Termination Without Cause in Ontario
A “without cause” termination occurs when an employer decides to end an employee’s employment at any time without needing to provide a specific reason.
Is it legal?
Notice is Required!
To terminate an employee without cause, an employer must either provide: 1) reasonable notice of dismissal, or 2) compensation in lieu of notice.
Reasonable notice of dismissal is essentially an advance warning from the employer, informing the employee that their employment will end on a specific date. “Pay in lieu of notice” means that the employer chooses not to have the employee work during the notice period and instead compensates them with the amount they would have earned if they had continued working during that time.
Employees are entitled to notice (either under the Employment Standards Act(“ESA”) or the common law). The ESA entitles employees to statutory notice, pay in lieu of notice, or a combination of both, along with statutory severance pay, if the employer’s payroll exceeds $2.5 million and the employee has at least five years of service.
Must Not Be Discriminatory!
Under the Ontario Human Rights Code, an employer is prohibited from terminating an employee for discriminatory reasons. For instance, if an employer discovers that you plan to start a family and terminates your employment due to concerns about potential time off for childcare, this would be considered discrimination based on “family status” and is illegal.
Cannot be for Retaliation!
An employer cannot terminate an employee without cause to retaliate against an employee for enforcing certain rights, such as your right to a safe work environment under the Ontario Health and Safety Act or your right to payment of wages under the Employment Standards Act. This would be an illegal way to terminate an employee and against the inalienable rights of each employee.
You Cannot Contract Out of the ESA!
Likewise, your employer cannot reduce your entitlements in a termination without cause—whether it’s notice, pay in lieu of notice, or a combination of both—below the minimum standards set by the ESA.
If your employer tries to attempts to limit your entitlements below the legal minimum, you should reach out to us.
Employment Contracts
If your employment contract includes a termination clause, it might state something like, “You will receive your minimum entitlements pursuant to the Employment Standards Act (ESA).” By referencing the ESA in a termination provision, your employer is likely attempting to limit your severance pay. However, the common law—established and upheld by the courts—typically grants employees significantly more notice than the ESA. For this reason, employers often attempt to “contract out” of the common law by specifying that employees will only receive the minimum under the ESA.
Is the Termination Clause Valid?
As a result of this decision, a significant number of termination clauses in Ontario employment contracts are now void. Several other legal grounds can render a termination clause unenforceable.
How do we calculate severance pay in Ontario?
In Ontario, the calculation of termination pay you should receive is determined by examining common law and the ESA.
At Agha Law, we calculate your entitlements and evaluate the fairness of your termination package.
Full Severance Pay (Common Law)
In Ontario, your complete termination pay is decided by our court system, known as common law severance. Judges base this on various past court cases. The key case shaping severance calculations in Canada is Bardal v. Globe & Mail Ltd. from 1960.
The factors in Bardal that Ontario employment lawyers rely on to calculate severance include an employee’s:
- Age; Salary; Position; Years of Service; Experience, Training, Qualifications;
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Availability of similar employment, having regard to the experience, training and qualifications of the employee; and
- Any other special circumstances that affect your ability to find a comparable job.
They are numerous other factors to severance pay. These include but are not limited to: overtime pay, benefits package, and bonuses. A company may use these factors to determine the severance package they offer you.
If your employer terminates you without cause and fails to provide the correct amount of severance, it constitutes a wrongful dismissal. This is a highly likely scenario. If you’ve experienced this, reach out to Agha Law to determine your actual entitlements and discover how we can assist you in obtaining them.
What is the maximum severance pay in Ontario?
The employer generally caps the maximum severance pay you may receive at 24 months’ pay.
