case of contract of employment, you must look at the length of time he had been employed, the position which he held, and, of course, most important of all, the length of time he is likely to be away from his work and unable to perform it – and the importance of getting someone else to do his job meanwhile.”


In Heynen, the plaintiff was an employee of 23 years with an excellent employment record. He had never been reprimanded or disciplined in any way. He was terminated only a month before he was to return to work, and the employer had previously been able to find a temporary replacement. Under the circumstances, the Court concluded that the employer did not have cause to terminate.

That an employer’s conduct in terminating an employee, in the above circumstances, may give rise to a claim for wrongful dismissal, will provide some consolation to an employee who has been fired for non-attendance or absenteeism. Where the absence from work is illness-related, the employee may also have grounds for bringing a complaint under the Ontario Human Rights Code based upon disability. An individual, who has been terminated due to absenteeism or persistent lateness, is therefore well advised to meet with a lawyer to determine what avenues of legal redress are open to him.

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An individual had been working as a labourer in an auto repair shop for over seven years and until the date of termination, had an unblemished record of employment. On that day, he was asked by his supervisor to work on two vans. Some two hours later, the supervisor inquired as to the employee’s progress and was told that work on the first vehicle had not been completed. The supervisor reprimanded the labourer by telling him: “Jesus, Gerald, we only get $45 or $50 per truck.” The labourer reacted to the criticism, in the presence of co-workers, by becoming loud and abusive and using foul language. He refused the supervisor’s suggestion that he calm down. The labourer began to taunt the supervisor into firing him. After the third such taunt, the supervisor did exactly what he was challenged to do and fired the labourer on the spot.

In Henry v. Foxco Ltd., the case based on the above facts, the New Brunswick Trial Court found that the employer had cause to terminate based upon the labourer’s insolent behaviour.

The decision was reversed on appeal. The Court of Appeal observed that while, an isolated act of insolence would not normally justify dismissal, exceptional circumstances could tip the balance the other way. These could include situations where (1) the employee and superior were no longer capable of maintaining a working relationship; (2) the incident undermined the superior’s credibility in the workplace and therefore his ability to supervise effectively; or (3) the employer had, as a result of the incident, suffered a financial loss, a loss of reputation or its business interests had been seriously harmed as when, for example, the incident occurred in front of customers.

In the absence of such factors, the Court indicated that the more appropriate response of an employer in these circumstances might be to proceed by way of progressive discipline, beginning with a warning that repeat episodes of such conduct would not be tolerated.

Courts will also consider whether the misconduct in question, involves profanities although the use of foul language, in and of itself, is not cause for dismissal. The use of profane language will clearly be of less significance when such language is commonly tolerated in the workplace. The Court further noted that what is said between co-workers in the workplace cannot be equated with profanities which “ricochet off the ears of the employer’s customers or within the auditory range of the general public.”

In determining whether insolent behaviour constitutes cause for termination, the Courts will also look at whether the misconduct reflects a momentary lapse of good judgment which may be repaired by a cooling off period and the opportunity thus presented for an apology.

In reaching its decision, the Court of Appeal drew from the case of McKinley v. B.C. Tel, in which the Supreme Court of Canada determined that, in assessing whether there is cause for termination, the misconduct in question must be examined within the context of the employee’s overall employment record. In McKinley, a single act of dishonesty, given the employee’s length of service and generally positive work record, was not found to be cause for termination.

In Henry, the plaintiff was a long-term employee with a clean employment record. The misconduct in question, represented an isolated incident. The employer was not able to establish that the incident resulted in irreparable harm to the relationship between the labourer and his supervisor or undermined the supervisor’s ability to direct the workplace. There was no evidence that the incident damaged the employer’s financial interests or its reputation with the public. The Court found that the use of profanities had been tolerated in the workplace. The Court concluded:
“Many things are said and done in the heat of the moment that, on reflection, are regretted by all. This is one of those cases. In my respectful view, the facts of the present case do not warrant the ultimate penalty in employment law: dismissal.”

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Richard Zerr was employed with The Corporation of the District of North Vancouver (the “District”) commencing August 10, 1988, initially earning an annual salary of $92,622.00 as Director of Community Planning.

In 2001, Mr. Zerr was promoted to the position of Director of an enlarged Department of Planning, Engineering, Parks and Regulatory Services. In this position, Mr. Zerr had ultimate responsibility over 325 employees and earned $125,000.00 per year.

Mr. Zerr was terminated for cause on August 20, 2004 as a result of an allegation that he submitted false travel reports.

The relevant facts are as follows:

• Prior to 2004 the District never required detailed mileage logs from its employees, although it did have them record annual totals;

• There was no issue that Mr. Zerr was a very dedicated and hard working employee;

• As part of his managerial functions, Mr. Zerr was responsible for managing the application of the Districts policies, including the car allowance policy;

• An audit of the car allowance claims was done in April, 2004. As part of the audit, an email was sent to Mr. Zerr (as well as others) requesting a travel log;


• Mr. Zerr stated that he asked his assistant to construct a log based on his outlook schedule, not having kept a detailed log during the course of the year;

• Mr. Zerr indicated that his assistant delivered the log to the auditor without his review or consent;

• The assistant testified that she prepared the log in accordance with Mr. Zerr’s instructions, that Mr. Zerr then made changes to it, and then delivered the log to the auditor based on Mr. Zerr’s instructions;

• The log submitted contained false entries.

If you believe that the above facts would warrant Mr. Zerr’s termination cause, you are right. The Court stated that when called upon to produce the logs that Mr. Zerr “could simply have said that he never kept any logs”, and that would likely have been the end of the matter. However, that is not what happened and the cover up is what ultimately resulted in a finding of just cause. The Court found that Mr. Zerr “knowingly submitted a false travel log” and “later falsely accused his assistant of submitting the log without his approval”. In such circumstances, the Court held, “a senior manager could not responsibly expect to retain his position”.

The Court went to great pains to state that zero tolerance for employee dishonestly is not the law. In fact, the Court held, “a warning or other discipline would be the appropriate course”. However, in this case Mr. Zerr clearly crossed the line, most notably by not simply stating the truth (that no log was kept) but then falsely blaming his assistant for submitting the log without his approval.

The lesson to be learned from this case is that the Court may in certain circumstances forgive specific conduct such as, for example, failing to keep a log when otherwise required. However the Court will not likely forgive a mistruth such as Mr. Zerr trying to cover up by blaming his assistant for the false entries in the log.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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David Strauss worked for Albrico Services (1982) Ltd. (“Albrico”) for approximately 16 years. Mr. Strauss was terminated for theft on June 13, 2002. Albrico alleged that Mr. Strauss charged gasoline on the company’s gas card for his personal use and not authorized to do so. Mr. Strauss was 47 year old at the time of termination and was a journeyman “insulator and metaller”. An “insulator and metaller” insulates piping, ducts, vessels, tanks, boilers and other similar types of apparatus in commercial buildings and industrial plants. There is no dispute that Mr. Strauss was a very skilled tradesman.

Albrico had offices throughout Western Canada. Mr. Strauss was at one point promoted to a supervisory position in Albrico’s Langley, British Columbia’s office. One of the perks of that position was a company vehicle and use of a company gas card for personal and business use.

In 2001, Mr. Strauss was told that he could not use the gas card for all purposes, but there was some factual dispute as to when Mr. Strauss was told that he could not use the company card at all. It was clear that the company did not keep good or any records. The Court found that there was a striking lack of policies or procedures. Some time in April, 2002, a principal of Albrico asked Mr. Strauss to return the gas card, phone and truck. Mr. Strauss returned the truck and phone but kept the gas card and used it to pay for personal gasoline costs. On June 13, 2002, Strauss was terminated for theft of gasoline. The Court went through the state of case law with respect to theft and confirmed that theft is a serious breach of the employment contract which warrants a dismissal. Referring to Ducharme v. England, a British Columbia case, the Court summarized the law (as of 1999) as it relates to theft as follows:

It is an implied term of an employment contract that an employee will not steal or commit criminal acts against his employer. When an employee commits such an act not only has he committed a breach of contract but more importantly has demonstrated a revelation of character incompatible with due and faithful discharge of his duty to his employer. Under these circumstances the employer is entitled to summarily dismiss.

However, more recent case law now obliges a Court to engage in a contextual approach, by analyzing all the circumstances surrounding an employee’s alleged misconduct, in order to determine if the dishonesty alleged amounted to just cause for termination without notice.

According to the Supreme Court of Canada’s decision in McKinley v. B C Tel, the Court held that “there must be an effective balance between the severity of an employee’s misconduct and the sanction the employer imposes”. The Court held that when theft is alleged, the Court requires a higher degree of probability, because of the stigma attached to it. Theft must be proven with clear, cogent and compelling evidence. The Court held in this case that Albrico must prove that Mr. Strauss intended to engage in the deceitful conduct and that conduct which is equally consistent with bad judgement, incompetence, lack of training, or simply raises a suspicion of lack of trust, may not be sufficient to establish dishonest intent.

