Category: Employee Terminations

Termination of an employee for cause may be justified in cases involving wilful misconduct or serious neglect of duty. It starkly contrasts with the common situation of termination without cause, in which the employee may have more extensive entitlements, such as a common law period of reasonable notice. 

This article looks at termination for cause, including some types of conduct that may justify termination for cause and the implications and risks surrounding such a termination. Termination for cause is fact-specific, and employers and employees are likely to need advice from an experienced employment lawyer.

What is termination for cause?

Termination “for cause” or with “just cause” is a common law concept developed by case law. An employer may be entitled to dismiss an employee for cause if the employee has engaged in conduct incompatible with the employment relationship’s fundamental terms. 

Termination for cause is not a step to be taken lightly by employers. The misconduct needs to be sufficiently serious to cause a breakdown in the employment relationship.

What types of conduct might warrant termination for cause?

Generally speaking, the following types of conduct are examples of what may qualify for a termination for cause:

• dishonesty, such as theft or fraud;
• insubordination;
• workplace harassment, such as sexual harassment;
• neglect of duty that is severe or habitual; and
• conflict of interest. 

However, what constitutes just cause depends on the particular circumstances of each case. 

What are the implications of a just cause termination?

The implications of a just cause termination differ from those following a dismissal without cause. Termination for just cause means that the employer is not required to give reasonable notice of the termination or compensation in lieu of notice (at least as required under the common law).

However, it has become clear that termination for cause does not necessarily remove the employee’s entitlement to the minimum statutory period of notice required under the Employment Standards Act (ESA). This is because, under the Termination and Severance of Employment Regulation, an employee is not entitled to reasonable notice or severance pay under the ESA if the employee is “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”

The Ontario courts have held that the threshold for “wilful misconduct” is higher than required for cause termination under the common law. This was demonstrated in a recent decision of the Court of Appeal for Ontario, in which an employer was found entitled to dismiss an employee for cause after he slapped a co-worker on the buttocks. However, statutory termination pay was required because the court found that the employee’s conduct did not rise to the level of wilful misconduct. The court found that the employee’s conduct was not intentional or deliberate.

How does a court determine whether a termination for cause was justified?

An employee dismissed for cause can sue for wrongful dismissal, arguing that their conduct did not justify termination for cause. The onus is on the employer to prove that it did.

The courts have developed a complex test for determining whether the employee’s conduct justified termination for cause. Firstly, the employer needs to prove the nature and extent of the employee’s misconduct. Secondly, the surrounding circumstances of the employment relationship need to be considered, including the employee’s employment history, role and responsibilities, and the employer’s business, policies and practices. Finally, the employer needs to show that termination for cause was a proportional response to the conduct because it was sufficiently serious to cause a breakdown in the employment relationship.

It is also possible that the threshold for what constitutes just cause may be contained in the specific employee’s employment contract.

What can employers do to manage the risk of claims?

After acquiring all the evidence, employers will likely need to consider a range of factors before taking a decision about whether to terminate an employee for cause. 

Employers should consider the gravity of the misconduct and any policy-setting employee expectations. It may be important to consider whether the employee was directed to the policy and whether they were warned about their conduct in the past and given an opportunity to improve.

This is particularly important when it comes to incompetence or neglect of duty. A single instance of incompetence is unlikely to justify a termination for cause, and employers need to explain the issue and provide an opportunity for improvement before resorting to dismissal. This is why it is important for employers to have a progressive discipline policy. 

Whether the employer has followed a progressive discipline policy is important in a termination for cause. Such a policy sets out the employer’s stages in dealing with performance issues. It should set out the various measures that will be applied (such as training, warnings and suspension), along with other matters, including the timelines and consequences.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

Termination for cause is a difficult area of employment law. For employers, terminating an employee for cause can create the risk of costly litigation. It is important to have policies to mitigate the risks and allow the business to move forward following employee misconduct. For employees, it is critical to get advice if you have been accused of misconduct in the workplace in order to preserve your legal rights and your reputation. The Haynes Law Firm helps employers and employees to deal with issues relating to termination for cause. Whether it is through creating a progressive discipline policy to proactively manage the risk or providing effective representation in a specific case, Paulette Haynes will assist you or your organization. Please get in touch with the Haynes Law Firm online or call us at 416.593.2731.

There have been several cases this year in which employers have been hit with damages awards after engaging in bad faith conduct during the termination of employees. These significant costs to the employer mean that it is crucial to follow proper processes when terminating employees and also to understand the types of acts that draw the ire of courts.

We have reported on some of these decisions that have ordered aggravated/moral and/or punitive damages against employers. For example, an employee was awarded $75,000 in aggravated and punitive damages after the employer did not act with good faith in claiming it had just cause to terminate the employee and subjected her to a toxic work environment. 

This article looks at the latest in the line of these decisions out of the Ontario Superior Court of Justice. In Pohl v Hudson’s Bay Company, an employee was awarded $55,000 in moral and punitive damages after being marched out the door and for the employer’s failure to comply with the Employment Standards Act (ESA).

