HR Law 101

Seems like a straightforward question, but it’s an issue that frequently arises and one that can find the employer in hot water, especially where there has been a heated exchange or disagreement. Sometimes, employers will argue that an employee is “deemed” to have quit.

In reality, those situations will be quite limited. Under the law, an employee will be considered to have resigned where there is clear and unequivocal evidence of a voluntary resignation.

Where a resignation is tendered in the heat of the moment, courts will expect employers to give employees a reasonable cooling off period and opportunity to retract the quit. Resignations initiated, coerced or insisted on by an employer lack the necessary element of voluntariness and are likely to be considered invalid, in which case the employee will be considered wrongfully dismissed.

Employers should never attempt to capitalize on a resignation tendered in ambiguous or emotionally charged circumstances. Employers faced with an acrimonious or ambiguous resignation are well advised to seek counsel.

When employment is terminated, the employee will likely ask “was I wrongfully dismissed”?

In Canada, a wrongfully dismissed employee is simply an employee who has been provided no, or inadequate notice of termination under common law principles (i.e. non-statute based law).

The amount of notice that must be given will vary from employee to employee and between industries.  The notice period may be defined in a written contract.  If there is no written contract, or the contract is silent on termination, the law will imply an obligation to provide reasonable notice of termination.  What is reasonable will depend on the employee’s age, length of service and the availability of similar employment.

One exception where notice is not required is where the employer has just cause to terminate the employment relationship.  Just cause can exist where the employee has engaged in significant misconduct (e.g. theft) or a persistent inability to meet performance standards.  In such cases, there is no wrongful dismissal.

Employers cannot easily establish just cause to terminate and, more often than not, are unsuccessful in doing so.  Employers and employees should always seek legal advice in a situation where just cause may be an issue.

Previously, we identified a wrongful dismissal as the employer’s failure to provide adequate notice of termination above the statutory minimum requirements for termination and severance pay.

A constructive dismissal occurs when the employer does not expressly terminate the employment relationship but conducts itself in a way that indicates that it does not desire to abide by the underlying terms and conditions of employment.  This can happen if the employer substantially reduces wages, demotes an employee or repeatedly treats the employee in an objectively intolerable manner.

As a constructive dismissal is a wrongful dismissal, the compensation is the same. The employee is entitled to the compensation he or she would have earned over the termination notice period the employer was required to provide in terminating the relationship.

Constructive dismissal cases are highly fact driven. The employee must object to changes to the employment relationship or risk condoning them. Employees often quit in response to a constructive dismissal and, in some cases, may continue to work while making their objection clear.  Employers and employees should always seek advice in situations that may suggest a constructive dismissal.

In most cases, yes, but there are exceptions. Determining whether the employer is provincially or federally regulated is also key to determining compensation on

termination. In this topic, we’ll consider employment relationships regulated under Ontario law.

Under Ontario law the Employment Standards Act, 2000 (ESA) establishes minimum requirements for notice of termination or pay in lieu of notice of termination. This can range from 1 week to 8 weeks of an employee’s wages. In addition, severance pay may be payable, if the employer’s annual payroll exceeds $2.5 million and the employee has 5 or more years of service. If payable, severance is 1 week for each completed year of service up to a maximum of 26 weeks.

The employment contract is key to determining an employee’s complete entitlement to compensation on termination. The contract may limit the employee to the ESA minimums. If not, employers have an implied obligation to provide reasonable notice of termination, which includes the ESA minimums for termination and severance pay. What is reasonable will depend on the nature of the position, length of service and the employee’s age. Other factors may affect the notice period length, depending on the circumstances. The availability of replacement employment can significantly limit compensation. Older employees with long service in senior positions tend to be entitled to the longest notice periods. A 65+ year old senior manager with 24 years of service and limited prospects for re-employment may be entitled to 24 months’ notice or pay in lieu of notice, including the ESA minimums.

Again, there are exceptions. Construction employees, employees with less than 3 months service and employees dismissed due to significant misconduct may not be entitled to any compensation on termination, other than earned wages. Permanently disabled employees unable to work may be limited to ESA minimums. The written contract of employment is a key piece of the puzzle. Employees and employers should always obtain legal advice to determine compensation entitlements upon termination and employees should always be given adequate time to consider compensation offers and obtain advice.

