Wrongful Dismissal Involves Employment Termination Without Proper Notice or Pay-In-LieuPage last modified: January 12 2023
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What Does Wrongful Dismissal Mean?
Often Misunderstood As Requiring Cruel Conduct By An Employer, Wrongful Dismissal Simply Involves An Employee Terminated Without Proper Notice or Payment-In-Lieu of Notice.
Understanding Wrongful Dismissal Claims Including the Principles For Calculating Compensation
If an employer decides to let an employee go without there being a just cause reason, generally, the employer will owe the employee termination pay. If the employer fails to provide the proper termination pay the law deems that the employee was wrongfully dismissed and should hold the employer liable for the amount properly due.
Termination Pay Requirement
When an employee is let go without just cause, it is common that both employer and employee misunderstand the law applicable to the termination pay requirements. Very frequently there is a false belief that the law regarding termination pay is based solely on what is stated in the Employment Standards Act, 2000, S.O. 2000, Chapter 41; however, the Employment Standards Act describes only what is required as a minimum. Very regularly more than the minimum is required by law.
It is important to remain aware that the Rule of Thumb that a dismissed employee is entitled to one month of compensation for every year of service is a myth. In 1999, this myth was explicitly rejected by the Ontario Court of Appeal in the case of Minott v. O'Shanter Development Company Ltd., 42 O.R. (3d)321.
Unless an enforceable clause within a written contract exists that expressly states that the Employment Standards Act minimum is indeed what applies, there is a "presumption that the contract is terminable without cause only on reasonable notice"; Machtinger v. HOJ Industries Ltd.,  1 S.C.R. 986 at 1005; accordingly, an employee is entitled to reasonable notice based on a variety of factors established and loosely defined by the precedent case of Bardal v. Globe & Mail Ltd.,  O.W.N. 253 (H.C.). The factors from the Bardal case, which are expanded upon by other subsequent cases, include:
- The employee's age at the time of termination;
- The employee's position and level of responsibility;
- The employee's length of service;
- The employee's compensation including wages and value of benefits; and
- The availability of similar employment to which the employee is reasonably suited given the employee's experience, training, and qualifications.
It is important to note that, "availability of similar employment" is not the same as whatever time it takes to find a similar position.
Additionally, as per the case of Jamieson v. Finning International Inc., 2009 BCSC 861, if the employee's position was highly specialized, and therefore it is reasonably expected that the employee will have greater difficulty finding a similar position, and perhaps resolve to taking a less specialized position, such an employee will be deserving of an even greater notice period.
Avoiding Statutory Provisions
Employment Standards Act Minimums Mandatory
Often an employer will require an employee to agree to accept a specified notice period or pay-in-lieu such as a clause that limits the notice or pay-in-lieu to that prescribed within the Employment Standards Act. To apply and be enforceable, the specified notice period or pay-in-lieu stated within an employment contract must be in writing, must be within an enforceable contract (or severable clause), must be complete by referencing all entitlements including continuation of benefits (if any), among other things, and must show that the specified notice clause, such as an Employment Standards Act limiting clause, rebuts the presumption of the reasonable notice provided for by the common law. Interesting, in recent years various courts have made varying decisions as to how explicit such a clause must be; however, with the case of Nemeth v. Hatch Ltd., 2018 ONCA 7, the Court of Appeal has now stated that such a clause, which would essentially be a warning-of-waiver clause, is unnecessary so long as it is reasonably demonstrated within the gist of a specified notice clause that the reasonable notice required by common law is being waived. Specifically, the Court of Appeal stated:
 I do not agree that the appellant retains his common law entitlement to notice on termination of his employment because the termination clause does not explicitly state that the parties’ intent is to that effect.
 The well-established presumption is that on termination, an employee is entitled to common law notice; however, this presumption may be rebutted if the contract of employment “clearly specifies some other period of notice, whether expressly or impliedly”, provided that it meets the minimum entitlements prescribed under the ESA: Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC),  1 S.C.R. 986,  S.C.J. No. 41, at p. 998. That said, the intention of the parties to displace an employee’s common law notice entitlement must be clearly and unambiguously expressed in the contractual language used by the parties: Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, 134 O.R. (3d) 481, at para. 40.
