Termination of Employment Ontario

Termination of Employment in Ontario

An employment relationship can be terminated by either the employer or employee. There are several situations under which a termination of employment may take place:

Just Cause Termination by Employer

There are very few circumstances when an employer is justified in dismissing an employee without notice or pay in lieu of notice. In order to terminate an employee without notice or pay in lieu, an employer will have to establish ‘just cause’ under common law or ‘wilful misconduct’ under The Employment Standards Act (ESA).

Just Cause under Common Law

Just cause is a difficult test to meet as the employer must establish that employee engaged in serious misconduct that caused irreparable harm to the employment relationship. The court will also look at surrounding circumstances to determine whether just cause dismissal was warranted.

Wilful Misconduct under the ESA

Wilful misconduct under the ESA is a narrower concept than the common law just cause and hence is even more difficult to establish. The employer will have to evidence that the employee is guilty of wilful misconduct, disobedience or neglect of duty that is not trivial and has not been condoned by the employer. The term ‘wilful’ refers to the subjective intent of the employee, which means that the employee knowingly or intentionally engaged in the misconduct.

There are financial consequences for an employer that makes uncorroborated allegations against an employee, in order to terminate the employee without notice or pay in lieu.

Employers are highly encouraged to contact a lawyer before terminating an employee under ‘just cause’ or ‘wilful misconduct’. Similarly, employees who have been summarily dismissed without notice or pay in lieu should contact a lawyer to understand their rights.

Termination by Employer without Reasonable Cause

An employer can terminate an employment of indefinite duration at any time, provided reasonable notice or payment in lieu of notice has been offered. What constitutes reasonable notice depends on several factors. Depending on the employment agreement (as well as whether the agreement is enforceable), reasonable notice may be as per the ESA or common law.
Before accepting a termination package, employees are encouraged to get their package reviewed by a lawyer. If employers are relying on the termination provisions of an employment agreement, they should get the agreement reviewed by a lawyer before providing notice or payment to the employee.

Employee Resignation due to Employer’s Actions/ Constructive Dismissal

When an employer does something that demonstrates that it no longer wishes to be bound by the employment contract, the employee can claim that she/he has been constructively dismissed. Constructive dismissal differs from termination without notice as the employee is not formally terminated. Constructive dismissal can take place in two ways:

  1. when the employer unilaterally changes an essential term of employment contract- e.g. Employer reduces the employee’s salary or reduces the termination notice period without consulting with the employee; or
  2.  where the employer’s acts demonstrate that it no longer wishes to be bound by the employment contract- e.g. employee is required to continue working in a poisoned environment.

All action of an employer will not qualify as constructive dismissal and employees are encouraged to contact a lawyer before resigning from their job. Employers will be bound by the actions of the managers. If an employer suspects that a manager may have constructively dismissed an employee, they should contact a lawyer to understand their duties and obligations.

Employer’s Failure to Recall an Employee After a Lay-Off

Assuming that the employment agreement includes a provision for temporary lay-off, employers are required to recall employees at the end of the statutory lay-off period. An employer that fails to recall employees after the statutory lay-off period is deemed to have terminated the employment and is required to provide a termination package to the employees.

Voluntary Termination by Employee

Where an employee resigns from the job voluntarily, provided that constructive dismissal is not claimed, the employee is not entitled to any termination package by the employer. The employee will be required to provide a notice as per the employment agreement or the provisions under ESA.

If an employee is serving the notice period and is asked to leave early before completing her/his notice period, the employer will be required to pay wages to the employee for the remaining period of notice.

If you would like to understand your rights or obligations as an employer or employee, please contact us.