Key Differences Between ‘With Cause’ and ‘Without Cause’ Termination in Ontario, Canada

In Ontario, employment can be terminated either with cause or without cause, both of which have significant legal and financial consequences. The Employment Standards Act Ontario (ESA) establishes minimum standards for notice, severance pay, and other entitlements. For federally regulated employees, the Canada Labour Code applies. However, if an employee’s termination provisions in their employment agreement are found to be unenforceable, courts may award significantly more reasonable notice under common law than the minimum entitlements provided by the ESA. This can result in substantial compensation for the employee through a wrongful dismissal claim.

Employers can limit what employees are entitled to under common law by including termination provisions in an employment agreement. However, many such agreements fail to meet legal standards, which can result in large payouts for employers.

This article discusses these distinctions and highlights the importance of legal compliance.

Termination Without Cause

Termination without cause occurs when an employer ends the employment relationship for reasons unrelated to misconduct or performance. Employers may terminate an employee without cause if they comply with key requirements under the Employment Standards Act, including:

1. Notice of Termination or Pay in Lieu: The ESA requires employers to provide advance notice or pay in lieu of notice.
2. Severance Pay: Employees with at least five years of service may qualify for severance pay if the employer’s payroll exceeds $2.5 million.

Without an enforceable employment agreement, employees can pursue compensation through common law, where courts typically award reasonable notice based on factors such as the employee’s length of service, position, and age. Courts tend to award employees significantly more compensation than the ESA minimums under common law, which can lead to substantial financial exposure for employers.

Termination With Cause

Termination with cause applies when an employee is dismissed for serious misconduct or breaches of their employment contract. In this situation, employers are not required to provide notice or severance. However, the standard for just cause is high and must meet the criteria under the Employment Standards Act in Ontario for wilful misconduct.

Wilful misconduct is when an employee intentionally and deliberately disobeys or neglects their duties in a way that is not trivial. Non-wilful actions, such as negligence or poor performance, generally do not meet this threshold. Examples of wilful misconduct include:

• Theft, fraud, or workplace violence
• Wilful neglect of duty: An employee’s deliberate failure to perform their duties
• Harassment: Unwelcome conduct or comments towards another employee

If the employer cannot prove just cause, the dismissal may be ruled wrongful, entitling the employee to notice or severance under either the ESA or common law.

Constructive Dismissal

Constructive dismissal occurs when an employer unilaterally makes significant changes to an employee’s job without consent. Examples of Constructive Dismissal in Ontario includes:

• Significant reduction in pay
• Increasing hours of work unreasonably
• Demotion: Resulting in a substantial change to the employee’s role or responsibilities

Employees may resign and claim that they were effectively terminated. If proven, the employee may be entitled to severance and notice similar to a termination of employment without cause.

Legal Standards Under the Employment Standards Act (ESA)

The Employment Standards Act Ontario provides essential protections for employees and sets minimum requirements for employers. Some key provisions are:

1. Notice Periods: Employers must provide notice or pay in lieu of notice for terminations without cause.
2. Severance Pay: Eligible employees with at least five years of service may receive severance in addition to notice.
3. Public Holidays and Vacation: Employers must adhere to ESA requirements for public holiday pay and vacation time.
4. Protected Leaves: Employees have the right to pregnancy and parental leave and other job-protected leaves.
5. Hours of Work and Minimum Wage: The ESA limits hours of work and mandates payment of at least the minimum wage.

Failure to comply with ESA standards may result in penalties and legal claims for damages.

The Role of Employment Agreements

Employers can limit what employees are entitled to under common law by having legally enforceable employment agreements that restrict termination of employment entitlements to ESA minimums. However, many agreements are poorly drafted or fail to meet legal requirements. When an agreement is unenforceable, employees may sue for reasonable notice under common law.

For employers, ensuring contracts meet legal standards is crucial to avoiding wrongful dismissal claims and unexpected financial liabilities. For employees, understanding these agreements is important to ensure their rights are protected.

Importance of Seeking Legal Advice

Employment law is complex, and both employers and employees should seek legal advice when termination occurs.

• Employees: A wrongful dismissal lawyer can help determine whether a termination was wrongful and whether they are entitled to compensation under common law.
• Employers: Legal advice ensures compliance with the Employment Standards Act Ontario and verifies if employment agreements are enforceable, reducing the risk of costly claims.

Key questions addressed through legal advice include:

• Can you terminate someone without cause?
• What compensation is owed under the ESA and common law?
• How can employers avoid wrongful dismissal claims?

Conclusion

In Ontario, terminations with or without cause have significant legal consequences. Termination of employment without cause requires compliance with notice and severance pay standards under the Employment Standards Act Ontario, while termination with cause requires the employer to prove the employee’s actions constituted wilful misconduct. The misconduct must meet a high standard set out in the ESA to justify termination without any financial compensation to the employee.

Employers can limit their liability through enforceable employment agreements, but when agreements fail, employees may pursue reasonable notice under common law. Seeking legal advice from a wrongful dismissal lawyer is crucial for both employees and employers to navigate Ontario Canada employment law effectively.

The information provided in this article is for general informational purposes only and is not intended as legal advice. Readers should consult with a qualified legal professional to obtain Employment Legal Advice customized to their specific circumstances. The authors and publishers of this article disclaim any liability for actions taken based on its content.

For expert guidance on employment termination and legal compliance, contact HR Enable Inc. at 905-483-5115 today. Protect your rights and minimize risks with professional advice.