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Termination of Employment the Canadian Way

By Jeffrey Percival and Kate Bresner, Pallett Valo LLP

The US concept of “at-will employment”, which allows for termination of employment for any reason without notice (so long as it is not for an illegal purpose), does not exist in Canada. In Canada, reasonable notice of termination is an implied term in all employment agreements. In order to terminate an employment relationship without cause, an employer must provide appropriate notice or pay in lieu.

In Ontario, termination of employment is governed by contract, statute, and the common law. Prudent employers can use a clear and unequivocal termination clause in their employment agreements to limit employee entitlements to the minimum amounts prescribed by employment standards legislation, which amounts are based upon the employee’s length of service.

Without contractual limitations agreed to before employment commences, employers may be required to pay common-law reasonable notice, which carries a very general rule of thumb of one month’s pay per year of service, up to 24 months’ pay, or more in exceptional circumstances. Failure to limit entitlement at the outset in a contract can prove to be costly.

When assessing reasonable notice in Ontario, courts consider a number of factors, including the employee’s age, length of service, the level of service, and the availability of similar employment, while taking into consideration the level of education and experience of the employee. These factors are interrelated and used to gauge compensation required to cover the employee’s losses between the date of termination and the date of new employment.

A recent decision illustrates just how costly common-law reasonable- notice awards can be. In Dawe vs The Equitable Life Insurance Company, the terminated employee was 62 years old, had 37 years of service in a senior executive position, and had an annual salary of CAD 250,000. He was awarded 24 months’ pay for wrongful dismissal; a significant amount that could have been expressly limited in a well-worded contract at the start of Dawe’s employment.


 

Jeffrey Percival

Jeffrey Percival

GGI member firm
Pallett Valo LLP
Law Firm Services
Mississauga (Greater Toronto), Canada
T: +1 905 273 33 00
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.pallettvalo.com

Pallett Valo LLP is one of Ontario’s Top 10 Regional Law Firms. The firm practices in the areas of business law, commercial litigation, commercial real estate, construction, insolvency & corporate restructuring, employment & labour, and wills, estates, & trusts.

Jeffrey Percival, l, the head of Pallett Valo’s Employment and Labour Practice Group, practices both employment and labour law and commercial litigation, with a particular focus on assisting clients with the management of challenging workplace issues, professional negligence, and product liability.
Kate Bresner

Kate Bresner

GGI member firm
Pallett Valo LLP
Law Firm Services
Mississauga (Greater Toronto), Canada
T: +1 905 273 33 00
E: This email address is being protected from spambots. You need JavaScript enabled to view it.
W: www.pallettvalo.com

Pallett Valo LLP is one of Ontario’s Top 10 Regional Law Firms. The firm practices in the areas of business law, commercial litigation, commercial real estate, construction, insolvency & corporate restructuring, employment & labour, and wills, estates, & trusts.

Kate Bresner has experience advising on a broad range of employment and labour law issues, including compliance with Ontario workplace legislation such as the Employment Standards Act, Human Rights Code, Labour Relations Act, and Occupational Health and Safety Act.


Published: Labour Law Newsletter, No. 07, Autumn 2019 l Photo: Jerome - stock.adobe.com

 

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