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.