Plaintiff sales manager was terminated without cause

The plaintiff employee started working for the defendant in 1992. By the time he was terminated without cause, he was the sales manager of eight departments in a Hudson’s Bay Company (HBC) store. 30 sales associates reported to him. He was employed full-time and received over $60,000 per year. 

At the time of his termination in September 2020, his supervisor was directed to walk the plaintiff out the front door immediately. He later brought a claim for wrongful dismissal. 

HBC eventually paid plaintiff his ESA entitlements

The employer argued that it did not wrongfully terminate the plaintiff because it offered him a separation package of 40 weeks’ pay in lieu of notice. When the employee declined this, the employer provided him with his ESA entitlements. They were initially paid bi-weekly until the plaintiff’s lawyer requested in November 2020 that the termination and severance be paid as a lump sum. The employer did so in December.

HBC offered plaintiff continued employment as an associate lead

The employer also offered the plaintiff continued employment as an associate lead. The relevant terms of this offer were:

• the employee would “voluntarily relinquish” his sales manager job;
• the employee would be paid hourly, based on 28 to 40 hours per week (but there was no minimum number of hours), and
• the employer could terminate him without cause by paying him the ESA minimum notice period.

Sensibly, the employee did not accept this offer. It would have involved resigning from his full-time employment, eliminating his entitlement to a common law notice period based on his 28 years of service.

Court decided that plaintiff was wrongfully dismissed

Justice Centa noted that the plaintiff did not have a written employment contract and was entitled to reasonable notice under the common law. His Honour decided that the employer’s severance package of 40 weeks was less than his common law entitlement and settled on a reasonable notice period of 24 months. 

Plaintiff awarded $55,000 in moral and punitive damages

In addition, Justice Centa decided that the employer’s conduct warranted an award of both moral and punitive damages.

Moral damages are available for untruthful, misleading or unduly insensitive conduct

His Honour explained that moral or aggravated damages are available:

“where the employer engages in a breach of the duty of good faith and fair dealing at the time of termination. An employer can breach this duty, for example, by being untruthful, misleading, or unduly insensitive.”

These damages are designed to compensate employees for distress beyond a dismissal’s normal suffering. Medical evidence showing mental distress is not required. 

HBC made several errors warranting an award of moral damages

Justice Centa awarded the plaintiff $45,000 in moral damages. 

Firstly, his Honour considered that marching the plaintiff out the door was unduly insensitive, given that he had committed no misconduct. Secondly, offering the sales associate job was misleading and designed to extinguish the plaintiff’s rights. He was offered “nothing of substance” in exchange for losing his right to a lengthy period of common law notice. The court criticized the employer for trying to take advantage of the plaintiff while he was at his most vulnerable. 

Moral damages were also warranted because the employer did not initially pay the ESA entitlements as a lump sum. Under section 11(5) of the ESA, the employer must pay wages, termination and severance pay required under the ESA no later than seven days after the employment ends and the day that would have been the employee’s next payday. The court criticized the employer for failing to comply with the ESA and waiting until the plaintiff’s lawyer demanded payment.

Punitive damages awarded for failure to comply with the ESA

In addition, Justice Centa awarded the plaintiff $10,000 in punitive damages. These are awarded in exceptional cases to “punish misconduct that represents a marked departure from ordinary standards of reasonable behaviour.” The defendant’s failure to pay the plaintiff his ESA entitlements on time and failure to issue an accurate record of employment in the timeframe required by the Employment Insurance Regulations justified this award.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

This case shows how important it is for employers to manage the termination process to avoid insensitive conduct. It is also crucial to avoid being untruthful or misleading and to strictly comply with all requirements under the ESA. For advice on how to undertake this process, or respond to a claim brought by an employee for wrongful termination, contact the Haynes Law Firm. We will work with you to manage the risk and reduce your liability.Alternatively, Paulette Haynes will preserve your legal rights if you are an employee who has not been given your ESA pay or received an offer designed to strip you of your entitlements. Please contact the Haynes Law Firmonline or call us at 416.593.2731.

As we have written previously, employees have a duty to mitigate their losses. This means making reasonable efforts to obtain comparable alternate employment after being terminated. Failure to do this may result in reduced damages in a claim against the employer for wrongful or constructive dismissal. 

It can be difficult for an employer to prove that the employee still needs to mitigate losses. The recent decision of the Court of Appeal for Ontario in Lake v La Presse shows us why.

Employer needs to show the employee failed to take reasonable steps to mitigate and therefore did not secure a comparable position

The onus is on the employer to establish that the employee has failed to mitigate reasonably. This has been described as “by no means a light one.” The employer must prove the following two things. 

Employee failed to take reasonable steps to mitigate damages

Firstly, the employer must show that the employee did not make reasonable efforts to obtain comparable alternate employment. The employee needs to search and apply for comparable positions. Waiting too long to start the job search after being terminated and only applying for positions above their previous role is likely to count against the employee.

However, the employee need only accept a position comparable to their former employment. This means a comparable position reasonably adapted to the employee’s abilities. Courts have assessed comparable positions by comparing a range of factors, including geographical location, nature of the work and compensation. 

