What is wrongful dismissal?
Wrongful dismissal is a legal cause of action that an employee may have when terminated from their employment. The name "wrongful dismissal" is misleading. The only factor that makes a dismissal "wrongful" is the lack of sufficient notice of termination. The reasons or circumstances of the termination are usually not particularly important.
What are wrongfully dismissed employees entitled to?
Wrongfully dismissed employees are entitled to "reasonable notice" of termination, or (more often) pay in lieu of that notice. Pay in lieu of notice is often colloquially referred to as severance. The courts decide how much notice is "reasonable" based primarily on the employee's length of service, age, character of employment, and chances of re-employment. Most awards total about 1 month of notice per year of service. The rationale behind the award is that the employee should have enough time to find a suitable replacement job.
What if there was a good reason to terminate the employee?
An employee terminated for "just cause" is not entitled to reasonable notice. However, it can be very difficult to establish just cause. It usually takes repeated acts of misconduct, coupled with repeated and escalating discipline and warnings, to support a termination for just cause. We strongly advise against alleging "just cause" without expert legal advice. Doing so where it is unwarranted can be interpreted by courts as "bad faith" and can result in an Order for the employer to pay additional damages to the employee, on top of the amounts awarded for wrongful dismissal.
Why would an employee be entitled to more than what is set out in the Employment Standards Act?
Unfortunately, the Employment Standards Act of Ontario only sets the minimum entitlements to notice and severance - it does not address the employee's right to claim wrongful dismissal at common law (i.e. in court). All employees in Ontario are presumptively entitled to both, which often comes as a costly surprise to employers.
Do small businesses get a break?
They do not. This is why it's even more important for small businesses to protect themselves by obtaining sound legal advice. When courts award reasonable notice, they do not consider the size of the company, or the employer's ability to pay. Although severance under the Employment Standards Act is limited to companies with a total payroll of $2.5 million or more, small companies can end up paying just as much as large companies after factoring in an employee's common law entitlement to reasonable notice.
What can companies do to protect themselves?
With early and sound planning, companies can protect themselves from wrongful dismissal claims. The best way to do so is by having employees sign a lawful contract at the beginning of employment, which limits their entitlements at termination. These contracts are notoriously difficult to enforce, however, and are routinely struck down by courts. It is therefore very important that employment agreements are drafted and regularly reviewed by lawyers with specific expertise in employment law.
We have already terminated an employee. Is there anything we can do to limit our liability?
Yes. There are several strategies that can be used to reduce your company's liability for wrongful dismissal after the termination has occurred. For instance, the terminated employee has a duty to seek out alternative employment during the reasonable notice period. In some cases, that duty requires that the employee accept an offer of re-employment from the employer. Consult with an experienced employment lawyer to determine the best approach.
What can Hyde HR Law do for my company?
The employment lawyers at Hyde HR Law are experts in wrongful dismissal. We can help protect your business from wrongful dismissal claims at an early stage by drafting lawful employment contracts and designing sound employee discipline policies. If you are dealing with a recently terminated employee, we can assist you in limiting your liability and negotiating a settlement. Should you be faced with wrongful dismissal proceedings, we will vigorously defend you and aim to resolve the litigation as early a possible. Our focus is on providing value for our services. Contact Hyde HR Law today for advice, strategy, or representation in your company's wrongful dismissal matter.