Laws vary by jurisdiction.  In Ontario, the Employment Standards Act mandates 1 week per year of service, up to 26 weeks, provided annual payroll exceeds $2.5 million and the employee has at least 5 years’ service.  This is in addition to ESA termination pay, which ranges from 1 to 8 weeks, depending on service.  Where misconduct is the reason for dismissal, the ESA minimums may be exempted.

ESA minimums are often not the end of the story.  Common law requirements may require more generous compensation.  The employment contract must be reviewed, and common law entitlements can be reduced by earnings from subsequent employment or self employment. Employees and employers should always obtain legal advice on termination.

A successful litigant in a court matter is entitled to a portion of its legal fees.    

Outside of Small Claims Court, judges  can award fees on a “partial” or “substantial” indemnity basis.  As a rule of thumb, partial indemnity costs are approximately 50-60% of the winning party’s actual costs.  Substantial indemnity costs could rise to 80-85% of incurred costs. 

Litigants can obtain higher costs by demonstrating unreasonable opposing conduct.  This can be done in a few ways.  First, by referencing conduct that prolonged or overly complicated proceedings. Second, by serving a reasonable offer of settlement.  If a judge gives a judgment that is better than the offer, the party who refused  the offer will pay costs at a higher scale.  Third, a litigant can ask the other side to admit facts.  Refusing to admit facts later proved in court can result in a cost award against the unreasonable party.  

This description is merely a snapshot.  Judge discretion, jurisdiction, degree of success, custom, matter complexity and stage of proceeding are all important factors.

A Court of Appeal decision from 1997 held that WSIB benefits are deductible from common law severance (i.e. reasonable notice) payments. The reasoning is that the combination of WSIB benefits and severance would represent “double recovery” for the employee.

An interesting issue is whether or not the CERB is deductible from severance payments.

The Government of Canada’s website states that severance does not affect eligibility for the CERB. As a result, severance payments would not trigger a CERB repayment obligation, unlike EI benefits which are repayable.

But what about the converse? Should the employer be able to deduct CERB amounts from severance payments? If WSIB benefits are deductible from severance payments, it makes sense that CERB payments should also be deducted. A court will eventually clarify this issue.

In Ontario, most workplaces follow a vote based model.  In a nutshell, unions apply to certify “units” of employees in a non-unionized workplace.  There are a few criteria the union must satisfy to apply, but the most important (and sometimes contentious) criterion is that it has to demonstrate that 40% or more of the employees in the unit applied for are union members. Typically, union membership is acquired during “campaigns” (sometimes unbeknownst to employers) in which employees are persuaded to sign membership cards.

If the 40% threshold is met, the Ontario Labour Relations Board (OLRB) will order a vote of all employees in the unit.  If over 50% of employees vote “YES”, the OLRB will certify the Union as the exclusive bargaining agent of the unit.  Certification is permanent, unless and until employees voluntarily apply to terminate bargaining rights in a highly restrictive process.

The certification process is fast, intense and unforgiving to employers. More so for construction employers where certification can happen without a vote on the basis of membership evidence alone.  Employers must respond to an application within 2 days and the vote typically happens within 5 days of the application.  Unfair labour practice laws greatly restrict an employer’s ability to persuade employees not to vote in favour of the union, but communication of the disadvantages of unionization is permitted.  Employers walk a tightrope between unfair and permissible communications.

Disputes often arise in certification applications, particularly with respect to which employees should be permitted in a unit.  These disputes result in litigation at the OLRB and can sometimes extend for up to 2 years.

Employers in receipt of a certification application should immediately consult legal counsel experienced in union matters.

Most employers prefer to be non-unionized. In a unionized workplace, the union is the exclusive representative of the employees and all terms and conditions of employment must be negotiated through the union.  Unionized employees have greater protections from discipline and discharge versus non-unionized employees, and enjoy seniority rights.  Union rights once acquired, are permanent. 

For the above reasons, employers generally prefer not to deal with a union.  Employers who find themselves unionized sometimes enquire about how they can “get rid of the union”.

The short answer is, they cannot.  

However, employees can apply to “decertify” a union during certain windows of time. This is often immediately before a collective agreement between a union and employer is set to expire.  

While employers may, if asked, give information to employees about the decertification process, it can have no role in initiating a decertification application. Labour laws strictly prohibit any initiation of or involvement in a decertification application by an employer. Unions almost always challenge decertification applications on the basis that the employer initiated it.   If the Labour Board determines that the employer did initiate or support the application, it will be dismissed.  