Employee would have been expected to obtain a comparable position if they made reasonable efforts

The second step requires the employer to show that, if reasonable steps had been taken, the employee would likely have found a comparable position during the reasonable notice period. This is necessary because a breach of the employee’s duty is only relevant if it contributes to their loss.

The employer may show that specific comparable positions were available at the time. It is also possible to meet this step’s requirements by inference from proven facts. For example, if the employee delayed the start of their job search and then found a comparable position quickly, the employee’s notice period may be reduced. 

Employee had two months’ damages deducted for failure to mitigate

Turning to the recent decision of the Court of Appeal, the plaintiff was employed by an online French-language newspaper as general manager. She was the most senior employee in Toronto and reported to a vice president in Montreal. She managed a sales team that generated advertising revenue. 

The plaintiff was dismissed after the employer decided to close the Toronto office. She brought a wrongful dismissal action and was awarded damages equivalent to an eight-month notice period, less than two months for failure to mitigate. The employee appealed, arguing that the damages should not have been reduced for failure to mitigate. 

Did the employee take reasonable steps to mitigate her damages?

The motion judge decided that the steps taken by the employee were not reasonable in the following three ways.

Employee waited too long before starting job search

The employee was notified in March 2019 that her employment would end on May 30. She stopped working on April 30. The motion judge concluded that the plaintiff did little to look for work until June and that this constituted waiting too long. The Court of Appeal agreed.

Employee did not need to apply to lower-paying positions after a period

The motion judge decided that after a reasonable period of trying to find similar employment, an employee needs to start searching for a lower-paying job. The judge found that the plaintiff should have applied for sales representative roles.

The Court of Appeal disagreed, saying: 

“The obligation of a terminated employee in mitigation is to seek “comparable employment”, which typically is employment that is comparable in status, hours and remuneration to the position held at the time of dismissal … There was no obligation for the [plaintiff], to seek out less remunerative work, including by working as a sales representative.”

Employee did not “aim too high” by applying for senior roles

The motion judge found that the plaintiff aimed too high by applying for vice-president positions. The Court of Appeal disagreed again, finding that the plaintiff searched regularly and did not limit herself to positions that would have been a promotion over her prior position. She applied for 20 suitable positions that matched her work experience and qualifications. The plaintiff took reasonable steps to mitigate her damages in the circumstances.

Would she have found comparable employment if the employee had taken reasonable steps?

Turning to the second step, the motion judge inferred that had the plaintiff expanded her job search and applied for more positions, her chances would have improved. It was reasonable to assume that comparable positions existed.

The Court of Appeal disagreed with the motion judge again. While it is possible to draw a reasonable inference from proven facts, in this case, there was no evidence to support an inference that, if the plaintiff applied for other positions, she would have found comparable employment. Furthermore, the inference drawn by the motion judge did not satisfy the test – the existence of positions does not mean that the plaintiff would have obtained one during the notice period.  

Due to these errors, the Court of Appeal granted the plaintiff eight months’ notice, with no deduction for failure to mitigate.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination and the Duty to Mitigate

The duty to mitigate is a complex area of law and difficult for employers to prove. It is important for both employers and employees to seek advice from an experienced employment lawyer when either defending or bringing a claim after being terminated. Haynes Law Firm helps achieve effective solutions to legal issues and conflict management in employment law and civil litigation. Please contact us online or call us at 416.593.2731.

Common law notice periods are based on factors including the employee’s length of service. This raises the question about the appropriate length of notice period for an employee where there has been an interruption in the period of employment due to the sale of the business. 

This article looks at how courts calculate notice periods for employees that have stayed with the business after it has been sold. We also look at a recent decision of the Court of Appeal for Ontario in which a terminated employee brought a wrongful dismissal claim after being re-hired by the company after it was sold in the context of creditor protection proceedings.

Under the ESA, the period of employment continues when the business is sold

Under section 9(1) of the Employment Standards Act 2000 (ESA), if an employer sells a business and the purchaser continues to employ an employee of the seller, “the employee shall be deemed not to have been terminated or severed for this Act, and his or her employment with the seller shall be deemed to have been employed with the purchaser for any subsequent calculation of the employee’s length or period of employment.”

This means that when employers calculate the statutory minimum notice period for employees terminated after a business sale, employees are deemed to have an uninterrupted period of service. Under the ESA, the required notice period is longer for employees with longer lengths of service.

Under the common law, employees are terminated when the business is sold

As we have mentioned previously, notice periods under the common law may be more generous than the statutory minimum notice period under the ESA.

Courts determine the period of reasonable notice by considering the unique circumstances of each case and focus on the four factors laid down in Bardal v The Globe & Mail Ltd (Bardal) – the character of the employment, the length of service, the age of the employee and the availability of similar employment. 

When considering the service length factor in a business sale, the common law is different from the ESA. According to the case law, when the employer sells the business and there is a change in the employer’s identity, the employees are deemed to be terminated by constructive dismissal. This is because a contract of personal services cannot be assigned to a new employer without the parties consent. If the employee accepts employment by the new owner, a new employment contract is entered into.