Furthermore, the Court held that an employer must engage in a contextual approach in its investigation of the suspected dishonest conduct and its determination of the appropriate sanction. The Court held that Mr. Strauss’ behaviour was inappropriate. However, Albrico had not established clear, cogent and compelling evidence that Mr. Strauss stole gasoline. The Court in this case was very disapproving of Albrico’s lack of written communication, record keeping and policies relating to the gas cards. The Court also noted that Albrico was obligated to do a more thorough investigation and provide Mr. Strauss with an opportunity to explain his intention before summarily terminated him. In those circumstances, the Court found that Albrico did not have just cause to terminate Mr. Strauss.

GIVE WITH ONE HAND, TAKE AWAY WITH THE OTHER

The Court found that there was no cause to terminate Mr. Strauss’ employment and that Mr. Strauss was entitled to 16 months pay or $91,200.00. The Court reduced the award by the amount of employment income received from another employer approximately one year after the termination. The Court also had to deal with whether Albrico should get credit for any income Mr. Strauss was alleged to have received in running a business almost immediately after the termination from Albrico. In a twisted piece of irony, the Court found that Mr. Strauss’ complete lack of record keeping with respect to earnings received in that business could only result in a finding that the deposits made into his bank account were all income. Although Strauss indicated that net income in his business was negligible, he was unable to explain deposits of more than $85,000.00. As such, the Court held that the whole amount of $85,000.00 was income for which would offset monies Albrico owed to Mr. Strauss as a result of the Order in respect of notice. The Court therefore held that Mr. Strauss had completely mitigated his damages by receiving income almost exactly to the dollar that Albrico was ordered to pay.

This case demonstrates a number of important issues to litigants or potential litigants. Firstly, proving cause is difficult for an employer. The case also highlights that entitlement to damages are subject to mitigation. An employee cannot just sit back and expect to receive damages. A Plaintiff must undertake a diligent job search and any employment income received over the notice period will ultimately go to the credit of the employer. Furthermore, if an employee starts their own business, any employment income received from that business (net of expenses) will go to the credit of the employer.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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Ms. Fedorowicz was a bookkeeper for Pace Marathon Motor Alliance Inc. (“Pace”), and a friend of the Principal of Pace, George Mallouk. Ms. Fedorowicz knew Mr. Mallouk from a previous employer where she worked in an administrative capacity and Mr. Mallouk was the general manager. Mr. Mallouk left this company to start Pace and Ms. Fedorowicz was invited by Mr. Mallouk to join him in May 1992 as its bookkeeper. There is no dispute that Ms. Fedorowicz’ played a significant role at Pace, which company grew over the years. There is further no dispute that both Mr. Mallouk and Fedorowicz liberally interpreted tax rules such that Ms. Fedorowicz received part of her remuneration on a non-taxable basis. Furthermore, during the course of Ms. Fedorowicz maternity leave, Ms. Fedorowicz continued to receive payments from Pace, which conduct may have breached Employment Insurance rules. Presumably, Mallouk and Fedorowicz thought that their employment relationship and/or friendship would not end and that their remuneration agreement would never cause either any harm.

However, in March, 2000, Ms. Fedorowicz was diagnosed with cancer. In May, 2000, Mr. Mallouk imposed certain conditions that Ms. Fedorowicz had to comply with in order to return to work, one of which was that Fedorowicz would only be compensated as reflected in the payroll records and would not receive the extra funds (non-taxable). Ms. Fedorowicz ultimately took the position that the reduction in salary constituted a constructive dismissal. Ms. Fedorowicz brought a claim for constructive dismissal and a claim for malicious persecution stemming from criminal charges laid by Pace against Ms. Fedorowicz, alleging that she conducted a fraud against Pace.

The Court held that Ms. Fedorowicz was constructively dismissed given that her remuneration was significantly diminished. The Court awarded her eight (8) months notice. Ms. Fedorowicz was also awarded an additional two months because the Defendants did not act in good faith when they did not respond to her letter seeking clarification of the terms of her return to work. The Court also awarded Ms. Fedorowicz $44,500.00 as damages for malicious prosecution. The Court found, in part, that the criminal charges were pursed by Pace as a result of malice and for the improper purpose of pressuring Ms. Fedorowicz to drop and/or settle the civil claim.

Ms. Fedorowicz was victorious on all accounts. She was awarded damages for wrongful dismissal, malicious prosecution and bad faith. However, the ultimate irony in this case was that the Court held that since it heard evidence of admissions of tax improprieties by both the Plaintiff and Defendant, that it was appropriate in the circumstances to provide a copy of the Court decision to the tax authorities. Whether the tax authorities acted upon receiving a copy of the decision and whether Ms. Fedorowicz was ultimately better off pursing the claims in such circumstances is unknown.

Having a dispute heard in Court is a public process leaving the decision a matter of public record. Whether such a forum is appropriate in all cases is a factor that parties should discuss with counsel prior to commencing litigation.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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The case of Rodica Cimpan is a tale of giving with one hand and taking away with the other.

Ms. Cimpan was an Early Childhood Educator employed with the Kolumbia Inn Daycare Society (“K.I.D.S.”) from August 1, 1994 to October 31, 2005 when she was terminated as a result of “insubordination”. Ms. Cimpan brought a claim for wrongful dismissal. K.I.D.S.’ position was that Ms. Cimpan’s employment was terminated for cause, and as such was not entitled to any damages. In the alternative, K.I.D.S took the position that Ms. Cimpan failed to undertake a reasonable job search, and as such was not entitled to any damages.

The evidence tendered at trial suggested that Ms. Cimpan was an overall good employee and which was evidenced by positive annual reviews. The Court noted that as recently as six months prior to her termination, Ms. Cimpan was provided with a positive letter in support of Ms. Cimpan’s renewal of her certification as an Early Childhood Educator, referring to her in the letter as a “very responsible, responsive and valuable member of the staff”.

K.I.D.S.’ allegation of insubordination stems from three separate incidents involving Ms. Cimpan’s non-attendance at work, without approval of or notice to her immediate supervisor, Ms. McBean (“McBean”). The first incident occurred in November 2002 when Ms. Cimpan and her family had gone on vacation to Mexico on a scheduled and approved one-week holiday. Ms. Cimpan was expected back to work on Monday, December 2, 2002. Unfortunately, during the vacation, her son became ill. Ms. Cimpan’s evidence was that her son was well enough to return from Mexico by the end of the scheduled vacation but that Ms. Cimpan and her family decided to extend the vacation by a week so that they could enjoy the vacation which was otherwise ruined by her son’s illness. Upon her return to work, Ms. Cimpan was suspended for failing to return to work as scheduled. The Court ruled that Ms. Cimpan’s conduct in not returning to work as originally scheduled warranted severe discipline and suggested that the suspension was appropriate in all the circumstances. In fact, Ms. Cimpan could have been terminated for such conduct. However, in this case Ms. Cimpan was suspended and given a strong warning that similar conduct would not be condoned.

The next incident did not occur for another three years when on August 10, 2005, Ms. Cimpan advised her Employer that she would not be able to be at work the next day and that another employee would cover her shift. K.I.D.S. was upset that Ms. Cimpan failed to contact McBean directly and that in fact no one was able to cover for her for the whole day. K.I.D.S.’ treatment of this incident was found by the Court not to be disciplinary in nature but merely treated as a “reminder to Ms. Cimpan”.

The third and final incident occurred shortly thereafter. On September 22, 2005, McBean denied a request by Ms. Cimpan that she be given her September 26, 2005 shift off. K.I.D.S. alleges that Ms. Cimpan was upset when she did not get the day off and states that she told a co-worker that she would not be coming to work the next day in retribution for not receiving September 26 off. Ms. Cimpan later left a message (as opposed to contacting McBean directly) indicating that she had a doctor’s appointment the next morning and may not be in on September 23, 2005. Ms. Cimpan did see her doctor and was given time off to October 24, 2005 due to “stress-related” illness. K.I.D.S. was clearly suspicious of Ms. Cimpan’s “alleged” illness. When Ms. Cimpan’s was able to return to work, K.I.D.S. terminated her, relying on the three incidents as above.

The trial Judge indicated that the medical evidence confirmed that Ms. Cimpan was ill. The Court further determined that the misconduct alleged by K.I.D.S. would not warrant the termination of her employment and that she would be entitled to reasonable notice of the termination of her employment in the equivalent of nine months’ pay.

However, the matter did not end there. The Court confirmed that damages were subject to Ms. Cimpan’s showing that she undertook a reasonable job search in mitigation of her damages. Ms. Cimpan’s evidence at trial on this issue was that she did not make any attempt to obtain alternate employment after her termination initially “relying upon the financial ability of her husband to support her” and then deciding to “educate herself” in furtherance of opening up her own daycare centre. The Court held that “it cannot be the law that a dismissed employee can elect to take further training for self-employment and charge that to the Employer, unless the employee cannot obtain alternate suitable employment”. The Court further held that notwithstanding the fact that the onus is on the Employer to prove that the Plaintiff has failed to mitigate, and which it acknowledged is a very difficult burden, the Court held that the Employer was able to prove that there were comparable positions available for Ms. Cimpan had she been interested in alternate employment.