 The need for clarity does not mean that the parties must use a specific phrase or particular formula, or state literally that “the parties have agreed to limit an employee’s common law rights on termination”. It suffices that the parties’ intention to displace an employee’s common law notice rights can be readily gleaned from the language agreed to by the parties.
 The appellant relies upon three recent decisions from the Ontario Superior Court of Justice for the proposition that the clause must expressly stipulate that it displaces an employee’s common law notice entitlement in order to effectively do so: Singh v. Qualified Metal Fabricators Ltd., 33 C.C.E.L. (4th) 308 (S.C.); Nogueira v. Second Cup, 2017 ONSC 6315,  O.J. No. 5456; and Amberber v. IBM Canada Limited, 2017 ONSC 6470,  O.J. No. 5587.
 I do not read these cases as standing for the appellant’s proposition, which is inconsistent with the governing jurisprudence. In my view, the Supreme Court in Machtinger, at pp. 1004-1005, made it very clear that the kind of specific, express language advocated by the appellant is not required:
Absent considerations of unconscionability, an employer can readily make contracts with his or her employees which referentially incorporate the minimum notice periods set out in the [ESA] or otherwise take into account later changes to the [ESA] or to the employees’ notice entitlement under the [ESA]. Such contractual notice provisions would be sufficient to displace the presumption that the contract is terminable without cause only on reasonable notice. [Emphasis added.]
 While the parties are free to express their agreement in language of their choice, a high degree of clarity is required and any ambiguity will be resolved in favour of the employee and against the employer who drafted the termination clause in accordance with the principle of contra proferentem: Miller v. A.B.M. Canada Inc., 2015 ONSC 1566, 27 C.C.E.L. (4th) 190, at para. 15 (Div. Ct.); Ceccol v. Ontario Gymnastic Federation (2001), 2001 CanLII 8589 (ON CA), 55 O.R. (3d) 614 (C.A.), at para. 45. As this court recently reiterated in Wood, at para. 28:
Termination clauses should be interpreted in a way that encourages employers to draft agreements that comply with the ESA. If the only consequence employers suffer for drafting a termination clause that fails to comply with the ESA is an order that they comply, then they will have little or no incentive to draft a lawful termination clause at the beginning of the employment relationship: Machtinger, at p. 1004.
 In consequence, if employers do not make clear the parties’ intention to displace common law notice, they cannot complain if the fruits of their drafting are found to be ambiguous and unenforceable.
 It is clear from the plain language of the termination clause in the present case that the parties intended and agreed to limit the appellant’s common law notice entitlement. The clause clearly “specifies some other period of notice” that meets the minimum entitlements prescribed under the ESA: it contemplates the appellant receiving “one week per year of service with a minimum of four weeks or the notice required by the applicable labour legislation.” It cannot be said that the appellant retained his common law entitlements in the face of this explicit language, which denotes an intent to the opposite effect. I agree that there is no ambiguity that the parties intended and agreed to displace the appellant’s common law notice entitlement. Whether they agreed to limit it to the minimum entitlements under the ESA is a question to which I return later in these reasons.
Interestingly, where an employer wishes to use a contract to alter the termination rights of an employee from the presumptive common law rights to reasonable notice, as was examined and explained in Nemeth, the contract terms intended to do so must comply with the Employment Standards Act or such terms become void and the presumptive common law rights remain applicable even if the employer, subsequently recognizes the flawed contract and, upon termination, attempts to comply with the statutory requirements. The unavailability to comply with the statute as a means to cure or save a contract containing a termination clause that violates the statute was explained by the Court of Appeal in the case of Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158, wherein it was stated:
 The motion judge's interpretation of a contractual provision -- other than a provision in a standard form contract -- is now entitled to deference from an appellate court: see Sattva Capital Corp. v. Creston Moly Corp.,  2 S.C.R. 633,  S.C.J. No. 53, 2014 SCC 53. But no deference is owed if the motion judge made an error of law that can be extricated from the judge's interpretation of the contractual clause in question. And that is the case here. The motion judge made an "extricable error of law" in holding that Deeley's actual contributions to Wood's benefit plans were material to the interpretation of the termination clause. Its contributions on termination should have no bearing on whether the termination clause itself contravenes the ESA. The wording of the clause alone must be looked at to decide whether it contravenes or complies with the ESA.
