Breakfast for Business

Breakfast for BusinessA Practical Guide for Employee Terminations

Dan CondonChristine AshtonCarole McAfee Wallace

March 6, 2013

Introduction: Employee Terminations

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• Employee terminations can be very costly for an employer

• It is important that employers are fully aware of the potential liabilities prior to terminating an employee

• In addition, it is important that employers take steps to minimize the cost of employee terminations

Just Cause and Without Cause

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Generally, employer can terminate an employee without cause provided that:reason for termination is not based on a prohibited ground

under applicable human rights legislation (such as age, gender, disability)

the termination does not breach a statute (i.e. job protected leave); and

the employee is given reasonable notice of termination

ExceptionsEmployer can terminate employee immediately, and

without notice, for cause cause exists when the employee has engaged in serious

misconduct that is incompatible with the fundamental terms of the employment relationship


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What Constitutes Just CauseContextual Approach To Assessing the

Misconduct Was there misconduct? Nature and

extent Evaluate the surrounding circumstances Is dismissal without notice the

proportional response?


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Recent Ontario Cases – No CausePlester v. PolyOne Canada Inc., January 11,

2013Ontario Court of Appeal

Barton v. Rona Ontario Inc., August 3, 2012Ontario Superior Court of Justice


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Recent Ontario Cases – CauseDziecielski v. Lighting Dimensions Inc.,

March 19, 2012Ontario Court of Justice

Bennett v. Cunningham, August 17, 2012Ontario Court of Appeal


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Just Cause v. Wilful MisconductJust cause – common law concept which

relieves employer from providing reasonable notice or pay in lieu thereof

Employment Standards Act, 2000, Reg. 288/01, S.5. 2(1) provides that an employee is not entitled to statutory notice (or severance) where 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”


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Just Cause v. Wilful MisconductTwo concepts are not identicalGenerally more difficult to prove wilful

misconductSee Oosterbosch v. FAG Aerospace Inc.,

March 14, 2011, Ontario Superior Court of Justice found dismissal for cause, but the employee’s conduct did not amount to wilful misconduct under the ESA

The Termination Package

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When preparing a termination package an employer must first consider whether the employee’s entitlements are limited to the minimum provisions contained in the Employment Standards Act or whether the employee is also entitled to notice of termination at common law


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Notice Of Termination At Common LawThe general purpose of notice at common

law is to put the employee in the position they would have been but for the termination of employment

While this, of course, includes base salary, it most times will also include other items


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Variable CompensationDepending on the type of variable

compensation provided and how it has been structured by the employer, this may need to be recognized through the notice period


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Variable CompensationCommon types of variable compensation

include:CommissionsBonusesProfit Sharing Plans


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CommissionsCommissions generally need to be recognizedCommissions are considered wagesOften, an employer will have to consider

commissions which may have been earned but not payable up to the time of termination, as well as the amount to be included in the notice payment

Commissions through notice periods are generally based on historical averages


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Bonuses/Profit Sharing PlansWhether these kinds of variable

compensation must be recognized through the notice period will very much depend on how the employer has structured the plans

Also, the larger the percentage of the overall compensation which is comprised by a bonus or profit sharing plan, the more likely a Court will be to hold these must be included through the notice period


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Payment of Notice at Common LawIf a notice period exceeds approximately

two months, the general practice is to provide pay in lieu of notice by way of salary continuance

This is due to the possible impact of mitigation

If providing pay in lieu of notice in a lump sum, an employer should consider the discounting of the notice period


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Clawback PaymentsWhen providing pay in lieu of notice by way of

salary continuance, an employer should also consider whether to offer a clawback payment

A clawback provision can encourage an employee to obtain alternate employment more quickly

It can lead to a situation where the terminated employee receives more pay in lieu of notice than would be the case if they litigated while, at the same time, the employer’s notice payment is less than it would otherwise have been


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Benefits/Vacation PayIf an employer provides its employees with

benefits, these also are required to be recognized through the common law notice period

Medical/Dental vs. Life Insurance and Disability benefits

It is important to advise terminated employees of any conversion rights they have with respect to benefits

It is also important to address any accrued and unused vacation pay which may be owing to the employee at the time of termination


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Post Employment RestrictionsIf a terminated employee is subject to non-

solicitation or non-competition covenants, it is important to make reference to these in the termination materials

If an employee is not subject to any restrictive covenants in some instances it may be appropriate to attempt to obtain these as part of the negotiated settlement


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Miscellaneous MattersIn the termination materials, the employer

should also address matters including return of Company property, payment of outstanding expenses, provision of a letter of reference

Employers can also consider whether it is appropriate to offer outplacement counselling as a term of the package

The Release

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If a terminated employee is being offered notice of termination in excess of what they are entitled to under the Employment Standards Act the provision of any additional amounts should be made contingent upon the employee executing a Full and Final Release in favour of the employer

It should be a comprehensive Release which addresses not only notice of termination under the Employment Standards Act and common law but also benefits and any potential claims under other legislation including the Human Rights Code

The Release

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Employers must be mindful, however, that if a negotiated settlement is not obtained, the terminated employee must still be provided with their entitlements pursuant to the Employment Standards Act

No Settlement

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On occasion, and for a variety of reasons, the termination package presented by the employer is not accepted and a settlement cannot be reached

In such instances, the employee will be at liberty to pursue the matter further by way of an action, MOL claim, and/or a Human Rights application

No Settlement

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Where no settlement has been reached, the employer still has certain obligations which it must satisfy

If it fails to satisfy these obligations, the employer can be exposed to more significantly liability

No Settlement: ESA Entitlements

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Employees whose employment is terminated on a without just cause basis must be given their ESA entitlements on termination

These are: Termination pay Severance pay (only applicable in certain

situations) Benefits continuation during the termination

pay period; and Vacation pay on the termination pay


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If an employee’s employment is terminated on a just cause basis at common law, but is not terminated on a just cause basis under the ESA, then the employee must be given their ESA entitlements on termination

In order to have just cause under the ESA, the employee must be guilty of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial”

No Settlement: Benefits

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The ESA provides that during the termination pay period the employer must continue to make whatever benefit plan contributions are required to maintain the employee's benefits until the end of the notice period

This applies even if employment is terminated effective immediately and the employer pays termination pay instead of continuing the employment

No Settlement: Benefits

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If the employer fails to continue the benefits during the termination pay period, the employer can be held liable for any damages which flow from this


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If an employer fails to provide an employee with their entitlements under the ESA upon termination, the employee is entitled to additional damages

No Settlement: Reference Letter

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If no settlement is reached, the employer should still offer to provide, and should provide where requested, a letter of reference (where no cause is alleged) or a letter confirming employment (where cause is alleged)

If an employer improperly refuses to provide such a letter, the employee may be entitled to additional damages as a result of the employer hampering mitigation efforts

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QUESTIONS?Wilson Vukelich LLP can help ensure that your employment law matters are handled effectively and efficiently, and in manner that is reflective of new legal developments and obligations. If you have any questions or require further information, please contact:

Dan CondonWilson Vukelich [email protected]

Christine AshtonWilson Vukelich [email protected]

Carole McAfee Wallace Wilson Vukelich LLP [email protected]

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Breakfast for Business