The Court found that given that Ms. Cimpan made no efforts whatsoever to mitigate her damages by seeking alternate employment notwithstanding that employment was available, that she had not suffered any damages at law even though she was wrongfully dismissed.

This case is a lesson to terminated employees that damages are not guaranteed, and are subject to mitigation. A Court expects an employee to undertake a reasonable job search failing which the value of the damage award will be affected. The Cimpan case is a worst-case scenario where the Court nullified the whole award. Employees are well advised to undertake a reasonable job search and to keep strict records of their efforts in that regard.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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In a previous article dealing with the employer’s obligation to provide reasonable notice upon termination, we pointed out that the obligation is by no means absolute. There will certainly be no such obligation where the employee is terminated for cause. The concept of “just cause” and employee’s conduct which can give rise to just cause for termination will be treated in future articles. Today, however, we will take a look at the increasingly common situation where an employer requires that an employee sign an employment agreement setting out the terms and conditions of the employment relationship. Such agreements will typically include termination provisions which attempt to restrict the employee’s right to notice in the event of termination without cause. In monetary terms, the contracted entitlement to notice will likely be significantly less than “reasonable notice” as prescribed at common law. Put differently, it is rare that an employment contract will provide more generous terms than at common law.

If the termination provisions of the agreement are drafted carefully by the employer, it may be difficult for a terminated employee to obtain reasonable notice. The Courts however, have shown a reluctance to enforce such agreements unless the following conditions are met:

1) The termination provisions of the agreement must be clear and unambiguous. The Courts have determined that if an employee is going to be asked to sign away their right to reasonable notice, the employer must make it clear to the employee what it is seeking. Under these circumstances, terms which are vague or open to more than one interpretation will likely not be enforced against the employee. Where the employee does not understand the agreement he or she is being asked to sign and asks for the opportunity to obtain legal advice, an employer’s refusal to allow the employee to see a lawyer before signing the agreement may result in such an agreement not being enforced.

2) The termination provisions of the agreement must comply with the notice and severance provisions contained in applicable Employment Standards legislation. Termination provisions which fail to meet minimum Employment Standards entitlements will not be enforceable. For example, an employee terminated without cause after three years of service (and assuming they are regulated by the Ontario Employment Standards Act) is entitled to three weeks notice of termination or the equivalent in pay. Where the agreement on the other hand, permits the employer to terminate an employee without notice or to provide less than three weeks notice, the termination provisions are invalid and the employee will be able to pursue his/her common law right to reasonable notice.

3) Where an employee accepts employment on terms which do not limit his right to notice and commences employment only to subsequently be given a contract which limits those rights, the notice provisions of the agreement may only be enforceable where something passes from the employer in exchange for the right the employee has given up. Where on the other hand, the terms and condition of the employment contract otherwise remain the same, the new agreement will not likely limit the employee’s right to reasonable notice.

4) Where subsequent to signing an agreement limiting one’s right to notice, the employee’s duties and remuneration are substantially increased, the Courts may conclude that the termination provisions of the agreement, while enforceable with respect to the position occupied by the employee at the time the agreement was entered into, may not be applicable with respect to the employee’s new position.

Where the employment agreement is silent on the issue of notice, the Courts have found an implied term providing for an employee’s right to reasonable notice in the event of termination.

Employees are best advised to seek legal advice before executing an employment contract. It is appropriate to know what you are getting into before signing on the dotted line. An employee who has signed a contract which includes a term which seeks to limit his right to notice, will need to consult a lawyer to determine if there are any grounds upon which such term can be set aside. Finding a basis for contesting the agreement can make the difference between employment standards minimum entitlements and potentially greater damages.

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Part 1

In a previous column, we discussed the situation of an employer dismissing an employee without cause. In such circumstances, the employer is obliged to provide notice of termination or pay in lieu of such notice.

Where it is not the employer who has terminated the relationship by terminating the employee, but rather the employee who has resigned or quit his or her job, an employer normally has no obligation to provide any notice or pay in lieu of notice. Certainly, where the employee resigns, for example, to take a better job or returns home to raise a family, for example, the employer has no obligation to give notice. Indeed, the obligation to provide reasonable notice in these circumstances rests with the employee.

But what is the situation where the employee resigns or contemplates resignation because of changes introduced by the employer to an employee’s working conditions or as a result of deteriorating workplace relationships? The Courts have long recognized that it is an implied term of every employment contract that an employer may not make substantial changes to the duties, status or remuneration of an employee, and that doing so strikes at the every root of the employment relationship. Where such is the case, an employee may be entitled to terminate the employment relationship by resigning and treating himself/herself as having been wrongfully or constructively dismissed.

The Courts have also held that an employer may not create conditions at work which require an employee to work in an atmosphere of hostility, embarrassment or humiliation. If faced with such a situation, the employee may consider themselves to have been constructively dismissed.

A resignation in the above circumstances, may permit an employee to bring an action for wrongful dismissal and seek damages for the losses sustained. However, not every change introduced by an employer nor any “problem” at work will permit an employee to sue for constructive dismissal. The Courts must determine whether the conduct in question constitutes a “fundamental breach or repudiation” of the employment contract. This is a legal question which requires an assessment of the employment contract and knowledge of legal precedent with regard to the changes introduced by the employer. Whether a change amounts to a fundamental breach will depend upon the extent and nature of the changes in question, the surrounding circumstances, and an assessment of the above, not from the perspective of the “injured” employee, but from that of a “reasonable” employee.

The existence at law of a constructive dismissal is premised upon the unilateral imposition of changes by the employer. An employee who accepts the changes or fails to object, will likely be held to have consented to the employer’s actions and will not be able to later say that he or she has been constructively dismissed. Similarly, where the employment agreement permits the employer to make such changes, the Courts are unlikely to conclude that they were unilaterally imposed by the employer.

Given the number of legal issues at play where constructive dismissal is involved, it is strongly urged that an employee, who is considering quitting in the face of changes in working conditions or a declining atmosphere at work, seek legal advice well in advance of any actual resignation. This is all the more important given that a resignation, where grounds for constructive dismissal cannot be established, will likely result in the extinguishing of one rights upon termination.

In Part II of this discussion, we will canvass some of the employment situations which the Courts have identified as giving rise to a constructive dismissal.

Part II

Previously, we discussed the situation where changes introduced by the employer to an employee’s working conditions would permit the employee to terminate the employment relationship by quitting his job and then treating himself/herself as having been wrongfully or constructively dismissed. This will almost certainly be the case where the changes involve substantial reductions to an employee’s responsibilities, authority and/or remuneration. Such changes may involve reduction in salary or hourly wage or pay freezes, reduction in working hours, loss of existing additional remuneration such as bonuses or commissions or benefits, reduced responsibilities such as loss of management or supervisory functions, more onerous duties, reduced advancement opportunities, and forced retirements where no mandatory retirement policy was in place at the time of hire.

The difficulty in applying the law of constructive dismissal lies in determining where the Courts will draw the line between changes which constitute “a fundamental breach” of the employment contract and therefore constitute a constructive dismissal and those which do not. An employee contemplating quitting under any of the above circumstances is well advised to seek out legal advise beforehand given the serious consequences which will flow where an individual has resigned under the mistaken impression that he or she has been constructively dismissed.

As we previously pointed out, a constructive dismissal may also be found where an employer by its dealings with an employee has created a situation where it would be unreasonable to expect the employee to continue in employment. There are two fact situations which will give rise to a constructive dismissal in the these circumstances: in the first instance, the employee is engaged in a personality clash with a supervisor or co-worker and the conduct of the supervisor or co-worker is such that continued employment becomes intolerable. In the second instance, a constructive dismissal may occur where discipline is imposed for poor or substandard performance and such discipline is not warranted in the circumstances.

With respect to the former situation, the Court in Saunders v. Chateau Des Charmes, found that the plaintiff had been constructively dismissed where he was exposed to hostile, aggressive, profane, rude, demeaning and intimidating behaviour from his supervisor. Over time, the supervisor’s conduct escalated and the plaintiff suffered additional verbal attacks. While the Court recognized that the plaintiff may not have been performing as expected, managers are not permitted to discipline employees in the manner the plaintiff had experienced. On these grounds, the plaintiff was found to have been constructively dismissed.

The conduct of a co-worker may also result in a constructive dismissal. In Stamos v. Annuity Research and Marketing Service Ltd., the employer’s failure to intervene where the plaintiff had been subjected by a co-worker to verbal harassment, unjustifiable attacks on her performance, unreasonable demands, sexist and bigoted language, and hostility towards her as a woman, led to a finding of constructive dismissal.

Chambers v. Axia Net Media Corp. is a case of constructive dismissal arising in the context of unwarranted discipline. There, an employee of 14 years who had previously been placed on probation for poor sales performance was advised that his probation was being extended for a further twelve months and warned that he could lose his job if his performance did not improve. The warning letter further indicated that failure to meet job requirements could result in termination at any time during the probationary period. Upon receiving the letter, the employee took the position that he had been constructively dismissed and resigned his employment. The Court concluded that while the employer had acted reasonably in setting performance standards, warning of poor performance, and placing the employee on probation, it constructively dismissed the employee when it advised that the employee could be terminated for poor performance at any time before the probationary period was completed. As the Court indicated, where an employer gives an employee an opportunity to correct shortcomings in his job performance and the employee accepts the offer, it is not open for the employer “to give, on the one hand, and take away with the other.”