 That the enforceability of the termination clause depends only on the wording of the clause itself, and not on what the employer may have done on termination, is implicit in the judgment of Iacobucci J. in Machtinger, explicit in the ESA, consistent with the considerations governing the interpretation of employment agreements, and supported by at least two decisions of the Ontario Superior Court of Justice. I will elaborate on these four points.
 First, nothing in Machtinger suggests that an employer's conduct on termination, or during the notice period, can remedy an otherwise illegal and unenforceable termination clause. Instead, Iacobucci J. states, at p. 1004 S.C.R., "if an employment contract fails to comply with the minimum statutory notice provisions of the Act, then the presumption of reasonable notice will not have been rebutted".
 Second, the ESA itself is perhaps more explicit. An employer's obligation to continue its contributions to an employee's benefit plans during the notice period is an employment standard (ss. 60-61), and s. 5(1) of the ESA states expressly that an employer cannot contract out of, or waive, an employment standard. In other words, an employer's later compliance with an employment standard -- here, Deeley's contributions to Wood's benefit plans -- cannot cure the termination clause's exclusion of the employer's obligation to contribute to those benefit plans during the notice period.
 Third, allowing employers to rely on their conduct at the time of termination of employment would also be inconsistent with one of the important considerations governing the interpretation of termination clauses: these clauses should be interpreted in a way that encourages employers to draft agreements to comply with the ESA. If employers can always remedy illegal termination clauses by making payments to employees on termination of employment, then employers will have little incentive to draft legal and enforceable termination clauses at the beginning of the employment relationship: see Machtinger, p. 1004 S.C.R.
 Finally, two well-reasoned Superior Court decisions reject the argument that an employer's later compliance with its statutory obligations can affect the interpretation of a termination clause in an employment agreement: the decision of Low J. in Wright v. Young and Rubicam Group of Cos. (Wunderman),  O.J. No. 4960, 2011 ONSC 4720,  C.L.L.C. Â210-018 (S.C.J.) and the decision of Leach J. in Stevens v. Sifton Properties Ltd.,  O.J. No. 6244, 2012 ONSC 5508, 5 C.C.E.L. (4th) 27 (S.C.J.).
 In Wright, Low J. held that the termination clause was void because it precluded the continuation of benefit contributions during the notice period. The employer had actually complied entirely with its obligations under the ESA to make contributions to the employee's benefit plans. Low J. held, however, that its compliance was irrelevant. In a passage I agree with, she wrote, at para. 16:
The fact that the defendant continued benefits for the statutory notice period under the Act does not change the meaning of the language used in the agreement stipulating that the payments under the termination provision are to be inclusive of "all . . . entitlements to compensation".
 Similarly, in Stevens, Leach J. held that even though the employer had provided the employee with all of his statutory entitlements, the termination clause was still unenforceable because it precluded the continuation of benefit contributions during the notice period. In Leach J.'s opinion, the employer's later voluntary compliance with its statutory obligations did not remedy the illegality of the termination clause. In a passage with which I also agree, Leach J. wrote, at para. 65:
[E]mployers should be provided with incentive to ensure that their employment contracts comply with all aspects of the employment standards legislation, including provision of adequate notice (or pay in lieu thereof) and mandated benefit continuation. As emphasized by Justice Low in Wright, supra, an employer's voluntary provision of additional benefits after the fact does not alter the reality that the employment contract drafted by the employer is contrary to law.
(Italics in original; underlining added)
 For these reasons, Deeley's actual contributions to Wood's benefit plans during the notice period cannot affect the enforceability of the termination clause. Its enforceability or unenforceability depends on whether the termination clause itself included or excluded Deeley's obligation to make those contributions.
