A recent decision from the Court of Appeal for Ontario has the potential to render many existing contractual termination clauses unenforceable. This development will have a major impact on employee severance rights and the costs employers may be required to incur when dismissing workers.

Over close to 9 weeks of social-distancing, my 2-year old daughter and I have watched Disney’s Sleeping Beauty (at her request, I promise) at least 167 times (and often before the sun rises). As we both became word-perfect, I realized this movie, in addition to great animation, holds some important lessons for Ontario employers and employees.

One of the issues we commonly encounter, when speaking with both individuals and employers, is whether the language in their employment contract addressing termination is enforceable.

For employees, where a termination provision is unenforceable, it can mean they have an entitlement to increased severance. Whereas for employers, if the clause does not hold, it can create uncertainty and result in unintended liability.

People quit their jobs at various times and for various reasons. Often, when a worker quits his/her job they provide their employer with a written letter or an email confirming their decision to resign on a specified future date with the intention of continuing to work until that date.

The majority of employment disputes are resolved long before they ever reach a court room. Usually, the former employee will agree to accept a sum of money from their previous employer in exchange for executing a release agreement. While the substance of release agreements can vary, they generally share two similarities:

1. No further liability: The individual agrees that upon receipt of an agreed payment, he/she shall have no further right to seek additional compensation as a result of their employment, or the termination thereof; and

2. Confidentiality: The individual agrees to keep the terms of settlement confidential.

Generally speaking, employers have the right to dismiss employees that fail to report to work sober, and perform their duties in a safe manner, particularly where these requirements have been clearly communicated through written policy.

We are not long into 2019 and yet one thing already seems clear – the law concerning employment contract termination clauses will continue to be the focus of a great deal of litigation in Ontario. In just the past few months alone, new decisions from the Superior Court have helped to advance the law and provide further guidance to employers on proper drafting of termination clauses.

Tagg Industries v. Rieder serves as a useful reminder of the importance of proving (and communicating to employees) a termination for cause, as well as the high threshold that employers must meet in such circumstances.

When an employee is fired and not given sufficient notice, a common point of dispute becomes how to properly calculate the lost value of non-monetary benefits. Wages, by contrast, are a relatively simple affair. If a court orders the employee ought to have received an additional three (3) months’ notice, the parties need only calculate the value of three months’ wages and any resulting interest for the delay in payment.

Determining what conduct amounts to just cause for dismissal is no easy task. In part this is due to just cause being inherently situation specific. When describing what may constitute just cause, employment lawyers often refer to extreme examples: think of situations where a public-facing employee makes repeated racial slurs to a customer or commits major fraud in the course of their duties. Typically, such facts will prove fertile ground for successful assertions of just cause for dismissal by an employer.

As we have discussed in previous articles, if you are fired from work and decide to seek severance, you are required to take reasonable steps to find alternate comparable employment. This obligation is referred to as the “duty to mitigate” the loss of your employment.

Wrongful dismissal disputes are fairly common. In our experience they often resolve through negotiation and infrequently progress far into the litigation process. That said, sometimes cases of this nature do reach the court room and the parties usually fight over the quantum of severance sought, the type of payments claimed (i.e. bonus/commissions) and whether the former employee made reasonable efforts to find re-employment.

A long-standing rule of wrongful dismissal cases is that employees who seek additional severance are required to look for new work post-dismissal. Employers are only obligated to pay monies for actual loss incurred beyond any statutory entitlement period.

Most people understand that if they lose their job, they have a right to receive severance from their employer. Generally speaking, what reflects fair severance for a person will depend on a number of factors such as whether the individual has a written employment contract, their age, their tenure of service, their formal education and the availability of comparable jobs in the local market.

Q&A is a recurring series on the Vey Willetts LLP blog. The aim is to provide quick answers to questions we commonly encounter in our day-to-day practice of employment law. In this edition, we focus on wrongful dismissal from employment.

Dismissing an employee is not a pleasant experience. But whether you like it or not, this is one task that most businesses will encounter at some point. As President Trump reminded us again this week after reports surfaced that Secretary of State Rex Tillerson learned of his firing by way of a twitter post, there is both a right way and a wrong way to conduct employee terminations.

Last month, the Court of Appeal for Ontario released its decision in Nemeth v. Hatch Ltd. garnering a lot of attention within the province’s employment law bar.

Vey Willetts LLP was recently successful in defeating a summary judgment brought by IBM Canada Limited. This decision, Amberber v. IBM Canada Limited, serves as an important reminder to employers of the need to draft contractual termination clauses with a high degree of clarity, or risk unanticipated liability in the event of a without cause dismissal.