The above cases demonstrate situations where constructive dismissals were found, but ought not to be relied upon as determinative of other, even similar fact situations.

Where an employee is faced with a legal issue in the employment contract, including a constructive dismissal situation, one should obtain independent legal advice.

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In a recent Ontario Superior Court of Justice decision in Peng v. Star Choice Television Network Inc., the issue of whether a Judge in an action for wrongful dismissal can deal with allegations of discriminatory conduct was addressed.

The state of the law until quite recently was that allegations of discriminatory conduct were the sole jurisdiction of the Human Rights Commission. The decision in Peng v. Star Choice Television Network Inc. is consistent with the more “modern” view of the law, that allegations of discrimination can be relied upon in a civil action for wrongful dismissal for limited purposes, including (a) a claim for punitive damages; (b) bad faith damages; or (c) grounds for constructive dismissal.

In this case, Ms. Peng alleged that she and other visible minority groups who were terminated as a part of a large layoff, were the victims of discriminatory conduct on the basis of race and gender.

On the issue of whether the Court had jurisdiction to adjudicate upon the claim of discrimination, the Court stated that “insofar as the allegations are relevant to the issues of the alleged wrongfulness of the dismissal, length of reasonable notice and availability of certain heads of damages raised in this particular case, entitles the Court to hear evidence and entertain argument about them within those boundaries…” The Court stated that the Plaintiff’s allegation that the termination was discriminatory and constituted bad faith and entitled her to damages for mental distress, an increased period of notice, as well as punitive damages, was therefore generally relevant to the issue of damages. The Court went to say that “such claims have been permitted and recognized, most recently by the Ontario Court of Appeal which countenanced an award of punitive damages as a result of discriminatory conduct in breach of Human Rights legislation”.

Notwithstanding the finding that the Court could deal with the issue of discrimination in the context of determining whether a wrongful dismissal existed, and whether bad faith or punitive would be warranted, the Court found in this case there was no basis for the allegation of discriminatory conduct. However, the Judge found that Ms. Peng was entitled to wrongful dismissal damages as a result of the employer’s failure to provide adequate notice.

The decision in “Peng” illustrates that litigants should be careful when to make allegations of discrimination and/or bad faith in a civil matter. In hindsight, Ms. Peng may have been better off limiting her claim to damages for wrongful dismissal, that issue not being in dispute. Clearly, the trial and thereby the costs of litigation were increased by the investigation into issues of discrimination which were ultimately determined to be unfounded. There are however, many instances where additional damages whether characterized as “bad faith” or “punitive damages” have been awarded as a result of the employer acting in a discriminatory manner. The difficulty is being able to prove the allegation.

One of the issues that will likely be discussed between counsel and a potential claimant during an initial meeting are the relevant claims available to the terminated employee which may include a civil action for wrongful dismissal, Human Rights claim, Employment Standards claim and WSIB applications, all of which have varying limitation periods, and remedies. Based on ”Peng” and similar cases, the issue will now be expanded to include not only which claim(s) to bring, but in addition, which claim(s) should be included in a civil action. It is important that an employee understand the relevant claims available, remedies, and the interaction between the various claims. The impact of these discussions and ultimate decision will likely have a direct impact to the bottom line.

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Ms. Ning Peng was employed at Canadian Satellite Communications Inc., the predecessor to Star Choice Televisions Network Inc. (“Star Choice”) from June 20, 2000 to August 18, 2002.

Ms. Peng held the position of computer analyst. The uncontroverted evidence was that Ms. Peng was a motivated, honest, skilful, dedicated and conscientious employee. On August 8, 2002, while Ms. Peng was on maternity leave, and receiving Employment Insurance maternity benefits, she was called to a meeting with several co-workers who were all advised that they were terminated due to “consolidation” and “financial and business concerns”.

Star Choice did not rely on cause for termination and there was no dispute that Ms. Peng was entitled to reasonable notice of the termination of employment. Ms. Peng however took the position that not only was there lack of notice, and thereby a wrongful dismissal, but that the termination was racially motivated. Ms. Peng alleged that all of the members of her group that she described as a “visible minority” were among those terminated on August 8, 2002. Ms. Peng alleged that all of those persons retained were “Caucasian”. Ms. Peng maintained that she was the victim of discriminatory conduct on the basis of race and gender. The Court summarized the issues to be resolved at the trial of the matter as follows:

Issues

A. Does this Court have jurisdiction to adjudicate upon Ms. Peng’s allegation of discrimination?

B. Was the termination of Ms. Peng’s employment influenced by considerations of race or gender?

C. What are Ms. Peng’s damages?


Issue A: Does this Court have jurisdiction to adjudicate upon Ms. Peng’s allegation of discrimination?

The Court held that it was bound by a decision of the Supreme Court of Canada that a civil action cannot be brought based on the tort of discrimination or breach of Human Rights legislation (see: Seneca College of Applied Arts and Technology v. Bhadauria). However the Court held that in this case, “the action was principally based on damages for wrongful dismissal and the conduct alleged is said to provide a factual context for the dismissal and thus forms part of the basis of Ms. Peng’s argument that the dismissal was wrongful”. Ms. Peng also argued that Star Choice’s conduct constituted bad faith and that she was entitled to damages for mental distress and/or an increase in the notice period as well as punitive damages as a result of such conduct. The Court found that the evidence relating to discrimination was therefore relevant to the issue of damages. The Court held that “such claims have been permitted and recognized, most recently by the Ontario Court of Appeal which approved an award of punitive damages as a result of discriminatory conduct in breach of Human Rights legislation (see: Keays v. Honda Canada Inc.). Although, the Supreme Canada has held that the Courts cannot deal with issues relating to the tort of discrimination, it is now clear that the Courts can deal with allegations of discrimination where they relate to bad faith, punitive damages or “independent actionable wrongs” as long as such allegations are made in of context of a separate action, such as a wrongful dismissal.

It is also noted that there are upcoming changes to the Human Rights Code which appear, at least in the draft stages, to provide Courts the right to hear claims of discrimination under the Human Rights Code when such complaint forms part of a separate action, and when the nature of the claim before the Court is not limited to a claim of discrimination, such as a wrongful dismissal.


Issue B Was the termination of Ms. Peng’s employment influenced by considerations of race or gender?

The Court held that there was insufficient evidence adduced at trial to support Ms. Peng’s contention that she was the victim of discrimination. As such, the Court held that Ms. Peng was not entitled to damages on account of bad faith and/or punitive damages as a result of the alleged discriminatory conduct. The Court did however hold that Ms. Peng was entitled to reasonable notice of the termination of her employment in the amount of six (6) months pay.

It will be interesting to determine the costs consequences of Ms. Peng’s claim given that much of the Trial was spent dealing with issues of discrimination which the Court ultimately dismissed.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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Kevin Keays was employed with Honda Canada Inc. (“Honda”) for 14 years. Mr. Keays developed Chronic Fatigue Syndrome (“CFS”) and initially took a disability leave in October 1996, returning in December 1998. After the long-term disability insurer denied further compensation, Mr. Keays returned to work notwithstanding his protests and that of his doctors that he remained disabled. After his return, and as a result of the CFS, Mr. Keays had to take a number of days off work, which became a contentious issue between Honda and Mr. Keays.

Although there is no dispute that Honda initially accommodated Mr. Keays’ absences, Honda later asked Mr. Keays to provide a medical note for each absence. This caused friction between the parties. In March 2000, Honda also “coached” Mr. Keays, a form of discipline which Mr. Keays disagreed with. In early 2000, Mr. Keays asked Honda to remove the “coaching” from his record and to remove the requirement that he provide a medical note for each absence. Honda denied this request. Mr. Keays then hired a lawyer to deal with the issue. In response, Honda asked Mr. Keays to meet with an occupational medicine specialist. The pretext for this meeting was based on Honda’s position that “we no longer accept that you have a disability requiring you to be absent… In order for Dr. Brennen to get to know you and understand completely your condition, we advised that we would arrange for Dr. Brennen to meet with you”.

Mr. Keays advised, through his lawyer, that he would not meet with Dr. Brennen unless the purpose and parameters of the assessment were clarified. Honda responded by terminating Mr. Keays for insubordination.

THE DECISION
The trial Court held that the termination was without cause and awarded:
(i) Notice of 15 months;
(ii) Bad faith damages of 9 months; and
(iii) Punitive damages of $500,000.00.

THE APPEAL DECISION
Just Cause
The Court of Appeal confirmed that cause can be based on “disobedience”. However, as a condition of proving this defence, the Employer must show that the request which was the subject of the disobedient conduct was reasonable. The Court found that the request that Mr. Keays meet with Dr. Brennen without it first clarifying the purpose of the meeting was unreasonable. Therefore, no cause was substantiated. The Court went on to say that even if the order was reasonable, that the penalty had to be proportionate to the misconduct and termination would not have been warranted in any event. The Court stated:

An Employer’s response to employee’s misconduct must reflect the principle of proportionality …. In a broad sense, the question is whether the employee’s misconduct is irreconcilable with continued employment.