Employers seeking to avoid unionization need to be proactive about doing so. Equal treatment, competitive compensation, sound HR practices and good communication are key.  A strategy of union elimination by employers is unlawful and frequently backfires

Employers prefer to operate union-free and employees have a right to unionize.  These competing preferences can create legal issues for employers 

It is unlawful for employers to prohibit union membership.  Promising compensation in exchange for staying union-free is unlawful. Threatening dismissal, business closure and other sanctions if the employer is unionized is prohibited.  Labour Boards have broad remedial authority to sanction employers and preserve employee rights to unionize.  

An employer can provide employees with information about unionization.  Employers facing a certification application will often advise employees of the downsides of unionization, highlighting monthly dues, the disruption of strikes, the absence of individual negotiation and uncertainties associated with union negotiations.  

In most cases, employers facing an application for certification have already lost. The key to avoiding unionization is treating employees well. Fair wages and equitable treatment is always the best buffer against unionization.

Earlier, we wrote about how an employer goes from unionized to non-unionized status. Critically, the employer cannot have a significant or influential role in an employee application to decertify. 

What if the reasons for decertifying seem irrational? Can the Labour Board infer that the employer put the employee up to the application?  

BLPC recently successfully represented an employee’s application to terminate bargaining rights. The Union argued that the application made no sense because the union got him a significant raise, benefits and a pension. The employee said he didn’t want benefits or a pension plan. While appreciative of the wage increase, he felt no ongoing loyalty to the union. He preferred a one-to-one relationship with his employer.  

The Labour Board rejected the Union’s argument and decertified it. The Board does not question an employee’s motives to decertify a union unless there is evidence of significant or influential employer involvement in the application. In this case, that evidence did not exist.

The short answer is no. A union is certified in respect of a business, not its legal form. Although corporations are distinct legal entities, labour relations legislation contain broad, remedial provisions that serve to preserve and transfer a union’s bargaining rights.

Section 1(4) of the Ontario Labour Relations Act allows the Ontario Labour Relations Board to treat multiple employers as one entity where related activities are carried on under common control or direction. Section 69 of the Act automatically transfers the union obligations of an employer to a purchaser of the employer’s business. These provisions are largely effective in defeating schemes to undermine a union’s rights through a transfer of all or part of a business.

Newly unionized businesses should always seek legal advice from a labour lawyer, as should purchasers of businesses with employees.

Employers are obliged to accommodate employee human rights needs in relation to disability, creed or family status, and other grounds.
The accommodation obligation ends, however, at the point that the accommodation would cause undue hardship to the employer.

The threshold for establishing undue hardship is a high one. Some hardship is expected. Under the Ontario Human Rights Code, three considerations are relevant in determining undue hardship:

• Cost
• Outside sources of funding, if any
• Health and safety requirements, if any

Inconvenience, morale, and customer preferences are not relevant considerations. Employers must prove undue hardship with real, objective evidence, as opposed to subjective or speculative opinions.

Many employers fail in their accommodation obligation from the outset of the request. Employers should take all requests seriously and are obliged by law to discuss accommodation solutions that work for the employer and the employee. Employees must cooperate with the process and accept reasonable accommodation solutions.

Accommodation requests can be complex and challenging to manage so privileged legal advice is always beneficial.

Section 7 of the Canadian Charter of Rights and Freedoms guarantees that everyone has the right not to be deprived of the “right to life, liberty and security of the person…, except in accordance with the principles of fundamental justice”.

A requirement that compels an individual against their will to submit to medical treatment could engage Section 7.

However, the Charter simply does not apply to the actions of private individuals or employers. It applies to the actions and laws of public institutions. Human rights legislation may require non-government employers to accommodate vaccine objections grounded in disability, religious or creed based restrictions, but these are not constitutional issues.

Government mandated vaccination policies or laws could be challenged under Section 7, but the potential success of such a challenge is far from certain.

Employers are prohibited from discriminating against employees on the basis of their religion or creed (a deeply held belief connected to an organization or community). Issues of religious or creed based discrimination can arise, for example, in relation to work schedules that may interfere with an employee’s prayer requirements or attendance at a place of worship. Religious discrimination issues are arising in relation to mandatory vaccine requirements – a current hot button topic of discussion.

