Common Law Notice of Termination in Ontario
When an employee faces employment termination without cause in Ontario , determining how much notice or pay in lieu of notice is crucial. This notice period, known as Common Law Notice or common law reasonable notice , compensates the employee for the time needed to find new employment. It is essential for both employees and employers to understand how common law notice differs from statutory notice under the Employment Standards Act (ESA) and what factors influence the amount of notice owed.
What Does Ontario’s Employment Standards Act Say?
The Employment Standards Act (ESA) sets out the minimum rights of provincially regulated employees and the responsibilities of employers. According to the ESA, an employer cannot terminate an employee who has been employed for at least three months without meeting the minimum notice requirements, which include providing either written notice of termination or pay in lieu of notice .
The ESA outlines the following minimum notice periods:
For example, if ABC Company terminates Susie after 4.5 years of service, the minimum notice required under the ESA would be four weeks. Susie could receive this notice as “working notice,” where she continues to work until her last day, or as pay in lieu of notice, where she is compensated instead of working through the notice period. Employers often choose to provide a combination of both working notice and pay in lieu of notice.
Statutory Severance Pay and Other Entitlements
In addition to termination pay , certain long-term employees may also be entitled to a severance package that includes statutory severance pay under the ESA. Severance pay applies when an employee has been employed for five years or more, and the employer has a payroll of $2.5 million or more or is conducting a mass layoff . This severance pay is separate from common law notice and provides additional compensation based on years of service.
Common Law Notice: Going Beyond the ESA Minimums
While the ESA sets the minimum requirements, the reasonable notice period under common law often provides for more extensive notice periods. Common law reasonable notice is significant in employment law as it outlines the obligations of employers to provide notice before terminating an employee without cause. Unlike statutory notice, common law notice is not capped and is determined by various factors, often referred to as the Bardal factors . These include:
These factors were established in a landmark 1960 case and continue to guide courts in determining reasonable notice periods. These factors influence what is considered common law reasonable notice, which can vary based on the employee’s length of service, age, job role, and the availability of similar employment. Common law notice is generally more generous than the ESA minimums, and employees who are not bound by a valid termination clause in their employment contract may be entitled to significantly more notice.
The Role of Employment Contracts in Limiting Common Law Notice
Employers often try to limit an employee’s entitlements to the ESA minimums through a contractual termination clause in the employment contract. However, for this clause to be enforceable, it must be clear, unambiguous , and compliant with the ESA. Many termination clauses have been invalidated by courts, leading to the employee receiving full common law notice instead. Recent legal cases highlight the importance of properly drafted contracts to avoid unexpected liabilities for employers.
Mitigation of Damages
When an employee is dismissed and entitled to common law notice, they have a duty to mitigate their damages. This means they must make reasonable mitigation efforts to find new employment. Any income earned during the notice period may reduce the amount of notice pay owed by the employer. Courts carefully assess whether an employee has fulfilled this duty, and failure to mitigate can significantly impact the compensation awarded.
Special Considerations for Federally Regulated Employees
Employees who are federally regulated are subject to different rules under the Canada Labour Code and federal employment standards, which may affect their entitlements upon dismissal. It is important for federally regulated employees and their employers to understand these differences, as they may be entitled to different notice periods or severance pay than those outlined in the ESA.
Practical Advice for Employees and Employers
For employees facing dismissal, it is crucial to review your employment contract, document the termination process, and seek legal advice before signing any severance agreements. Consulting with an employment law firm for legal consultation can provide experienced guidance and representation. Experienced employment lawyers can help determine your entitlements and navigate complex employment law issues. Understanding your rights, including common law reasonable notice, can help ensure you receive fair compensation and avoid wrongful dismissal claims.
For employers, drafting clear and enforceable termination clauses is key to limiting liability. Ensuring compliance with the ESA and common law standards can help avoid costly legal disputes. Consulting with legal counsel when managing terminations is advisable to navigate these complexities effectively.
Conclusion: Why Legal Advice Matters
Understanding Common Law Notice in Ontario is essential for both employers and employees. While statutory notice provides a baseline, common law notice often offers more substantial compensation. Employers must be aware of their potential liabilities, and employees should be informed of their rights to ensure they receive fair treatment upon dismissal. Seeking legal advice and legal representation is crucial in navigating these issues and ensuring that your rights and obligations are fully understood.