Notice/Bad Faith
The Court of Appeal upheld the award of 15 months notice and 9 months for bad faith. The Court specifically referred to the following conduct in respect of the award of bad faith:
(i) Honda’s position that Mr. Keays was not suffering from a disability;
(ii) Honda playing hardball with respect to workplace absences;
(iii) Honda’s failure to accommodate Mr. Keays’ disability.

Punitive Damages
All three members of the Court of Appeal agreed that punitive charges were warranted. However, only one Judge agreed that the trial Judge’s award of $500,000.00 was appropriate. The majority awarded $100,000.00 for punitive damages. The basis of the award was Honda’s failure to accommodate Mr. Keays’ disability, which is a breach of the Ontario Human Rights Code, and therefore an “independent actionable wrong”. The Court stated that in order for punitive damages to be awarded in a wrongful dismissal matter, the conduct must be harsh, malicious and vindictive, and constitute an independent actionable wrong. In this case, a violation of the Human Rights Code was found to be 'an independent actionable wrong”.

From a legal perspective, this decision is important for two reasons:

(i) It has set a ceiling of $100,000.00 for punitive damages, except perhaps in the most egregious of cases;
(ii) That punitive damages can be awarded in wrongful dismissal cases where there is egregious conduct and where there is an “independent actionable wrong”.

As always, if you have any issues relating to employment law, please seek the advice of a lawyer.

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Part VIII of the Employment Standards Act of Ontario (the “Act”) requires that an employer provide overtime pay of at least one and one-half times the regular hourly rate for work performed in excess of 44 hours per week. Where the parties have agreed to a regular workweek of less than 44 hours, overtime will be owing for hours worked in excess of the regular schedule of hours. For individuals whose Employment Standards entitlements are governed by the Canada Labour Code, overtime pay is owing for hours worked in excess of 40 hours per week or at a lower threshold where such is agreed to. This article focuses on the provisions of the Act.

An employer is obliged to pay overtime to hourly-paid and salaried employees alike. The overtime rate for hourly paid employees is a simple calculation. In the case of salaried employees, the formula is based on weekly earnings divided by non-overtime hours actually worked times the overtime premium of one and one-half times.

Where hours of work vary from week to week, the employee and the employer may enter into an “averaging agreement” subject to the terms set out in the Act, for the purpose of determining overtime eligibility. In the absence of such an agreement, the employee will be entitled to overtime pay where his hours exceed 44 in a particular week even if in other weeks, his hours fail to meet the overtime threshold.

The parties may also enter into an agreement whereby overtime is not compensated by overtime pay but by paid time off at one and one-half times the number of overtime
hours worked.

The Act requires employers to keep records of the hours worked by an employee during the course of a week and to retain such records for at least three years following
that employee’s termination. It is a fact however, that many employers do not keep
such records. Employees are therefore advised to maintain detailed records of their hours of work, which record should be made at the time the hours are worked. In such circumstances, the log kept by the employee will be the best evidence available for determining overtime compensation owing.

While employees and employers can contract to provide for overtime compensation on terms which exceed the entitlements under the Act, they cannot agree to waive or forego entitlement to overtime as set out in the Act. Any such agreements are not enforceable.

The Act exempts several categories of workers from overtime eligibility. These include, but are not limited to, various professionals, firefighters, taxi and ambulance drivers, superintendents or janitors who reside in the building where they are employed, and many salespersons who earn commissions on sales concluded away from the employer’s place of business. Individuals whose work is supervisory or managerial in character may or may not qualify for overtime compensation depending on the extent to which they also perform non-supervisory or non-managerial tasks.

An employee may seek to enforce his or her right to overtime by one of two means. The employee may either:
(1) bring a claim for overtime, under the Employment Standards Act, to the Ontario
Ministry of Labour. Under the Act, a claim for overtime will be limited to losses incurred in the six months preceding the filing of the claim and is capped at $10,000.00; or
(2) bring a civil action for overtime pay owing. In Kumar v. Sharp Business Forms Inc. a 2001 decision of the Ontario Superior Court of Justice, the Court ruled that the provisions of the Act, including those regarding overtime, are implied terms of every contract of employment and the failure of the employer to pay overtime owing, constitutes a breach of contract, damages for which are recoverable by way of a civil action. At common law, an individual may seek damages for overtime extending over a two-year period prior to the filing of the claim. In the recent decision of Abdelshahid v. Schiffenhaus Canada Inc., an Ontario Court, for the first time we believe, awarded civil damages for loss of overtime pay.

Is a “supervisor” entitled to overtime? Is a salaried employee entitled to overtime? Does the contract of employment bear on an individual’s entitlement to overtime? How far back can an employee go in seeking damages for loss of overtime? What is the value of an overtime claim? If proceeding with a claim for overtime, is an individual better off bringing an employment standards claim to the Ministry of Labour or a civil claim for breach of contract? The law in Ontario on these issues, as in so many other areas, is evolving and individuals who are considering bringing an overtime claim, are well advised to contact a lawyer before commencing legal action.

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Except where there is a contract with a specific term to the contrary, an employee is entitled to reasonable notice of his or her termination of employment, subject to an employer being able to prove cause for termination. The main factors a Court uses in determining appropriate notice are the employee’s age, position, years of service and availability of alternate employment taking into consideration his or her education.

An Employee and Employer are free to enter into a contract setting out a pre-arranged period of notice upon termination. Such term, if enforceable, will replace the implied right to reasonable notice.

A common problem with Employment contracts with terms which purport to contract out of the implied term to reasonable notice is that the “negotiated” term is usually one sided in favour of the Employer. This is likely due to the inherent inequality of bargaining power between an Employee and Employer. Put differently, a prospective Employee’s need for work/pay is usually more important to that person than the adequacy of a notice period at a date uncertain. This further presumes that the Employee has read or understood the relevant provision. An “Employment Contract” unlike most commercial contracts is not normally entered into between parties of equal strength, the Employer having a distinct advantage. Therefore, it is not a surprise that most contracts that speak to the issue of notice, will limit an Employee’s entitlement to the Employment Standards Act minimums or marginally more than such minimum payments. It goes without saying that common law entitlements are, almost without exception, greater than Employment Standards payments. In such circumstances, and if the termination provision is found to be enforceable, a terminated employee would be significantly worse off by having entered into such an agreement.

Courts have acknowledged this “inequality in bargaining power” and therefore will only enforce pre-employment termination provisions, where the Employer is able to clearly and unequivocally show that the presumption to “reasonable notice” has been rebutted. As such, any ambiguity in the term will likely lead to a Court providing the Employee with reasonable notice as opposed to the amount set out in the contract. Furthermore, a Court may decline to enforce a termination provision where the term is unconscionable or the contract is signed under duress. Where the termination provision does not meet minimum payments pursuant to the Employment Standards Act, the provision will likely not be enforceable. Courts have also found that where the notice provision is entered into after commencement of employment and without proper consideration, the employer may not be able to rely on the contracted notice period.

In all the circumstances, it is extremely important that an employee obtain legal advice before a contract is entered into. If one has already entered into contract and there are provisions in that contract which are prejudicial to their interests, it is also in one’s interest to obtain legal advice as to the enforceability of that term.

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In the normal course, an employee is entitled to reasonable notice of his/her termination. How does the additional factor that an employee is pregnant at the time of termination affect the notice period? The case of Harris v. Yorkville Sound Ltd., (“Yorkville”) dealt with this issue. Ms. Harris, a 31 year old mother of three worked with Yorkville for eight years. Ms. Harris was terminated for cause related to inappropriate conduct and her inability to get along with coworkers. Ms. Harris had only received one written warning about her conduct in the five years prior to termination but the termination was approved by a committee made up of co-workers. Mr. Justice Dambrot of the Ontario Court set out the following issues he had to decide in this case:

1. Was the Plaintiff dismissed for cause?
The Court held that Ms. Harris’ alleged misconduct would not warrant summary termination of her employment since the Company failed to follow progressive discipline. The Court further held that the decision of the employee committee confirming the termination was meaningless given that there was “not even a modicum of fairness to the employee”.

The Court concluded that Ms. Harris was loud and boisterous, told dirty jokes at times, as did most of her coworkers. However the allegations made against Ms. Harris “could not conceivably justify dismissal”. The Court held that if Ms. Harris’ behaviour was truly perceived by the employer to be serious, further formal written warnings and ultimately a suspension might have gone a long way to bring home the importance of modifying her behaviour. The Court said that if that had happened, and there had been no change in Ms. Harris’ alleged behaviour, then termination could have been considered. In these circumstances, however the termination was “utterly unjustified”.

2. What is the appropriate notice period?
The Court held that the reasonable notice based on the normal factors (age, position, years of service), would have been 10 months. However, the Court took into account the fact that the Plaintiff was pregnant at the time of termination and increased the notice period to 12 months. The Court indicated that pregnancy should be taken into consideration when determining appropriate notice given that the pregnancy of an employee would have a direct affect upon the employee’s ability to find other work.