An employer may be required to accommodate an employee’s religious or creed based objection, up to the point of undue hardship.

The question that arises in relation to such accommodation is what is a valid religious or creed based belief? According to the Supreme Court of Canada (Syndicat Northcrest v. Amselem, [2004] 2 S.C.R. 551 at para. 52), a religious or creed belief must be sincere, held in good faith and connected to a religion or creed. The belief need not to be an essential or obligatory element of their religion or creed. An employer may request objective evidence to support the employee’s sincerely held belief, but should take care not to question the sincerity or validity of the employee’s belief.

Religious accommodations are delicate, complex and specific to each accommodation situation. Employers should engage legal counsel to assist in addressing.

Under contract law, frustration of contact occurs when an unexpected event prevents the parties to the contract from completing their obligations.  In employment contracts, where disability prevents an employee from returning to work or fulfilling the essential functions of the position, the employment contract can be considered “frustrated”. 

Under common law principles, no compensation is owed to an employee where the employment contract has been frustrated.  Compensation is required, however, under employment standards legislation. Employers governed by Ontario law must provide termination pay up to eight (8) weeks of wages and severance pay equal to one (1) week for each year of service to a maximum of 26 weeks.  Severance pay requires the employee to have at least five (5) years of service and the employer must have a payroll of at least $2.5 million in Ontario.

A position of frustration is customarily taken by the employer.  Employees may, however, also claim frustration.  In either case, there must be clear medical evidence indicating that the employee will never return to work or can never perform the essential functions of the position, even with accommodative measures.

In short, yes.  

Where an employee requests time to pray during working hours, refusing the request would constitute discrimination on the basis of “religion”, which is prohibited under human rights legislation.  The discrimination may be excused or exempted if accommodating the prayer request would create undue hardship for the employer.  Most prayer requests involve brief interruptions from the work schedule and can be easily accommodated, so it is hard to think of a scenario where a prayer request would cause an employer undue hardship. 

Other religious accommodation scenarios can raise interesting and difficult workplace issues.  

In safety sensitive workplaces, employers may have to accommodate Sikh workers unable to wear a conventional hardhat because of the religious requirement to wear a turban. Fortunately, in most cases, accommodation is possible without causing the employer undue hardship, but employers have grappled with the issue.

Employers may restrict employees from unfair competition through the use of reasonably worded non-solicitation clauses. Blanket non-competition clauses are generally unenforceable.

Independent contractors, in their true sense, are not employees. It is tempting to think that businesses may have greater flexibility to restrain their competitive activities after the relationship ends.

Caution should be exercised in utilizing independent contractors in any business. The greater the degree of dependence and exclusivity of the contractor on the business will increase the likelihood that the contractor is, in substance an employee. Integration of the contractor in the business is also a critical factor. If it is necessary to restrain an independent contractor from competing, this will suggest that the contractor is integral to the business and, thus, an employee.

Restrictive covenants in respect of a contractor may be enforceable if the business is vulnerable to the contractor. This may occur where a business is sold and the seller retains a role with the purchaser. In other words, the circumstances where a contractor may be restrained from competing are narrow. Legal advice is always advisable.

Through a written contract of employment, an employer may prohibit an employee from unfairly competing with it after the employment relationship has ended.  Measures the employer may take to prevent unfair competition would include prohibitions against using the employer’s confidential information, solicitation of the employer’s customers and solicitation of its employees to accept employment with a competitor.  Restrictions against the use of confidential or proprietary information are not time limited and are implied by law (though confidentiality agreements are always advisable) .  Restrictions against solicitation are subject to the legal requirement that they must be “reasonable” in terms of duration and geography.  Restrictions that are excessive in terms of duration and geographical scope are more likely to be declared invalid. 

Employers cannot, generally speaking, preclude employees from simply “competing” with it after the employment relationship ends.  Courts have held that blanket non-competition provisions, regardless of duration, are a restraint of trade and contrary to public policy.  Courts are loathe to prevent employees from making a living and using skills acquired in an employment relationship.  In a free market economy, competition is the norm. 

Certain categories of employees may have implied restrictions against unfair competition.  Highly trusted senior employees characterized as “fiduciaries” can cause great harm to their employer upon departure.  The restrictions may include implied obligations not to solicit and to not misappropriate “ripe” business opportunities for use by a competitor.  

Employers and employees dealing with post-employment obligations should always seek legal advice.

