Wrongful dismissal – when does the limitation period clock start running?

A recent decision from the Ontario Superior Court of Justice touches upon a little discussed area of employment law. Specifically, when does the limitation period clock start running for a claim of wrongful dismissal?

Limitation periods are designed to provide employers and employees with assurance that possible legal claims will not hover over their heads indefinitely. In Ontario, there is a general two year limitation period that applies for most civil claims that could result in a Court action. Exceptions abound (such as those pursuant to the Libel and Slander Act) but the general two year period is the most common limitation period.

In an average wrongful dismissal claim, a dismissed employee will have two years to take legal action against their former employer if they are of the opinion they have not been provided with sufficient severance. But as the case of Bailey v Milo-Food & Agricultural Infrastructure & Services Inc. (2017 ONSC 1789) reminds us, complications can arise when a worker is dismissed by means of working notice.

Bailey had worked for Mio-Food for nearly 41 years prior to being informed of his dismissal. He was working as the company’s general manager at the time. In light of Bailey’s long years of service, age (he was in his early 60s at the time) and lack of employment contract, Milo-Food provided Bailey with twenty-four (24) months of working notice of his dismissal on March 18, 2013. Until March 2015, Bailey “was expected to perform all of the duties that are assigned to him in a diligent and conscientious fashion.”

Several months after successfully completing his two year working notice period, Bailey brought an action against Milo-Food for:

• Wrongful dismissal;
• Unpaid statutory severance pay;
• Intentional inflection of mental suffering; and
• Age discrimination.

As a preliminary move, Milo-Food brought a motion to strike Bailey’s entire claim as being out of time (in other words, after the expiry of the general two year limitation period). As Justice Munroe summarized: “[t]he main issue, therefore, is whether the limitation period commenced at the time Mr. Bailey received notice of termination or on his last day of work.”

Wrongful dismissal

On the issue of when the wrongful dismissal limitation period clock starts to run, Justice Munroe followed established precedent. In particular, he cited one particularly helpful passage from an earlier case which governs the proper application of a limitation period when working notice is elected:

Wrongful dismissal, in my view, raises a particularly difficult issue in the limitation context since it is not a dismissal per se that is actionable but rather dismissal without reasonable notice or salary in lieu of such notice, that is actionable.  Accordingly, the limitation period for an action for wrongful dismissal does not necessarily run from the date of actual dismissal.  It is activated when the cause of action is discovered – that is, the date that the terminated employee knew or ought to have known that he was discharged without cause and without notice or pay in lieu of notice and that a proceeding would be an appropriate way to get redress. [emphasis added]

On this basis, Bailey’s wrongful dismissal action was struck for being out of time. He would have had to bring his claim within 2 years of receiving his working notice of dismissal in March 2013 as it was on this date he learned that his notice period was insufficient. This is a particularly tragic result for the employee. As we have written about previously, an individual with Bailey’s length of service and age at dismissal may well have been entitled to a notice period in excess of twenty-four months.

Statutory severance pay

It is on the question of the limitation period for statutory severance pay that this case takes a bit of an odd turn. Despite the fact that Milo-Food only provided working notice, Justice Munroe held that Bailey was out of time for a claim of unpaid statutory severance pay as he did not act within two years of being given notice of dismissal.

With respect to the Court, this appears to be an erroneous result. Statutory severance pay pursuant to the Employment Standards Act, 2000, is designed to be paid out at the end of a worker’s employment (inclusive of any working notice period). It is for this reason that if an employer provides statutory pay-in-lieu of notice of termination these required weeks of notice are added to the length of employment used to calculate statutory severance entitlement (see s. 65(4)). Similarly, a close reading of ss. 11(5) and 63(a) of the Act supports the same conclusion that severance pay is not to be issued until the working relationship formally ends.

Intentional infliction of mental suffering and age discrimination

The Court resolved both of these issues summarily as they pertained to a limitation period. Given that the claims for mental suffering and age discrimination involved events that occurred during the working notice period, Justice Munroe held these two issues to be timely and refused to dismiss them.

The result

At the end of the day, Milo-Foods was successful in having two of the four claims brought against it dismissed right out of the litigation gate. Not a bad result for the employer. Beyond that, this case also stands for two principles all employers should keep in mind: 

1. the limitation period for a wrongful dismissal claim arises once insufficient notice of dismissal is proffered; and
2. as demonstrated by the Court’s decision on statutory severance pay, remember that in litigation it is wise to always expect the unexpected.

This article was originally published on April 18, 2017 on First Reference Talks.

Vey Willetts LLP is an Ottawa-based employment and labour law boutique that provides timely and cost-effective legal advice to help employees and employers resolve workplace issues in the National Capital Region and across Ontario. To speak with an employment lawyer, contact us at: 613-238-4430 or info@vwlawyers.ca