3. Is Ms. Harris entitled to bad faith damages?
The Judge held that the employer knew or ought to have known that Ms. Harris was pregnant at the time of termination and that terminating someone in such circumstances amounts to bad faith conduct. As a result, the Court increased the notice period by two months.

This case relies on the often cited principle in employment law that absent serious misconduct, progressive discipline must be used before an employee can be terminated for cause. The Court also awarded additional damages, not only for the fact that the employee was pregnant at the time of termination and would likely take more time to find alternate employment but for the mere fact that the employer knew that employee was pregnant at the time of termination.

It should be noted that a pregnant employee or an employee returning from a maternity leave have certain rights to continued employment. A pregnant employee also has the right not to be discriminated against in employment based on the pregnancy. The Court did not specifically state that additional damages were awarded because Ms. Harris was terminated as a result of the fact she was pregnant (a breach of both the Employment Standards Act and the Ontario Human Rights Code) but for the mere fact that the employer knew she was pregnant. Pregnant employees have rights to continued employment and against being discriminated against because of pregnancy. Courts, as in Harris case, may also award additional damages in a wrongful dismissal action because the employee was pregnant at the time of termination. An employee in like circumstances would be well served to seek legal advice based on the various remedies, limitation periods, and damages which may be applicable.

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In Antidormi v Blue Pumpkin Software Inc., a 2004 decision of the Ontario Superior Court of Justice, the plaintiff, “A.” had been employed as a Channel Sales Manager for a large software developer. She was one of the company’s highest achievers, winning awards and bonus incentives for her sales efforts. At the time the case arose, she was on track to earn salary and commissions for the year well into the six figure range.

A few months after joining the company, A. was contacted by a former colleague with news of an employment opportunity with Blue Pumpkin (“BP”), an American company seeking to build its sales team and develop the Canadian market. The colleague advised that she would be submitting A.’s name to BP’s V.P. Sales for consideration even though A. indicated that she was doing really well where she was and enjoying it there.

In the follow-up phone conversation with A., BP’s V.P. Sales addressed certain of A.’s concerns about the company and its products. A face-to-face meeting was agreed to even though A. indicated that she was not interested in changing jobs. At the meeting in Toronto, the V.P. Sales shared his vision for Canada and told A. that BP’s executives recognized Canada as having the potential to be its fastest growing market and were committing the necessary resources to facilitate its growth.

In the V.P.’s words, “the sky was the limit.” He represented that if A. proved herself in the Canadian market, she could fast track and pursue her goal of working in the global marketplace.

A. did not accept the offer to join BPimmediately. After researching the company, A. went out to California to meet wit BP’s senior management including the company’s CEO who expressed complete confidence in his V.P. Sales and confirmed that this was a long-term opportunity. Upon further reassurances that she would enjoy job security as long as she performed and that building the Canadian territory would take at least three to five years, A. agreed to leave her current employer of some 19 months and join BP.

At the outset, A.’s position was that of Account Executive. Within a few weeks, she was made Territory Manager – Canada and Latin America. Throughout her employment with BP, A’s performance was outstanding and consistently at or above assigned objectives. The V.P. Sales repeatedly expressed satisfaction with BP’s work and further indicated that he anticipated she would have a solid and immediate impact on BP’s performance in Canada. Approximately five months after A. commenced employment with BP, the V.P. Sales was replaced by the company’s V. P. Worlwide Sales. About a month later, A. was advised that she was being terminated as management had changed its focus. When A. protested about the promises which had been made to her and the impact of the termination would have upon her family, BP would only say that A. might have to change her lifestyle.

At trial, the Court determined that A. would never have left stable and lucrative position with her former employer but for the misrepresentations from BP about job prospects and job stability. A. had been employed by BP for six months at termination. The Court took BP’s misrepresentations into account in awarding A. reasonable notice of 10 months. BP’s conduct at termination and following A’s termination led to an increase in the notice period to 12 months. Based on A.’s salary and expected bonuses/commissions over the notice period, damages were fixed at $320,000.00.

The message sent by the Court in Antidormi is clear. Inducement by a prospective employer to leave one’s present job may extend the notice period that would otherwise be awarded, and could well result in a period of notice exceeding the length of employment itself. In determining the impact of an alleged inducement, the courts will take into account:
1. the position, remuneration and security enjoyed in the previous employment;
2. whether it was the employer or the employee who initiated contact with respect to
the new employment and/or pursued the negotiations leading to the new employment;
3. representations made by the new employer as to the position, remuneration and
prospect for secure employment and advancement at the new employment; and
4. the length of service at the new employment.

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The case of Mary Egan against her former employer, Alcatel Canada Inc., touched on two (2) important issues, namely (i) inducement, and (ii) the interrelationship between entitlement to damages for wrongful dismissal and disability benefits.

Ms. Egan worked with Bell Canada for 20 years before joining Alcatel in October 2000. Ms. Egan was terminated in July 2002 less than 21 months after joining Alcatel in a senior managerial position. The first issue addressed by the Court was whether Ms. Egan had been induced/enticed to join Alcatel and if so, the effect such enticement would have on the notice period.

The Court found that Ms. Egan had in fact been enticed and included that as a factor in concluding that a nine (9) month notice period was appropriate. The Ontario Court of Appeal upheld the Trial Court’s decision that there had been an enticement (over and above the normal representations during the interview process) and that such inducements were a factor, among many, used to determine appropriate notice. The Court of Appeal also cited with approval a Supreme Court of Canada’s decision which stated in part, that “the significance of the inducement will vary with the circumstances of the particular case and its effect, if any, on the notice period is best left to the discretion of the Judge”. In this case, the Court of Appeal did not believe it appropriate to alter the trial Judge’s determination that appropriate notice was nine (9) months.

However, there was an added twist to Ms. Egan’s case. By October 2002 (approximately three months after termination), Ms. Egan became disabled and remained so until October 2003. While employed, Ms. Egan was entitled to short-term and long-term disability benefits. The policy of insurance between Alcatel and the disability insurer permitted Alcatel to determine when benefits cease. Alcatel chose to continue disability benefit coverage after eight (8) weeks, commensurate with the notice period under the Employment Standards Act. By the time Ms. Egan was disabled, short-term disability and long-term disability coverage had been cancelled by Alcatel. The issue addressed by the Court was whether Ms. Egan was entitled to the monies worth of disability benefits from Alcatel, and if so, how this would impact on the award of nine (9) months notice. The trial Judge ruled that had Alcatel provided Ms. Egan with reasonable notice, she would have qualified for disability benefits which should have continued to October 2003. However, the trial Judge held that the award of nine (9) months “would leave Ms. Egan “whole”.

Ms. Egan appealed the decision stating that she should be entitled to reasonable notice in addition to the monetary loss of disability benefits.

The Ontario Court of Appeal held that Ms. Egan was not entitled to both disability benefits and notice. However, the Court stated that Ms. Egan was entitled to be made whole, meaning she should be compensated for the full duration of her disability (and not limited to the nine (9) month notice period) and that she should be paid on a non-taxable basis, given that disability payments were non-taxable. It should be noted that there are other Court of Appeal decisions which state that an employee is entitled to receive both disability benefits and notice. This case was out of the norm given that the payment of notice and disability benefits came from the same party (Alcatel) whereas payments usually come from two payors, (i) the disability insurer; and (ii) the employer. This fact likely had an impact on the decision not to award both payments.

The interrelationship between notice and disability claims is a complicated issue and should be addressed by counsel. An employee faced with similar circumstances or any other legal issue is well advised to seek legal advice.

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Verlie Sison (“Sison”) was employed with an A & W franchise in Alberta. During the course of his employment with A & W, Sison reported to Dwayne Taylor (“Taylor”). Taylor eventually found his way to the Ottawa Region where he was the General Manager of a number of Wendy’s franchises owned by the Louis Bull Tribe No. 439 and its related entities. On the recommendation of Taylor, Sison was hired to manage the Wendy’s holdings under a three-year agreement. It was a term of the agreement that if Sison was terminated, other than for cause, the agreement was to be paid out in full. Sison started work with the Louis Bull Tribe on March 20, 2000 but was fired by May of 2000. Soon after the hiring of Sison, the Louis Bull Tribe lost faith in Taylor and decided to make changes in the management ranks which happened to include Sison, even though the evidence showed that during Sison’s short tenure, he improved the restaurants performance. Notwithstanding, the Employer made allegations that Sison was terminated for cause, having allegedly undertaken conduct detrimental to the employer’s interest. The Court found such allegation to be wholly without merit and that the sole reason for the termination was Sison’s association with Taylor.

The Employer’s fall back position was that a corporation and not the Tribe was the proper employer and that any Judgment should be restricted to the corporation, not the First Nation. The Court held that both the corporation and the First Nation were in fact responsible for damages. The Court indicated that the two entities were co-employers. In addition, the Court held that if the First Nation was not the Employer, it would be responsible for the damages in any event given that it interfered with Sison’s contractual relations with the Corporation. For those reasons, the Court found that the Corporation and First Nation were both responsible for damages.