Like most workplace questions, there isn’t a one-size-fits-all answer.

The answer will depend on a number of factors, including, at the very least: (a) the purpose in asking the question; (b) the nature of the workplace and business activity; (c) whether the workplace is unionized; (d) the risk of virus transmission; (e) what the employer does with the information; and (f) how it handles a refusal to answer.

The following considerations are key:

• Engage with the union, if there is one
• Ask the question in the context of a clearly communicated, written workplace safety policy. Consult the Ontario government’s website to develop a proper safety plan
• Avoid punitive measures, including summary dismissal
• Be prepared to accommodate disability, religious or creed-based objections to the vaccine
• Ensure that privacy and confidentiality measures are in place
• Above all, get advice, don’t rush, be prepared to discuss and be flexible

WSIB benefits are available to employees who are injured in the workplace.  The workplace has never been restricted to the physical premises of the employer.  Benefits may be payable where an injury is sustained away from the regular workplace, but during the regular course of employment.  Injuries sustained at home where the employee is working remotely may also attract WSIB benefits.

The decision about whether an injury or illness is work-related can only be made by the WSIB, which will take into consideration the unique facts and circumstances of each case. The WSIB’s policy concerning accidents in the course of employment is helpful and can be  found here.

Prudent employers will have in place remote working policies.  Such policies cannot contract out of WSIB coverage, but may assist in defining what constitutes work on behalf of the employer.

In most situations, no.  

The Workplace Safety and Insurance Act  provides a comprehensive and exclusive system of compensation for employees injured in the workplace. Employers pay premiums under the Act and, in return, are protected from lawsuits for workplace injuries.  If an employee does sue for a workplace injury, the employer may apply under the Act to bar the claim from proceeding.

Employees are also prohibited from suing for injuries caused by workplace bullying and harassment.  A recent and controversial decision of the Workplace Safety and Insurance Tribunal (1227/19R) confirmed an earlier decision to bar an employee’s claim for constructive dismissal due to claims of ongoing harassment causing mental distress.  As the alleged injury was workplace related, the employee’s right to sue was taken away and she was required to proceed with a compensation claim under the Act.

In the unionized world, random alcohol or drug testing programs are likely invalid even in safety sensitive workplaces.  Human rights principles and employee privacy interests preclude random testing.  Random testing may be permitted if there is a pervasive culture of substance abuse in a safety sensitive workplace, but this is difficult to prove.

In non-union settings, privacy rights are not as strong so random alcohol testing may be permissible provided the employer accommodates employees who test positive.  Random drug testing is not permissible because such tests are incapable of reliably detecting impairment. Coupling a positive test with automatic discipline is discriminatory.

Safety sensitive workplaces, unionized or not, may test where there are reasonable grounds to suspect impairment, as part of a rehabilitation program or where there has been a workplace accident or “near-miss”.  

There are a number of variables to consider, including whether or not the workplace is unionized. Where there is a union, employees generally have greater privacy interests which, historically, have created barriers for employers seeking to mandate vaccines. A labour arbitrator will undoubtedly weigh in on the topic in 2021 in relation to COVID-19 vaccines.

In the non-unionized workplace, employers can ask employees to vaccinate. The question is what the employer can do if employees refuse. The employer may be able to terminate with notice and severance, but should ascertain the reason for the refusal. If it relates to a religious or disability based concern, the employer may have to accommodate the employee. The employer may also be able to place the employee on a leave of absence. In any case, the reasons for mandating vaccination and the risk of virus transmission within the workplace will be key considerations.

Employers are not legally required to provide a letter of reference for departing employees, though an arbitrator may order it in rare circumstances. Reference letters are also frequently a component of settlement agreements between an employer and a former employee.

Employers are often concerned about the risks of writing a reference letter if the employee is not successful in subsequent employment. Accordingly, many employers will only provide a confirmation of employment letter, outlining the former employee’s role, duties, and dates of work with no further commentary.

The possibility of an employer being sued for providing an inaccurate positive reference by another employer is remote. In most circumstances, it is advantageous to do so. An employer’s liability for wrongful dismissal can be significantly reduced if a dismissed employee finds replacement employment soon after termination.

