We write often in our blog about issues relating to termination payments, such as the requirements under employment legislation and the common law and the impact of employment contracts. But there are other, more procedural, requirements that employers need to comply with when terminating an employee. The consequences of not complying with these requirements can be serious.
This article takes a look at some of the termination-related requirements imposed on employers by the Ontario Employment Standards Act (ESA) and the potential consequences of non-compliance. We also look at a recent decision of the Ontario Superior Court of Justice in which an employee asked the court for moral damages following the failure of his employer to meet ESA requirements.
The ESA termination-related employment standards
Under the ESA, employers need to comply with certain employment standards when terminating an employee.
In most cases, when an employer terminates an employee who has been continuously employed for three months, they need to provide the employee with either written notice of termination or termination pay in lieu. Importantly, if notice is given, it must be given in writing. We have written more about calculating the statutory period of notice or termination pay here.
During the notice period, the ESA requires that employers comply with certain requirements, including:
- not reducing the employee’s wage rate or altering any other term or condition of employment;
- not paying less than the employee’s regular wages for a regular work week; and
- continuing to make benefit plan contributions.
Payment, including statutory termination pay, needs to be paid within seven days after employment ends or on the employee’s next regular pay date, whichever falls later.
Employers also normally need to issue a record of employment (ROE) in the event of termination to both the employee and Service Canada. Deadlines apply under the federal Employment Insurance Regulations.
The potential consequences of failing to comply
Failure to meet employment standards on termination can lead to significant penalties for employers.
Firstly, failure to comply with the ESA can be subject to enforcement by employment standards officers that can issue financial penalties.
Secondly, courts do not look kindly on ESA non-compliance when assessing damages for wrongful dismissal. They can award additional amounts for moral and/or punitive damages if the employer breaches the duty of good faith at the time of termination, for example, by being “untruthful, misleading, or unduly insensitive.” Failure to comply with ESA requirements can justify awarding these additional damages to terminated employees.
Plaintiff general manager terminated without cause
In Teljeur v Aurora Hotel Group, the plaintiff was employed for about three years as the general manager of a resort and golf course in Haliburton, Ontario.
In December 2021, two of the employer’s senior executives told him that he was being terminated because the resort was going to be managed by an outside company. The plaintiff recorded the meeting and submitted a transcript of the discussion as evidence.
During the meeting, the plaintiff asked for confirmation of his termination in writing, but despite agreeing, the employer never did so. He worked the remainder of the week and was told that he would also receive eight weeks of “severance”.
Plaintiff only received ESA termination pay and there was a significant delay
Despite this assurance, the employer only paid the plaintiff his statutory termination pay under the ESA. In addition, the employer said that it mailed this to him as a cheque on January 14, 2022. The plaintiff never received this, and a new cheque was sent in June.
The plaintiff had also spent almost $17,000 on behalf of his employer, and he was trying to get reimbursed. The employer had not paid him back and cited the plaintiff’s demand for interest on the amount owing as the reason it had not done so.
The plaintiff sued his employer for common law damages for reasonable notice, reimbursement of the out-of-pocket expenses and moral damages for the employer’s bad faith.
Court awarded damages for reasonable notice, reimbursement and moral damages
Justice McKelvey decided, based on an application of the Bardal factors, that the plaintiff was entitled to damages assessed at seven months’ salary as reasonable notice. His Honour also awarded reimbursement of the expenses.
On the issue of moral damages, his Honour said:
“I have concluded that a claim for bad faith damages should be awarded in this case. As noted previously, the termination meeting was surreptitiously recorded by the plaintiff. This recording, however, highlights a number of disturbing aspects about the plaintiff’s termination.”
“Disturbing aspects” included failure to comply with the ESA
Justice McKelvey noted several disturbing aspects that warranted an award of moral damages, including the employers:
- failure to give written notice of termination;
- failure to pay the plaintiff’s ESA entitlement within seven days of the employment ending or on the next pay date;
- failure to repay the principal amount of the out-of-pocket expenses, which represented 23% of the plaintiff’s annual income;
- payment of the statutory termination entitlement after telling the plaintiff he would receive eight weeks’ pay; and
- attempt to encourage the plaintiff to resign.
His Honour decided that this conduct was untruthful, misleading or unduly insensitive and that the employer breached its duty of good faith and fair dealing in the manner of the plaintiff’s termination. His Honour awarded $15,000 for moral damages after finding that the manner of termination caused the plaintiff mental distress.
Contact Haynes Law Firm in Toronto for Guidance on Employee Termination
Navigating the termination process can be difficult. Paulette Haynes and her team at the Haynes Law Firm strategically advise employers on their obligations, reducing the chances of potentially expensive and time-consuming wrongful dismissal claims. We also help employees fight for their entitlements so that they have the means to re-establish themselves following termination. Please contact us to discuss your employment law matter through either our online form or by phoning us at 416.593.2731.
