Employment Law

Wrongful dismissal is a legal term used to describe circumstances when an employer dismisses a non-unionized employee without “cause” (ie. without having a good reason) and without providing the employee with “reasonable notice” that they are ending their employment or appropriate severance pay in lieu of notice.  

If an employee is dismissed for “cause”, such as theft, assault or insubordination, employers are not required to provide “reasonable notice” or severance pay.  However, sometimes there can be a disagreement about whether or not the employer had “cause” to terminate employment. 

If a non-unionized employee believes they have been dismissed without appropriate notice or severance, they can sue their employer in court.  This is what is known as a wrongful dismissal lawsuit.

A severance package can include money and benefits that are paid to an employee when their employment is terminated without cause.  

Employment standards legislation typically sets a minimum amount of severance pay that employers must pay when they terminate employment without cause.  In Ontario, severance pay is owed when an employee has worked for an employer for at least five years and the employer has a payroll over $2.5 million.  The amount of severance pay owed to an employee depends on an employee’s years of service. Termination pay is the minimum amount of pay that an employer must pay when they terminate an employee who has been employed for at least 3 months without notice or cause.  The amount owing is not dependent on the size of the employer’s organization.   

If an employee believes that their employer has not paid the minimum amount of severance and/or termination pay required by legislation, they can file a complaint with the appropriate labour board or they can file a lawsuit.   

Separate from any statutory obligations under employment standards legislation, the courts have determined that employers are allowed to dismiss an employee without cause so long as they provide “reasonable notice”.  This means that employers must provide employees with a period of paid time in order for them to find alternate employment.  The length of notice that must be provided can vary based on a number of factors including:

• the type of job the employee held with the employer,
• the employee’s age,
• the employee’s length of service with the employee, 
• the availability of similar employment elsewhere, taking into account the training and qualifications of the employee.

Where an employer doesn’t directly fire an employee but, instead, changes a fundamental term of employment, the employee may have been constructively dismissed.  Fundamental changes to terms of employment include significant reduction to wages, removing key responsibilities, demotions, moving the work location to a different city or permitting a toxic work environment to exist.  

If you think that you have been constructively dismissed, it is best to seek advice from a lawyer about your legal options as soon as possible.  An employment lawyer can review your circumstances and advise whether you actually have a claim for constructive dismissal or not.  In particular, you should seek legal advice before taking any additional steps, such as resigning or continuing to work, as this area of law is complex.