Experience of a long-standing employee is a relevant factor

This might suggest that the common law results in shorter notice periods for employees after the sale of a business due to a shorter period of service. 

However, this isn’t always the case. Ontario courts have held that an employee’s prior years of employment can be taken into account in determining the notice period upon a subsequent termination. This is because the experience a long-serving employee brings to a new owner is relevant when applying the Bardal factors. The purchaser may benefit by not having to hire new employees and train them to become familiar with the work.

Employee was rehired in the context of creditor protection proceedings

These principles were explored in the recent case of Antchipalovskaia v Guestlogix Inc. 

The employee started working for a technology company that helped airlines provide digital concierge services to passengers in 2011. In 2016, in the context of creditor protection proceedings under the Companies’ Creditors Arrangement Act:

• a group of investors agreed to purchase the company’s shares;
• the Superior Court approved a plan settling and releasing claims against the company;
• the company terminated the employee’s employment;
• the employee made a claim for termination and severance pay under the ESA, which was accepted in the creditor protection proceedings; and
• the employee accepted a new offer of employment with the company and signed a new contract which set the start date for all employment-related matters.

In 2019, the employee was terminated without cause and commenced proceedings for wrongful dismissal. 

Court of Appeal emphasized need to consider effects of the termination and release

The Court of Appeal noted that the Superior Court had made an order that released all claims against the company up to the plan implementation date, including claims made by the employees. 

Under the common law, the employee’s employment had been interrupted by the share sale. Despite the fact that the identity of the employer did not change because the sale of the business was achieved through a share purchase agreement, the company terminated the employee and then re-hired her. 

The Court of Appeal held that the termination and release by the Superior Court were relevant in determining the employee’s length of employment and notice period.

Employee entitled to common law notice period of seven months

Nonetheless, the Court of Appeal decided that a notice period of seven months was appropriate in the circumstances of the case to balance the benefit received by the employer with the fact the employee was re-hired and received a payout in the context of the creditor protection proceedings. 

The Court concluded:

“This notice period is longer than the notice period the [employee] would have been entitled to if she had first started her employment with the [company] in 2016, thereby accounting for the benefit the [company] received from her previous period of employment. At the same time, however, this notice period recognizes and gives effect to the intent of the court ordered release in the [creditor protection] proceedings, which was to release the [company] from liabilities arising prior to the implementation of the Plan.”

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal, so they have the resources they need while they seek new employment. We also help employers manage employee terminations, including in the context of business sales, to limit their exposure to legal claims. Please contact us online or call us at 416.593.2731.

We have previously written about Ontario courts striking down termination provisions of employment agreements that attempt to remove an employee’s entitlement to receive common law notice in the event of termination without cause, where the agreement also contains a for-cause termination provision that breaches the Employment Standards Act 2000 (ESA).

This article recaps this trend and looks at a recent Ontario Superior Court of Justice decision in which an employee argued that she was entitled to common law notice after being terminated without cause because of the conflict of interest and confidential information clauses in her agreement that violated the ESA. 

The case shows that courts may also be prepared to disregard without cause termination provisions where other clauses in the contract permit the employer to terminate the employee without notice or compensation in lieu of notice in circumstances not permitted by the ESA.

Courts have decided that termination provisions are unenforceable where the just cause termination provision violates the ESA

There has been a string of wrongful dismissal claims by employees arguing that provisions in employment agreements stating that if the employee is terminated without cause, the employer will only pay the minimum notice period required under the ESA and nothing else such as common law notice, are unenforceable. Ontario courts have been sympathetic to such claims in some circumstances.

Courts have held that:

• broad termination for just cause provisions that remove entitlement to any notice are void for violating the ESA because the Termination and Severance of Employment Regulation states that statutory notice must be provided except in certain listed circumstances, such as where the employee “has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer”; and
• termination provisions in employment agreements need to be read as a whole, so that if the just cause termination provision is void, the without cause provision is also unenforceable. This is the case even if the without cause provision provides for the payment of statutory notice in accordance with the ESA.

This has meant that some employees have not been limited to the minimum ESA notice periods and have been able to claim lengthier common law notice periods from the court. 

Oral surgeons issued written employment agreements as they approached retirement

In Henderson v Slavkin, the plaintiff employee worked as a receptionist in the oral surgery dental offices of the defendant employers in Bolton, Ontario. She had worked there since 1990 without a written employment agreement.

In 2015, the defendants started to make retirement plans and sought to implement employment agreements so that the employees could know what to expect. In exchange for a $500 payment, the plaintiff signed an agreement that included a clause permitting termination without cause upon provision of the minimum notice required under the ESA.

In November 2019, the defendants told all employees of their impending retirements and that all staff would be terminated on April 30, 2020. The plaintiff continued to work for the defendants during this time but later brought a claim for wrongful dismissal seeking common law notice.

Employee argued conflict of interest and confidential information clauses invalidated termination provisions

The plaintiff argued that two clauses of her employment agreement were not in compliance with the ESA, which invalidated the agreement.