The most significant aspect of the Judgment was that the Court did not apply the provision of the agreement indicating that Sison would be entitled to pay for the full tenure of the agreement (three years) in the event that he was terminated without cause. The Court found that since Sison did not undertake a reasonable job search, he failed to mitigate his damages. As a result, the Court awarded Sison only four months notice at his promised salary of $70,000.00 plus out-of-pocket expenses incurred in relocating to the Ottawa region as well as an amount ($5,000.00) for his return to Alberta. The Court also awarded damages in lieu of the promise of an automobile and housing allowance. In the end, Sison received a total award of $44,350.00 which was significantly less that he would have received over the three-year contract. The Court however, believed that it would not have been reasonable to pay Sison amounts when he failed to undertake a reasonable job search.

Sison’s plight should serve as a lesson that there are two elements in the quantification of wrongful dismissal damages. Firstly, a Court is to determine the appropriate notice period, which is then subject to reduction where an employee fails to undertake a reasonable job search (as happened here) or where alternate employment is found within the notice period.

As always, if one has an employment law issue, there can be no substitute for seeking independent legal advice for your specific question.

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Consider the following situation. A dentist (the employer) hires a consultant to evaluate the operation of his dental practice. In a report critical of the dentist’s business operations, the consultant recommends changes, which include removing some of the duties previously performed by the office manager (the employee). Shortly after learning of the recommendations, the office manager writes to her employer as follows:
“If your intention was to hurt and destroy me – you’ve done a good job. Because of you, and your wife, the consultant and your staff, you’ve all succeeded! I’m resigning immediately. Enclosed, is the key to the office.”

After the note and the key are delivered, the dentist indicates that he needs an explanation and arranges to meet with the office manager. A long and emotional conversation then ensues in the employee’s car. According to the dentist, the employee maintains her desire to resign during their conversation. The office manager on the other hand, states she was told to take a few days off and they would work things out. On that basis, the employee alleges that she withdrew her resignation. The following day, the employer advises his staff that the employee resigned. Upon learning what the staff had been told, the employee contacts the employer and is told, “I think we should part company.” The employee sued for wrongful dismissal.

There was no dispute that the office manager’s employment had come to an end. The legal issue was whether the employee had resigned her employment. What was at stake was entitlement to notice and Employment Insurance benefits. If the employee “resigned” she would not likely be entitled to notice or EI benefits.


At common law and under the Employment Standards Act, a resignation which is voluntary and is accepted by the employer terminates the employment relationship without any obligation on the employer to provide notice or pay in lieu.

Courts will find that a resignation has occurred only where the conduct in question is clear and unequivocal. A resignation will not be found simply on the basis of actions or words expressed by an employee in the “heat of the moment” and in response to highly charged emotional circumstances.

An indication from the employee that she is not satisfied with her employment and is looking for other work, or is thinking of quitting does not necessarily constitute a resignation. Similarly, a situation where an employee resigns, but soon thereafter withdraws the resignation will not likely constitute a resignation. This may be so even where an employer subsequently accepts the resignation.


The Courts and the Act also distinguish between a resignation which is voluntary and a refusal by an employee to accept a significant change made by the employer to the terms of employment, such as a significant demotion or a reduction in pay. In this case, the employment relationship may have been terminated by the conduct of the employer and not the employee’s resignation, and the employee’s right to notice and Employment Insurance may not have been extinguished.

Under the Employment Insurance Act, an employee will be disqualified from receiving benefits where he or she has voluntarily left their employment without just cause. “Just cause” will be found where the claimant had no reasonable alternative to leaving his/her employment given all the circumstances of the case. Some of the circumstances which will support a finding a “voluntary leaving for just cause” are set out in the Act.

Back to the example described above. Did the employ resign her employment? How did the Court rule?

The Court found that the circumstances of the case did not support a resignation, and the individual was entitled to damages for wrongful dismissal. The Court based its decision on the following:
(1) While the resignation was a product of an emotional and stressful time in the employee’s life, it was not a spontaneous outburst in circumstances which undermined the fact that it was tendered voluntarily. The delivery of the note and the key, taken alone, represented an unequivocal resignation by the employee;
(2) However, the employer did not accept the resignation. Rather, he wanted to discuss the matter further with the employee and such discussions took place;
(3) While the employee started to resign, she never unequivocally and clearly did so. Instead she agreed to meet with the employer to discuss the issues which gave rise to her concerns;
(4) When all of the circumstances surrounding the “resignation” and the conduct of the parties which followed are taken into consideration, the Court concluded:
“the plaintiff did not voluntarily resign from her employment.”

Given the very serious consequences which can befall an individual who resigns his or her employment, both in respect of entitlement to notice and EI benefits, those contemplating resignation are strongly urged to seek legal counsel before pursuing such action.

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An employer who dismisses an employee without cause is obliged to provide reasonable notice of termination. Where no notice is provided and the employer fails to provide pay in lieu of notice for an amount equivalent to the notice period, the employee will be able to recover damages by bringing a civil action for wrongful dismissal,

The above formula makes no mention of an employee’s “right to their job back” or to “reinstatement” in the event of a wrongful dismissal. This is because at common law, there is no right to reinstatement. The Courts can award money damages for losses suffered as a result wrongful dismissal but they cannot order the employer to take the employee back.

There are however instances surrounding a termination which may entitle an employee to reinstatement. This is because both provincial and federal statute provide for such a remedy in specific circumstances.

Consider the following situations: (1) An employee, aged 65, is let go after the employer has hired a replacement even though the employee has expressed no interest in retirement; (2) An employee goes on parental leave and while away, is replaced. Upon advising the company that she is ready to return to work, the employee is told her job has been given to someone else; (3) An employee complains that he has not received the vacation pay to which he is entitled only to have the employer respond by advising him that if he doesn’t like it, he can look for work elsewhere; (4) A bank advises an employee that she is being dismissed without cause. In response to inquiries from the employee as to the reason for the dismissal, the bank indicates it was not satisfied with her performance; (5) An employee complains about safety violations in the workplace. Her campaign to have the employer adhere to safety standards results in her termination; (6) An employee is terminated after explaining that she cannot work late because she has been unable to arrange baby-sitting for her children; (7) An employer refuses to return an employee to his job after he has recovered from a work-related injury; (8) A dispute between an employer and an employee over his right to bereavement leave, after the death of a parent, leads to termination.

In each of the above cases, there are grounds for a statutory claim seeking reinstatement or re-employment. The following statutes govern the above examples:
(a) The Ontario Human Rights Code (examples 1 and 6 above) - Termination of employment on the basis of age and/or family status are among the grounds of discrimination prohibited under the Code. Where employment is governed by federal human rights legislation, the right to be employed free from discrimination is governed by the Canadian Human Rights Act. Under both provincial and federal human rights legislation, an employee may seek reinstatement where discrimination on a prohibited ground can be established.
(b) The Employment Standards Act (examples 2, 3 and 8) - An employee who goes on a leave of absence, as contemplated by the ESA, is entitled, in most cases, to return to his or her job upon the completion of the leave. Failure by the employer to return the employee to their former position or a comparable position is a violation of the ESA for which the employee can seek reinstatement. The same will apply where the employee has been terminated as a result of his or efforts to enforce rights under the ESA.
(c) Canada Labour Code (example 4) - The employment obligations of banks and
other federally-regulated employers are governed by the CLC. Where, under the CLC, an employee has been unjustly dismissed, his or her remedies include reinstatement.
(d) Occupational Heath and Safety Act (example 5) - An employee cannot be terminated for asserting his right to a safe working environment as contemplated by the OHSA. In such circumstances, an employee who has been terminated can seek reinstatement.
(e) Workplace Safety and Insurance Act (example 7) - An employer has a re-employment obligation to an employee who has recovered from a workplace injury. Unlike the previous examples, however, an employer who fails to comply with its re-employment obligation, faces only financial penalties for statutory non-compliance.

Does an employee who has been terminated have a right to reinstatement? If the circumstances of the termination fit within the statutory protections set out above, the answer may be Yes. In such circumstances, even where the employee does not want to return to the employer, he or she may have a claim for additional payments based upon the relinquishing of the right to reinstatement.

Please note that the above examples are not meant to be exhaustive, and ought not to be taken, in any way, as limiting the right to reinstatement to the above mentioned statutes or fact scenarios. As always, individuals who are faced with termination, are well advised to seek legal counsel so that they understand their rights upon termination and the remedies available to them.

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It is not unusual for an employer to offer employment subject to a three- or six-month “probationary” term. In such cases, the term will form part of the offer of employment made to the employee. A “probationary employee” has been defined as follows:
“The term is well understood in business and industry as an employee who is being tested to enable the employer to ascertain the suitability of the employee for its purposes. Probation is a period when the employee may prove that he is suitable for regular employment as a permanent employee and will meet the standards set by the employee.”


If the work of a probationary employee proves unsatisfactory, can the employer terminate him without any further obligation? The answer depends on whether the employer can establish just cause and thereby avoid the common law obligation, which would otherwise exist, to provide reasonable notice. In the case of a probationary employee, cause will be found where the employee proves unsuitable for the position he has been given. Thus termination may be justified on grounds which go well beyond those which would support the discharge of a regular employee and may include such considerations as the employee’s character, compatibility, as well as his ability to meet present and future production standards set by the employer.