Sometimes a negative reference is warranted. Some employers will be concerned about being sued for defamation by the former employee in response to a less than flattering reference. That risk is also limited given the defences of qualified privilege and truth. The former defence insulates potentially defamatory comments made in good faith and pursuant to moral or ethical obligations. While negative references may be appropriate at times, a confirmation of employment is often the preferred path of least resistance.

Legal advice concerning obligations to a former employee is always wise.

Vacation time and vacation pay are two separate obligations under employment standards legislation.

For Ontario regulated employers, the Employment Standards Act, 2000 (“ESA”) stipulates vacation time based on service time. After 1 year of employment, vacation eligibility is 2 weeks, and 3 weeks after 5 years. These are the minimum entitlements. Vacation time must be taken within 10 months after it is accrued, but is scheduled at the employer’s operational convenience.

Technically, vacation time is unpaid. The earned time off is compensated with vacation pay, which is equivalent to 4% of gross wages for employees entitled to 2 weeks’ vacation, or 6% of gross wages for those entitled to 3 weeks’. Vacation pay is earned from day 1 of employment when wages are earned.

Many employers often just continue compensation during the period of vacation, which, in most cases, satisfies their obligation to provide vacation pay. Vacation pay is payable on most forms of compensation that are not discretionary, including bonuses and sales commissions. Accrued but unpaid vacation pay is payable at the time of termination, however caused. Vacation pay issues can be tricky to navigate and cause unexpected liability, particularly when the relationship ends. Proactive legal advice can mitigate the risk.

Under the Ontario Employment Standards Act (ESA), employers must provide between 1 and 8 weeks of notice depending on years of service, but can provide payment in lieu of notice instead (i.e. termination pay).

Under the ESA, employees are only entitled to severance pay once they have been with an employer for 5 years or more, and if the employer either has a payroll over $2.5 million (globally), or if they are letting go of more than 50 workers at once. From there, severance pay is calculated in a formula based on the number of years of the employee’s service, to a maximum of 26 weeks.

These amounts are guaranteed minimums under employment standards law – an employer can offer an employee more than these amounts, but (with narrow exceptions) cannot offer less.

Federally regulated employers must comply with the Canada Labour Code, which prescribes less generous termination and severance pay entitlements, but provides just cause protection for certain employees.

When employers are calculating amounts owed in an exit package, they must remember that ESA amounts are the floor, not the ceiling. An employment contract must be worded appropriately if the employer wants to ensure that an employee is paid only these legal minimums upon termination of their employment. Otherwise, an employer may be liable for significantly more than the minimum ESA requirements.

In Ontario, the Employment Standards Act, 2000 mandates paid time off (with certain exceptions) in respect of the following nine (9) statutory holidays: New Years Day, Family Day, Good Friday, Victoria Day, Canada Day, Labour Day, Thanksgiving Day, Christmas Day and December 26 (Boxing Day). The August Civic Holiday is not an officially recognized statutory holiday, though many employers recognize it. Collective agreements may recognize additional paid days off.

With the federal government’s recent recognition of September 30th as the National Day for Truth and Reconciliation, many employers regulated under Ontario are asking if they are obliged to recognize this new, paid holiday.

The answer is no. While a long overdue recognition of Indigenous people, it only applies to employers covered by the Canada Labour Code, which includes banks, interprovincial transportation businesses and telecommunication companies, among others. The vast majority of Ontario employers, governed by the Employment Standards Act, 2000, are not obliged to recognize the new holiday.

Under the Employment Standards Act, an overtime premium of 1.5 times the employee’s hourly rate must be paid for hours worked in excess of 44 in a work week. Certain employees, however, are excluded from the overtime entitlement, pursuant to Section 8 of Regulation 285/01 of the ESA. The Regulation is comprehensive, listing 17 classes of employees excluded from overtime compensation.

The exclusions range from obvious (managers), to odd (mushroom growers). Salaried employees, however, are not exempted. If not within the list of exemptions, employees paid by salary are entitled to overtime after 44 hours. The premium is applied to the effective hourly rate.

Similar rules and exemptions apply to employers covered by the Canada Labour Code. A premium of 1.5 times the hourly rate applies to hours worked after eight in one day or 40 in a week.

In most cases, yes, but there are exceptions. Determining whether the employer is provincially or federally regulated is also key to determining compensation on

termination. In this topic, we’ll consider employment relationships regulated under Ontario law.