Conflict of interest clause was invalid

The employment agreement required the plaintiff to ensure that her personal interests did not conflict with the employer’s interests. It included a non-exhaustive list of examples of conflicts of interest. It said that “a failure to comply with this clause above constitutes both a breach of this agreement and cause for termination without notice or compensation in lieu of notice.” 

Justice Brown agreed with the plaintiff that breaching the clause would not necessarily amount to wilful misconduct or wilful neglect of duty. Some of the examples in the clause were broad, unspecific and ambiguous. As a result, her Honour decided that the clause was invalid and must be set aside. 

Confidential information clause also set aside

The plaintiff also agreed not to use, disclose or copy any confidential information relating to the business, except as required by law or for the performance of job duties. The agreement specified the same consequence for breach, which is terminated without notice or compensation in lieu.

Justice Brown found that it was not clear in what circumstances the disclosure of confidential information may occur without immediate termination for cause without notice. Given that there may be situations in which confidential information could be inadvertently disclosed where it was not wilful, the clause did not respect the ESA and was also invalid.

Court awarded common law damages, reduced for failure to mitigate

Justice Brown found that the plaintiff was wrongfully dismissed. The conflict of interest and confidential information clauses were not in compliance with the ESA “and therefore invalidated the employment contract.”

The plaintiff was therefore entitled to common law notice, and the parties agreed on an applicable notice period of 18 months. Her Honour reduced this by three months, finding that it took the plaintiff 12 months to start looking for work. A small deduction for the length of time it took her to mitigate was warranted in light of the pandemic, the plaintiff’s age and her move to a smaller centre.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination and Employment Contracts

As this decision shows, it is really important for employers to ensure that their employment agreements are up-to-date and correctly limit entitlement to common law notice. Terminated employees also need advice as they might be entitled to more than it appears on the face of their contracts. Haynes Law Firm can help. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal so they have the resources they need while they seek new employment. We also help employers manage employee terminations to limit their exposure to legal claims. Please contact us online or call us at 416.593.2731.

Some employment contracts provide for the possibility of discretionary bonuses in addition to the base salary. While there is no guarantee that such a bonus will be paid each year, employers are under certain constraints when issuing bonuses.

This article takes a looks at the limits imposed on the discretion of employers in the granting of discretionary bonuses. We also look at a recent decision of the Court of Appeal for Ontario in which two employees terminated without cause challenged their employer’s decision to refuse to pay a bonus for the year of their termination. 

The payment of a bonus upon termination

Employees who earn non-salary compensation, such as bonuses, are entitled to receive this compensation within reasonable notice unless their contract specifies otherwise.

The employer may present the employee with a termination package after informing them of their termination. This may cover the minimum statutory requirements while overlooking other matters, such as non-salary compensation. Before accepting a termination package that attempts to limit or remove entitlement to non-salary compensation, it is essential to review the package and the employment contract with an experienced employment lawyer.

Employers are not entirely unconstrained when deciding on discretionary bonuses

Where an employment contract provides a discretionary bonus, there is an implied term that the discretion will be exercised fairly and reasonably. 

In other words, just because a bonus is awarded at the sole discretion of an employer does not mean that it can be done arbitrarily or unfairly or that the employer can decide that an employee should not get a bonus without following a fair, identifiable process. While the employer may adjust the weight given to various factors, given the market conditions and other changeable criteria, that does not obviate the requirement that the exercise must be done in a fair manner. 

Employees went with the sale of a hedge fund and worked for the new owner

In Bowen v JC Clark Ltd., the two plaintiff employees managed a hedge fund that the employer acquired in December 2012. They were hired in 2003 by the creator of the fund, who later sold it to the employer.

The fund’s creator also joined the employer. as part of the sale. He signed an agreement that gave him a 40 per cent share of the management fees and 40 per cent share of the performance fees earned by the fund for four years after the sale. The agreement also required the employer to employ the two plaintiffs on a base salary along with “the potential (but not a guarantee) of [the employees] to be part of a discretionary bonus pool established by [the employer]” and such portions of the fees paid to the creator as determined by him.

The two plaintiffs entered employment agreements on these terms. They agreed in side agreements with the creator that he would pay them 50% of his management fees and 100% of his performance fees.

They were terminated without cause and claimed performance fees and bonus

In December 2013, each plaintiff received a discretionary bonus of $15,000 from the employer and performance fees of $24,000 from the fund’s creator.

In the first half of 2014, the fund performed exceptionally well. However, after a breakdown in the relationship, the employer terminated the plaintiffs without cause in July 2014. The plaintiffs received two weeks’ salary and a “2-week pro-rata bonus” of $577 from the employer and $358,000 each from the creator, representing his 40 per cent share of the 2014 performance fees.

The plaintiffs sued the employer for performance fees and bonuses for the portion of 2014 that they worked before their termination. 

Court found no entitlement to performance fees

The Court of Appeal decided that the plaintiffs were not entitled to performance fees as an implied term of their employment contracts beyond the share already provided for in the side agreements with the fund’s creator. 