Contact Us?
If you are an employer looking to dismiss an employee or an employee who has been dismissed, our team of experienced employment lawyers?at ACHKAR LAW Achkar Law can help.
What Does Ontario’s Employment Standards Act Say?
The Employment Standards Act (ESA) sets out the minimum rights of provincially regulated employees and the responsibilities of employers. According to the ESA, an employer cannot terminate an employee who has been employed for at least three months without meeting the minimum notice requirements, which include providing either written notice of termination or pay in lieu of notice .
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The ESA outlines the following minimum notice periods:
For example, if ABC Company terminates Susie after 4.5 years of service, the minimum notice required under the ESA would be four weeks. Susie could receive this notice as “working notice,” where she continues to work until her last day, or as pay in lieu of notice, where she is compensated instead of working through the notice period. Employers often choose to provide a combination of both working notice and pay in lieu of notice.
Statutory Severance Pay and Other Entitlements
In addition to termination pay , certain long-term employees may also be entitled to a severance package that includes statutory severance pay under the ESA. Severance pay applies when an employee has been employed for five years or more, and the employer has a payroll of $2.5 million or more or is conducting a mass layoff . This severance pay is separate from common law notice and provides additional compensation based on years of service.
Common Law Notice: Going Beyond the ESA Minimums
While the ESA sets the minimum requirements, the reasonable notice period under common law often provides for more extensive notice periods. Common law reasonable notice is significant in employment law as it outlines the obligations of employers to provide notice before terminating an employee without cause. Unlike statutory notice, common law notice is not capped and is determined by various factors, often referred to as the Bardal factors . These include:
These factors were established in a landmark 1960 case and continue to guide courts in determining reasonable notice periods. These factors influence what is considered common law reasonable notice, which can vary based on the employee’s length of service, age, job role, and the availability of similar employment. Common law notice is generally more generous than the ESA minimums, and employees who are not bound by a valid termination clause in their employment contract may be entitled to significantly more notice.
The Role of Employment Contracts in Limiting Common Law Notice
Employers often try to limit an employee’s entitlements to the ESA minimums through a contractual termination clause in the employment contract. However, for this clause to be enforceable, it must be clear, unambiguous , and compliant with the ESA. Many termination clauses have been invalidated by courts, leading to the employee receiving full common law notice instead. Recent legal cases highlight the importance of properly drafted contracts to avoid unexpected liabilities for employers.
Mitigation of Damages
When an employee is dismissed and entitled to common law notice, they have a duty to mitigate their damages. This means they must make reasonable mitigation efforts to find new employment. Any income earned during the notice period may reduce the amount of notice pay owed by the employer. Courts carefully assess whether an employee has fulfilled this duty, and failure to mitigate can significantly impact the compensation awarded.
Special Considerations for Federally Regulated Employees
Employees who are federally regulated are subject to different rules under the Canada Labour Code and federal employment standards, which may affect their entitlements upon dismissal. It is important for federally regulated employees and their employers to understand these differences, as they may be entitled to different notice periods or severance pay than those outlined in the ESA.
Practical Advice for Employees and Employers
For employees facing dismissal, it is crucial to review your employment contract, document the termination process, and seek legal advice before signing any severance agreements. Consulting with an employment law firm for legal consultation can provide experienced guidance and representation. Experienced employment lawyers can help determine your entitlements and navigate complex employment law issues. Understanding your rights, including common law reasonable notice, can help ensure you receive fair compensation and avoid wrongful dismissal claims.
For employers, drafting clear and enforceable termination clauses is key to limiting liability. Ensuring compliance with the ESA and common law standards can help avoid costly legal disputes. Consulting with legal counsel when managing terminations is advisable to navigate these complexities effectively.
Conclusion: Why Legal Advice Matters
Understanding Common Law Notice in Ontario is essential for both employers and employees. While statutory notice provides a baseline, common law notice often offers more substantial compensation. Employers must be aware of their potential liabilities, and employees should be informed of their rights to ensure they receive fair treatment upon dismissal. Seeking legal advice and legal representation is crucial in navigating these issues and ensuring that your rights and obligations are fully understood.
Contact Us?
If you are an employer looking to dismiss an employee or an employee who has been dismissed, our team of experienced employment lawyers?at ACHKAR LAW can help.