Under Ontario law the Employment Standards Act, 2000 (ESA) establishes minimum requirements for notice of termination or pay in lieu of notice of termination. This can range from 1 week to 8 weeks of an employee’s wages. In addition, severance pay may be payable, if the employer’s annual payroll exceeds $2.5 million and the employee has 5 or more years of service. If payable, severance is 1 week for each completed year of service up to a maximum of 26 weeks.

The employment contract is key to determining an employee’s complete entitlement to compensation on termination. The contract may limit the employee to the ESA minimums. If not, employers have an implied obligation to provide reasonable notice of termination, which includes the ESA minimums for termination and severance pay. What is reasonable will depend on the nature of the position, length of service and the employee’s age. Other factors may affect the notice period length, depending on the circumstances. The availability of replacement employment can significantly limit compensation. Older employees with long service in senior positions tend to be entitled to the longest notice periods. A 65+ year old senior manager with 24 years of service and limited prospects for re-employment may be entitled to 24 months’ notice or pay in lieu of notice, including the ESA minimums.

Again, there are exceptions. Construction employees, employees with less than 3 months service and employees dismissed due to significant misconduct may not be entitled to any compensation on termination, other than earned wages. Permanently disabled employees unable to work may be limited to ESA minimums. The written contract of employment is a key piece of the puzzle. Employees and employers should always obtain legal advice to determine compensation entitlements upon termination and employees should always be given adequate time to consider compensation offers and obtain advice.

Laws vary by jurisdiction.  In Ontario, the Employment Standards Act mandates 1 week per year of service, up to 26 weeks, provided annual payroll exceeds $2.5 million and the employee has at least 5 years’ service.  This is in addition to ESA termination pay, which ranges from 1 to 8 weeks, depending on service.  Where misconduct is the reason for dismissal, the ESA minimums may be exempted.

ESA minimums are often not the end of the story.  Common law requirements may require more generous compensation.  The employment contract must be reviewed, and common law entitlements can be reduced by earnings from subsequent employment or self employment. Employees and employers should always obtain legal advice on termination.

The Code applies to employers under federal jurisdiction while the ESA applies to provincially regulated employers.  Federal employers include banks, telecommunication and interprovincial transportation businesses. The ESA covers the vast majority of employers not engaged in federally regulated activities.

Both statutes reflect minimum standards of employment. A key difference lies in termination requirements. Under the Code, non-managerial employees with more than 1 year of service may only be terminated with just cause. Under the ESA, employers may terminate for any reason if termination and severance obligations are met.

Federal employees therefore have much greater security of employment, akin to unionized employees.  Improperly terminated federal employees can be entitled to significant monetary awards from an adjudicator.

If a business is sold and employees continue with the purchaser, the Employment Standards Act, 2000 (“ESA”) deems service between the 2 businesses to be continuous, for the purposes of the ESA.

The ESA is not the only consideration for a purchaser. Where an employer’s assets are sold, the law deems employment with the seller to be terminated. The purchaser may, however, offer employment to the terminated employees. In addition to the ESA continuity provision, the common law may require the acknowledgement of prior service history for the purpose of calculating notice of termination entitlements. This will depend on the facts and circumstances of each case and may significantly increase the purchaser’s liability for notice of termination.

If the transaction is only a share sale, the law does not deem a termination. Employment relationships between the seller and purchaser continue uninterrupted.

Purchasers can minimize liability in relation to carry-over employees by entering written contracts of employment prior to the sale. The contract can exclude prior service time, provided it does not attempt to contract below the ESA’s continuity of employment requirement.

Employment law advice is always prudent in relation to the sale and purchase of a business.

It depends on the reason for dismissal.

Under the Employment Standards Act, 2000 employees on leave have the right to reinstatement to the same position they had prior to the leave.  If the position no longer exists, they are entitled to a comparable position.  The obligation to reinstate may be exempted if employment ends for reasons wholly unconnected with the reason for the leave.  For instance, the closure of a business unit resulting in a mass termination may exempt reinstatement.

The Ministry of Labour will closely scrutinize the refusal to reinstate.  If any part of the reason to terminate relates to the leave, reinstatement with an order of back wages is likely to be ordered. Employers can find themselves in hot water with sham reinstatements.  Arguments that the returning employee’s replacement is a “better fit” will not fly. Unbundling the duties of a position and redistributing them to other employees will not qualify as a reinstatement exception.

The liability associated with failing to reinstate employees warrants caution and proactive legal advice.