In the circumstances known to the parties at the time, a plain reading of the employment contracts signed by the plaintiffs revealed that the employer did not owe the performance fees. The plaintiffs were only entitled to be paid performance fees through the creator.

However, the employees were entitled to discretionary bonuses

The Court of Appeal explained that the issue was whether a fair and reasonable exercise of the discretion in the employment agreements would result in the plaintiffs being awarded a discretionary bonus for the period they worked in 2014 plus the two-week notice period.

The Court decided that giving no discretionary bonus for the period from January to July 2014 and $577 for the two-week notice period was not a fair and reasonable exercise of the employer’s discretion in all of the circumstances.

The evidence showed a significant bonus pool in 2014, with bonuses awarded based on corporate and individual performance and “jaw-dropping” returns on the plaintiffs’ fund. The Court agreed with the plaintiffs that a fair and reasonable exercise of the discretion would see their bonuses based on the amounts paid to two similarly situated portfolio managers employed by the employer, pro-rated for the seven months that they worked in 2014, including the two-week notice period. 

As a result, the Court of Appeal awarded damages to each plaintiff of $115,000 for the discretionary bonus to which each was entitled. 

Contact Haynes Law Firm in Toronto for Guidance on Termination and Termination Packages

At Haynes Law Firm, we work with employees to ensure they receive maximum compensation upon termination. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal so they have the resources they need while they seek new employment. Haynes Law Firm also works with employers across the country to limit their exposure to legal claims stemming from poorly executed terminations. To discuss how our employment law team can assist you, please contact us online or by phone at 416.593.2731.

Employers are entitled to terminate employees at any time, however, if they fail to provide sufficient notice or pay in lieu of notice, according to law, the employee may bring a claim for wrongful dismissal.

However, if the employer fires an employee but rehires them later the same day, was the employee actually terminated? This article examines the recent decision of the Ontario Superior Court of Justice in Amerato v TSF-CF Solutions LP, in which an employee sought compensation after being terminated and then rehired at a lower salary.

Employee was terminated and offered a job change

In 2005, the plaintiff was hired as a customer service representative. She was later promoted to customer service supervisor. In May 2020, her employer merged with another company and continued operations. 

In June 2020, the plaintiff went on short-term disability leave. In December 2020, she transitioned to long-term disability leave and received monthly benefits. In January 2021, the plaintiff was told that her employment was terminated. Her employer confirmed this in a letter. At the same time, it gave her another letter in which she was offered a job change to a senior customer service representative at a reduced salary.

The employer said that because of the merger and challenges related to the COVID-19 pandemic, the company had to undergo significant changes, including the elimination of one of the two existing customer service supervisor positions.

Employee accepted new position and commenced wrongful dismissal proceedings

The plaintiff’s lawyer wrote to her employer, taking the position that she had been wrongfully terminated but that she agreed to mitigate her damages by working in the new position. The lawyer noted that the plaintiff did not accept that the new position or lower salary was appropriate to compensate for her loss.

The plaintiff subsequently commenced proceedings against her employer. She continued working at the company for four hours a day, three days a week. She receives a top-up from her long-term disability insurer.

Court found employee was terminated from her employment

The employer argued that the plaintiff was not terminated. It claimed that she was given two options, being terminated or accepting a job change and choosing the latter.

Justice Chalmers disagreed. His Honour found that the termination letter was unequivocal and confirmed the discussion that took place earlier. It did not refer to the letter offering the new position. The letters did not state that the options were mutually exclusive or that the termination was cancelled if the plaintiff accepted the new position. 

His Honour found that the correspondence was consistent with termination and that a new position was offered to allow her to mitigate her damages for wrongful dismissal. As a result, the plaintiff was terminated from her employment.

It was of little consequence anyway, with Justice Chalmers explaining that had he not found that the plaintiff was terminated, he would have found that she had been constructively dismissed. The plaintiff had been demoted from her previous position as a supervisor and paid a lower salary.

Employee entitled to 18-month notice period

Justice Chalmers applied the Bardal factors to determine the amount of common law notice to which the employee was entitled.

His Honour decided on a lengthy notice period of 18 months, explaining that the plaintiff:

was employed at TST for over 16 years. Her position at the time of her termination was Customer Service Supervisor. She was 52 years of age and disabled.  The availability of similar employment was limited because of [the plaintiff’s] age and disability. I also take judicial notice of the fact that her ability to obtain alternative employment may have been adversely affected by the restrictions in the economy imposed as a result of the COVID-19 pandemic.

Damages not reduced by amount of disability benefits

The employer argued that the plaintiff was receiving disability benefits, so the court should decline to award any damages for reasonable notice. It said that the total income she received in employment and benefits did not change the following termination, so if she was awarded damages, she would receive a windfall.

Justice Chalmers again disagreed with the employer. His Honour said it would not be fair to pay damages on the incomeless disability benefits she received at the time of termination. If her disability ended shortly after termination, she would not receive the appropriate amount. His Honour also opined that “if the employer is not responsible for payment of the terminated employee’s salary, employers may be encouraged to terminate the employment of disabled employees”.