The employer will have to act fairly and with reasonable diligence in determining the employee’s suitability for the job. Where however, this can be shown, it will be easier to terminate a probationary employee without having to provide notice. The Courts, it should be noted, will examine whether the reason for termination was, in fact, the employee’s suitability for the job as opposed to some other reason or improper motive on the part of the employer which would not justify the dismissal.

One Court has gone further and indicated that where an employer seeks to terminate a probationary employee as unsuitable, the employer must demonstrate that it gave the employee a fair chance to demonstrate his ability to do the job. The Court said:
“So long as the probationary employee is given a reasonable opportunity to demonstrate his ability to meet the standards the employer sets out when he is hired, including not only a testing of his skills, but also his ability to work in harmony with others, his potential usefulness to the employer in the future, and such other factors as the employer deems essential to the viable performance of the position, then he has no complaint. As for the employer, he cannot be held liable if his assessment of the probationary employee’s suitability for the job is based on such criteria and a fair and reasonable determination of the question. In my opinion, the law does not require the employer to do more.”


In another case, a Court found that the employer had acted reasonably where a memo had been provided to the employee regarding his deficiencies, and was provided for the purpose of assisting the employee in making the adjustments required to perform his duties. In determining that there was cause for termination, the Court further observed that the termination “was not out of the blue; continued suggestions, advice and assistance had been given throughout.”

Does the employer have to provide the employee with all or virtually all of the probationary period to prove himself? This issue has not yet been conclusively decided. In one case, a Court found that fairness dictated that the employee be given a reasonable time, if not necessarily the full probationary period to show what he could do. In another case, however, a Court held that the employer had the right, if acting in good faith, to terminate at any time during the probationary period without further obligation.

If a probationary employee is terminated for failure to meet the standards of performance set by the employer, is he still entitled to notice pursuant to the Employment Standards Act? An employee is entitled to notice under the Employment Standards Act where he has been continuously employed for at least three months. Therefore, where an employee, at the commencement of his employment, is terminated before the completion of a three-month probationary period, he will not be eligible for notice under the Act no matter the reason for termination. Thereafter, an employee will be entitled to statutory notice unless he is terminated for willful misconduct, disobedience or willful neglect of duty. Where an employee is terminated upon the completion of a three-month probationary term or after a longer probationary period, for failing to meet the employer’s expectations, the employee may qualify for notice under the Act even if he is not entitled to reasonable law notice at common law.

If an employee is terminated during the probationary period without cause, is his right to reasonable notice affected by the fact of his probationary status? One Court has indicated that
probationary status is one factor to be considered in determining appropriate notice. An author of a leading employment law text has expressed a different view of the issue as follows:
“An employer can discharge a probationary employee by meeting a minimal just cause requirement. If however, an employer cannot establish just cause, this often means that the employer did not even make a good faith effort to assess the suitability of the employee or allowed improper motive to taint the decision. In such a case it does not seem to make sense to further reduce what is already a slight notice entitlement by reason only of the fact that the employee was terminated during a probationary period.”

An individual, who is offered a contract of employment subject to a probationary term, is well advised to consult with counsel, so that they fully understand the opportunity being provided, and what they are giving up.

This article is provided for information purposes only and does not constitute legal advice. Any individual questions or legal issues should be discussed with independent counsel.

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Under the Employment Standards Act (the “ESA”), an employee who is given working notice upon termination, is entitled to the continuation of benefits throughout the statutory notice period. Section 60 of the Act reads:
“During the notice period under section 57 or 58, the employer shall continue to make whatever benefit plan contributions would be required to be made in order the maintain the employee’s benefits under the plan until the end of the notice period.”

Section 61 is a similar provision which applies to an employee who has been terminated without notice.

Thus for example, where a ten-year employee loses the job, he remains eligible for benefits covered under the group insurance plan for a period of eight weeks. It is therefore advisable for an employee (or members of his family who are covered by the plan) and who require a particular dental procedure or new eyeglasses, for example, to arrange to receive the treatment or order the product within the notice period available under the Act to ensure that they will be reimbursed for their expenses.

• What happens when the plan of insurance requires that an employee be actively employed for benefits to be effective?
This is an interesting legal issue, given that the ESA only obliges the employer to continue to make payment of premiums. In all likelihood, the insurer will acknowledge liability for benefits which are owing during the statutory notice period. In the alternative, an employee in such circumstances may have a claim against the employer as a result of such loss.

An employee is also entitled at a minimum to his wages over the statutory notice period, “which amount shall not be less than his regular wages for a regular work week”. Where the employee is not provided with working notice, he is entitled to his “regular wages”, which is a defined term under the ESA.

At common law, an employee who has been wrongfully dismissed can seek to recover not only the loss of income he would have likely earned over the reasonable notice period but the loss of fringe benefits as well. In other words, ESA payments are usually only a small fraction of a terminated employee’s entitlements/damages.

The fundamental principle underlying an award of damages for wrongful dismissal is that the employee should be put in the same economic position the employee would have been in had he worked to the end of the reasonable notice period. The Courts will therefore also factor in the amount of overtime pay the employee received over a comparable period prior to termination unless the employer can show that overtime hours were reduced or eliminated for its remaining employees in the period following termination. A terminated employee will also be entitled to compensation for loss of commissions that would probably have been earned during the period of reasonable notice.

Depending on the terms of the employment contract and the nature of the bonus and profit sharing plan in place at termination, the calculation of damages may also include an amount for loss of these additional payments during the notice period. The terminated employee may also be entitled to pension plan contributions from the employer and/or stock options post-termination.

The terminated employee is also entitled to recover for loss of fringe benefits during the reasonable notice period whether or not the employee has incurred out-of-pocket expenses that would otherwise have been covered by the group benefit plan. Where no medical expenses have been sustained during the period of reasonable notice, the employee may be able to obtain compensation for loss of benefits based upon the cost of obtaining alternate private coverage or the cost of premiums borne by the employer during the period of employment.

A terminated employee may also be entitled to convert group life insurance to a private plan without having to undergo the medical examination which is often required for private coverage. The conversion privilege is a time-limited opportunity available to the terminated employee. The employer has an obligation to advise the employee of this opportunity at the time of termination.

The foregoing represents some but not all of the entitlements available to an employee at termination and during the period of reasonable notice. As the above suggests, payments upon termination are not a simple matter of providing wages and wages alone for a set number of weeks or months. An employee facing termination is well advised to seek legal advice before accepting any termination package so that he fully understands what his rights are upon termination.

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As we have indicated in previous columns, an employer who dismisses an employee without cause is obliged to provide notice of termination or pay in lieu thereof. Minimum notice periods/payments for provincially regulated employers are set out in Ontario’s Employment Standards Act (the “Act”). For federally-regulated employers, statutory obligations upon termination are set out in the Canada Labour Code . In addition to notice, employees with five years or more of service and who are either part of a mass termination or were employed by an employer with a payroll of $2.5 million or more, will be entitled to severance pay.

These payments are mandated by statute and must be made within seven days of termination or by the employee’s next pay date. These payments however, do not exhaust the rights of a dismissed employee under the common law or by operation of other statutes such as the Ontario Human Rights Code. Further remedies however, may and often do require the commencement of a civil or court action for wrongful dismissal or a complaint to the Ontario Human Rights Commission if discrimination is at issue.

At termination, the employer may offer the employee a “termination package”. The termination package, usually described in the letter of termination, sets out the payments, benefits or other offers such as a letter of reference the employer is prepared to provide upon termination. Termination packages are often made conditional upon the signing of a Release by the employee. The Release is a contract which spells out the payments and any other consideration to be provided by the employer in exchange for a release by the employee of any further legal claims he may have against the employer with respect to his employment and/or termination of employment. Put simply, if an employee signs the Release, he is accepting the employer’s offer in full and final satisfaction of any claims he may have and will therefore not be able to pursue any further legal action against the employer.

The Release typically contains the type of jargon familiar to lawyers but not most employees confronted with the document. Employees may be asked to sign on the spot or may be given time to consider the offer before executing the document. Given what is a stake, employees are always advised to refrain from signing a Release until they have obtained legal advice. The value of the offer is dependent upon a whole host of factors such the damages for wrongful dismissal the employee can obtain as well as the other remedies he can pursue. Few employees have the legal expertise to make a proper assessment on their own of the offer contained in a Release. Pressure to sign on the spot should immediately raise suspicions that the employer is seeking to have the employee agree to an unequal bargain and should be resisted at all costs.

No action is required by an employee and specifically, no forms must be signed in order to obtain employment standards notice or severance payments from an employer. An employer therefore has no right to a Release in exchange for employment standards payments. Unfortunately, this will not stop some employers from making such payments conditional upon a Release in order to avoid or at least discourage legal action on the part of a terminated employee. There is therefore no benefit to an employee in signing a Release under these circumstances as the employer is obliged to make payment of employment standards entitlements even if the employee refuses to sign.

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