Failure to Mitigate
It is important for the wrongfully dismissed employee to take heed of the duty to mitigate. Essentially, the employee must make a reasonable effort to get back into the workforce. Getting back into the workforce does not mean that the employee must accept any position but a reasonably similar position with reasonably similar compensation. Quite simply, the employee is unable to just rest away. For this reason, the wrongfully dismissed employee should keep a well documented record of efforts to find suitable employment. At a wrongful dismissal trial, the court will need to see that the employee put in a legitimate effort to find new work. With this said, it is recognized by the courts that a wrongfully dismissed employee will need a mental break. Accordingly, the courts generally accept that a wrongfully dismissed employee takes a few weeks off before beginning a work search. A wrongfully dismissed employee can null and void all liability owed by an employer due to a failure to mitigate; accordingly, it is imperative that the employee put in a genuinely valiant effort towards finding new employment.
Claiming Distress Injuries
When an employment is terminated, the Plaintiff often experiences some level of distress. A sudden state of unemployment can, and often is, very distressing; however, so long as the Plaintiff experiences such distress solely as a result of the termination of employment, the Plaintiff will find that litigation against the employer for this distress will be unfruitful. This is because a contract of employment is always eventually going to end and there is a certain amount of distress presumed and expected. Often a newly unemployed Plaintiff will also feel that the past employer should pay something simply for making the Plaintiff feel sad about the loss of a job; however, the law requires more before an employer can be successfully called upon in law to compensate for causing distress. This more is known as "an independently actionable wrong". This "independently actionable wrong" is generally some improper conduct beyond the termination of employment such as a wrongful conduct in the manner or reasons for the termination such as an allegation that the employee engaged in a theft or other unlawful conduct. An employer that attempts to support a termination with harsh allegations had better be well prepared to demonstrate that the allegations were accurate; otherwise, the employer may be placed at risk of paying much more than just compensation for breach of the employment contract.
In addition to the requirement of "an independently actionable wrong" beyond just the breach of the employment contract, it is common that a claim for general damages (distress injuries) will require medical expert evidence. In the past, and therefore perhaps still the viewpoint of old school legal people, distress injuries were compensable only where proof in the form of medical expert evidence was provided, such as reports from a psychologist. Subsequently, in 1997, the Supreme Court of Canada ruled in Wallace v. United Grain Growers Ltd.,  3 S.C.R. 701 that distress for "an independently actionable wrong" should be compensated by bumping up the notice period - so if for example, an employee was found to deserve six (6) months notice, the Rule became such that a few extra months could be tacked on. However, in 2008, the Supreme Court changed its mind in Honda Canada Inc. v. Keays,  2 S.C.R. 362 and stated that awards for distress injuries, where appropriate, should be compensated in the usual way via a monetary award for the value of distress caused as determined by a court. This return to the requirement of a genuine formulation in establishing appropriate monetary compensation to compensate for distress injury rather than simply bumping-up the notice period as a means of punishing the employer for whatever "independently actionable wrong" was committed appears to result in a system that more accurately provides compensation when compensation is due except of the added challenge to the Plaintiff of once again needing to both prove that distress injuries occurred and what is the reasonable amount due for the level of distress injuries suffered. Many courts require that this proof come solely in the form of medical expert evidence while some courts will also accept the testimony of the Plaintiff. While it is always best to provide medical expert evidence if such is available, it is clear from the case of Canadian Pacific Railway Company v. Unifor and its Local 101R, 2014 CanLII 22982 (CA LA) that such is without absolute necessary:
79. The amount of damages awarded depends on the seriousness and severity of the injury suffered. Expert evidence, including medical reports, would be a useful aide in the assessment of damages. However, expert evidence is not a requirement and damages can be determined through other means, including the credible testimony of the claimant. An award of $5000 is substantially less than the amount awarded by the Courts in a number of recent cases where there was little or no medical evidence to support a finding of mental distress. (see Chappell v. Canadian Pacific Railway Company, 2010 ABQB 441 (CanLII) - $20,000; Simmons v. Webb (2008), 2008 CanLII 67908 (ON SC), 54 B.L.R. (4th) 197 (Ont. S.C.) - $20,000 ; Coppola v. Capital Pontiac, Buick, Cadillac, GMC, 2011 SKQB 318 (CanLII) - $25,000).
An employer that makes a fundamental and unfavourable change to the employment relationship may be deemed to have constructively dismissed the employee. While the employee may resign, the common law courts may deem that the employee suffered from constructive dismissal.