Finally, his Honour observed that the plaintiff had paid at least a portion of the premiums for her disability coverage. As a result, his Honour decided that the employer was not entitled to a deduction of the long-term disability benefits received by the plaintiff during the notice period.

However, employer entitled to credit for income earned post-termination

The plaintiff accepted the demotion and worked as many hours as she could, which was sufficient to meet the duty to mitigate her wrongful dismissal damages. Justice Chalmers held that the employer was entitled to credit for her income during the notice period.

As a result, the plaintiff was entitled to damages in 18 months of her pre-termination salary, less the amount earned through her employment during this notice period.

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal or seeking compensation through a wrongful dismissal action so they have the resources they need while they seek new employment. We also help employers manage employee terminations to limit their exposure to legal claims. Please contact us online or call us at 416.593.2731.

An employment law claim may result from several causes, such as alleged discrimination or wrongful dismissal. Claims may be resolved through litigation in the court system or dispute settlement in an administrative tribunal like the Human Rights Tribunal of Ontario.

Regardless of the forum, in certain circumstances, additional damages beyond those necessary for compensation (for example, damages in lieu of a reasonable notice period or for lost wages) might be awarded. This article takes a non-exhaustive look at some types of additional damages that may be available in employment law claims.

Additional damages in employment law court litigation

This section briefly describes aggravated damages for bad faith dismissals and punitive damages for reprehensible conduct.

Bad faith in the manner of dismissal of an employee

Employers have an obligation of good faith in the manner of dismissal of an employee. An employer cannot engage in conduct that is “unfair or is in bad faith by being…untruthful, misleading or unduly insensitive”. If an employee successfully argues in a wrongful dismissal action that the employer has engaged in such conduct, the court may award the employee extra damages, referred to as moral, exemplary or aggravated damages.

In the recent decision of the Court of Appeal for Ontario in Humphrey v Mene Inc., a wrongfully dismissed employee sought aggravated damages for mental distress. The Court awarded aggravated damages in the amount of $50,000 after finding that her termination was precipitated by a request for a salary increase and that the employer did not act with good faith in alleging that it had just cause for termination. It also found that the employer subjected her to a toxic work environment and communicated with other employees and clients about her termination before they spoke to her.

Punitive damages for reprehensible conduct

Parties to litigation can also be awarded punitive damages to punish the other party for reprehensible conduct and a “marked departure from ordinary standards of decent behaviour.” These may be awarded when required to punish a defendant for meeting the objectives of retribution, deterrence and denunciation.

The employee in Humphrey v Mene Inc. was also awarded $25,000 in punitive damages. The Court found that the employer’s litigation conduct warranted an award of punitive damages. Specifically, it “dredged the waters looking for anything” to make the employee look bad and was either untruthful when it claimed it had material to support a just cause termination, or it failed to preserve the documents in circumstances where the plaintiff’s lawyer explicitly asked it to do so. There were also inappropriate and irrelevant references to the employee’s personal life in the employer’s evidence.

Damages awarded by administrative tribunals

Administrative tribunals are empowered by statute to order certain remedies. These may include damages beyond, for example, compensation for lost wages. In this section, we briefly look at some damages that may be awarded by tribunals in the context of an employment-related discrimination claim. 

Damages for injury to dignity, feelings and self-respect or pain and suffering

Under the Ontario Human Rights Code, the Human Rights Tribunal of Ontario is able to direct a party that infringed a right to compensate the other party for loss arising out of the infringement, including compensation for injury to dignity, feelings and self-respect. 

When awarding damages, the Tribunal considers humiliation, hurt feelings; the loss of self-respect, dignity and confidence by the complainant; the experience of victimization; the vulnerability of the complainant and the seriousness ofthe offensive treatment. 

For claims by federally regulated employees before the Canadian Human Rights Tribunal, the Canadian Human Rights Act allows the Tribunal to compensate the victim for any pain and suffering experienced as a result of the discriminatory practice. This can be up to $20,000.

As we mentioned in a recent article, in the case of Luckman v Bell Canada, the Tribunal awarded the victim $15,000 in compensation for pain and suffering. It noted that Bell’s conduct in terminating an employee who was recovering from cancer surgery in circumstances where it made no inquiries as to whether his disability continued to affect his ability to work was a serious transgression of the Act. The complainant was forced to endure the humiliation of being fired and being forced to find a new job on top of all his problems.

Special damages for wilful or reckless conduct

In addition, the Canadian Human Rights Tribunal is able to award special damages if the defendant has engaged in the discriminatory practice wilfully or recklessly. This can also be up to $20,000.

These special damages are punitive and intended to provide a deterrent and discourage those who deliberately discriminate. A finding of wilfulness requires an intention to discriminate and to infringe a person’s rights, whereas recklessness usually denotes acts that disregard or show indifference to the consequences, such that the conduct is done wantonly or needlessly. 

Again, in Luckman v Bell Canada, the Tribunal awarded the complainant $15,000 for Bell’s reckless conduct. While the employer did not intend to discriminate, Bell was reckless in not considering whether firing an employee recovering from cancer surgery might be discriminatory and “single-minded” in pursuing sales. 

