What is a termination without cause in Ontario?
If an employer terminates an employee without cause, it means they don’t have to provide a reason, but they do have to provide “notice”.
What is “notice”?
Notice is the advance warning an employer has to give an employee when they are firing them. Employers can and usually do give “pay in lieu of notice” instead of providing “working notice”.
Notice is measured in units of time. Calculating the appropriate notice is an art, and there is no fixed formula.
Whenever an employer fails to give enough notice for a termination without cause, it is a “wrongful dismissal“.
What is “working notice”?
Working notice is when an employer makes the employee work the notice period instead of just paying them a lump sum payment in lieu of them coming in to work the notice period.
What is “pay in lieu of notice”?
Pay in lieu of notice is when the employer pays the employee an amount of money that is equivalent to the money they would have earned had they worked the working notice period. Pay in lieu of notice is also called a “severance package” or “severance” or “reasonable notice”. Click here to find out who is entitled to notice.
What is a “notice period”?
The notice period is how long an employer must provide advance warning they are terminating an employee for. Remember, employers can give working notice or pay in lieu of notice for the same amount of time.
What is a “with cause” termination?
In Ontario, employers can let go employees in one of two ways: without cause, as discussed above, or with “cause.” “Cause” is sometimes called “just cause”. “Cause” is a reason to fire an employee without any notice. Cause is defined as serious misconduct, habitual neglect of duty, incompetence, conduct that is prejudicial to the employer or wilful disobedience. Cause is difficult to prove, and the onus is on the employer.
Without cause termination example
A recent case highlights what happens in case of a termination without cause.
In Devlin v. High Liner Foods Incorporated, after more than 25 years working for High Liner Foods Incorporated (“High Liner”), Mr. Devlin’s employment was terminated without cause. High Liner called the termination without cause a “restructuring”, but, remember from above, they did not need to provide any reason because they offered Mr. Devlin a severance package.
Mr. Devlin worked for High Liner for 25 years, most recently as a Director, Customer Development, Retail Sales. When his employment was terminated without cause, his base salary was $166,806.61 per year together with a bonus which had averaged $22,854.35 each year over the last 3 years, and a comprehensive group health plan and pension.
When it terminated Mr. Devlin without cause, High Liner offered him 20 months’ severance inclusive of his base salary and benefits, but not his bonus over the same period.
Not happy with the offered severance package, Mr. Devlin sued for wrongful dismissal, claiming 26 months’ severance.
The court was thus tasked to determine the appropriate notice period and whether Mr. Devlin’s bonus should be paid over the notice period.
A court determines the appropriate notice period based on the leading case, Bardal v. Globe & Mail Ltd., where it was held that the catalogue of factors helpful in calculating a reasonable notice period include the “character of the employment, the length of service and the availability of similar employment” given the employees experience, training and qualifications. Based on these factors, a court looks at other wrongful dismissal cases called precedents to find the appropriate notice period.
Character of employment
In the position he held just prior to his termination without cause, Mr. Devlin reported directly to the Vice President, Marketing and Sales. His position was that of essentially a sales manager. His responsibilities were split 60% sales, 40% managerial supervision. Mr. Devlin had input but did not have the authority to hire and fire.
Length of employment
Mr. Devlin worked for High Liner for 25 and a half years. The court stated, “although there are cases in which employees have worked longer, this length of service is in the upper echelon.”
The prospects of finding similar employment with similar compensation
The court found that there was some transferability of his skills, but that Mr. Devlin could not easily switch to any sales job. Sales is based on relationships with people and, unless he gets a job in a very similar niche, he was going to have to start again from the beginning.
Reasonable notice award
In the result, the court awarded Mr. Devlin 22 months’ severance based on his age (55), the relatively specialized sales niche he has inhabited at High Liner and, ultimately, the difficulty he would have at securing a similar job.
I would put forth that had Mr. Devlin been a few years older or held a true management position, he would have been awarded 24 months’ severance, which is traditionally the maximum amount of severance one can get unless there are very special circumstances. Accordingly, in this example above, Mr. Devlin was “terminated without cause”. Because of his age, salary, years of service, position and chances of finding new, comparable employment, he was entitled to severance equal to 22 months’ notice. As is the law – a wrongfully dismissed employee should be put back in the position he would have been in if his employer had not breached its obligations to provide reasonable notice, Mr. Devlin was award the salary, bonus, pension benefits and health benefits he would have received as if he worked the 22 month notice period.