Contact Haynes Law Firm in Toronto for Highly Skilled Employment Litigation Representation

Whether in the courtroom or the boardroom, Haynes Law Firm in Toronto provides confident and adept advocacy, representing clients on either side of the employment line. The firm’s founder, Paulette Haynes, is highly regarded as an elite litigator and has earned a reputation for delivering remarkable results. Paulette is exceptionally knowledgeable, tactically astute, and inspires confidence in her clients. At Haynes Law Firm, Paulette has built a team that echoes her intense resolve and unrelenting determination to achieve successful results for every client in every case.

To discuss how the employment law team at Haynes Law Firm can assist you in your litigation matter, please reach out online or by phone at 416.593.2731.

While an employer is entitled to terminate an employee at any time without cause, the employee may bring a wrongful dismissal action if the employer does not provide sufficient notice or pay in lieu of notice, as required by law. 

However, employees have a duty to make reasonable efforts to obtain comparable alternate employment, known as the duty to mitigate. This is based on a rule in breach of contract cases that a wronged plaintiff is entitled to be put in as good a position as they would have been in if there had been proper performance by the defendant but cannot obtain avoidable losses. 

This article looks at five basic things that employees and employers should know about the employee’s duty to mitigate following a without cause termination. You should consult with an experienced employment lawyer for advice on your specific circumstances.

1. When does the duty to mitigate apply? 

The duty to mitigate applies when an employee seeks compensation for wrongful dismissal through the courts, for example, reasonable notice under the common law. If an employee is constructively dismissed, they are also subject to the duty to mitigate.

Rights provided under the Employment Standards Act 2000, such as the statutory minimum notice period, are not subject to the duty to mitigate. 

2. How might employment contracts affect the duty to mitigate?

If an employment contract contains a termination clause that specifies a fixed notice period in the event of termination without cause but is silent with respect to a duty to mitigate, the Court of Appeal for Ontario has held that there is no obligation on the employee to mitigate their damages. 

Similarly, if the employment contract is for a fixed-term and does not include a provision for early termination without cause, the employee may be entitled to the wages they would have received until the end of the term of the contract and have no obligation to mitigate. 

3. What does the employee need to do to comply with the duty to mitigate?

Where the duty to mitigate applies, employees have a duty to make reasonable efforts to obtain comparable alternate employment. This has been described as involving a “constant and assiduous application for alternate employment and exploration of what is available through all means.” Employees are required to search for and accept reasonably comparable employment. 

When does the job search need to start?

It is up to the court to decide what is reasonable in the circumstances. Courts have held that it is not reasonable to assume that the day after an employee has gone through the trauma of being fired that he or she must immediately seek alternate employment and that it is appropriate to give the employee a period of adjustment and recovery. 

What kind of position does the employee need to accept?

The employee does not need to accept any available position, only those that are comparable to their former employment. Comparable employment does not mean identical employment but a comparable position reasonably adapted to the employee’s abilities.

Courts have assessed comparable positions by comparing a range of factors, such as geographical location, nature of the work and compensation. 

Does the employee need to accept a position with their former employer?

In cases of constructive dismissal, it is possible that employees may be required to mitigate their damages by returning to work for the dismissing employer if the employer offers the employee a chance to return to work. 

The central issue is whether a reasonable person would accept the opportunity to return to work. Courts have said that a reasonable person should be expected to do so where the salary offered is the same, where the working conditions are not substantially different or the work demeaning, and where the personal relationships involved are not acrimonious. However, the employee is not obliged to mitigate their damages by working in “an atmosphere of hostility, embarrassment or humiliation”.

4. Who bears the burden of proof in relation to the duty to mitigate?

The onus is on the employer to establish a failure on the part of the employee to make reasonable efforts to mitigate. This has been described as “by no means a light one”, with the courts requiring an employer to prove that the employee did not take reasonable steps to find a comparable position and would likely have found a comparable position if they had done so.

Dismissed employees often keep a journal or record of their job search efforts, which can be useful in rebutting an employer’s claim that they have not taken reasonable steps to mitigate. 

5. What are the implications of complying or failing to comply with the duty to mitigate?

The court will deduct from the employee’s damages any actual earnings during the period of reasonable notice. In other words, the court will determine the employee’s reasonable notice period and reduce the compensation by the amount of employment income earned by the employee during that period.

If an employee does not make reasonable efforts to mitigate, the court will reduce the notice period awarded to the employee, thereby reducing their amount of damages. If the court determines that the employee was offered a comparable position that they did not accept, the court may end the notice period at the point that the employee was offered the comparable position. 

Contact Haynes Law Firm in Toronto for Guidance on Employee Termination and the Duty to Mitigate

Haynes Law Firm helps employers and employees throughout Ontario achieve effective solutions to legal issues and conflict management in employment law and civil litigation. We ensure our employee clients leave nothing on the table when negotiating the terms of their dismissal so they have the resources they need while they seek new employment. We also help employers manage employee terminations to limit their exposure to legal claims. Please contact us online or call us at 416.593.2731.