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Termination Without Cause in Ontario: A Guide for Employers

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Termination of employment can be a difficult situation for employers to navigate. But it is often a necessary component of running a business and managing employees.

What are the two types of terminations of employment in Ontario?

There are two main kinds of terminations of employment in Ontario:

  • Termination for cause
  • Termination without cause

This blog explains what termination without cause looks like in Ontario and how employers can ensure they handle these terminations correctly and in compliance with the law. Doing so would help protect your business from wrongful dismissal claims.

Employment contracts must have termination clauses that are clearly worded, enforceable, and set out termination pay. Job contracts are generally enforceable so long as they are compliant with the Ontario Employment Standards Act and other rules, such as the Ontario Human Rights Code.

What is termination without cause?

Termination without cause is when an employer terminates an employee without providing them with a reason for being let go. Ontario’s ESA does not require employers to provide a reason for dismissing employees. However, employers must give reasonable notice of dismissal or pay in lieu of notice if the employee being discharged has been continuously employed with the same employer for more than three months.

The amount of notice required depends on the employee’s length of service with the company. The employer can also provide the employee with a combination of termination notice and termination pay as long as they equal the length of notice the employee is entitled to.

Although employers have the right to terminate an employee without cause, they must ensure the reason for terminating the employment is not based on a protected ground under the Ontario Human Rights Code.

Even if they provide the correct amount of notice or pay in lieu of notice, employers cannot dismiss an employee, intimidate, or punish them for asking questions about the ESA or the Occupational Health and Safety Act (OHSA), or exercising their rights under the ESA or OHSA, such as taking a leave of absence or refusing unsafe work – this is called reprisal.

Is there risk involved in a termination without cause?

The risk for employers in termination without cause is that the employee may sue for wrongful dismissal. To avoid such a situation, employers must provide the employee with termination notice, termination pay, or a combination of both. It is also important to handle the termination process with professionalism and empathy.

For advice on how to carry out a termination of employment smoothly, please refer to our blog on terminating employment.

What about termination with cause in Ontario?

If the employee is being terminated for cause in Ontario, such as wilful misconduct, wilful neglect of duty or harming the company, they are not entitled to notice of termination or termination pay under the Ontario ESA.

But the employer must provide the employee with reasons for termination of employment.

What are the rules on providing notice of termination?

When it comes to termination of employment, employees are usually entitled to notice, or compensation in lieu of notice. In some cases, you may also be required to provide your employees with severance pay.

Employers can terminate an employment without notice if the employee has worked for them for less than three months.

But once an employee has continuously worked for you for three months, they are entitled to a notice of termination, or termination pay in lieu of notice.

The amount of notice depends on an employee’s length of employment. The minimum requirements for notice period as outlined under the Ontario Employment Standards Act are as follows:

Length of employment  

Notice period

 

More than three months, but less than a year One week
One year or more, but less than three years Two weeks
Three years or more, but less than four years Three weeks
Four years or more, but less than five years Four weeks
Five years or more, but less than six years Five weeks
Six years or more, but less than seven years Six weeks
Seven years or more, but less than eight years Seven weeks
Eight years or more Eight weeks

Is termination pay in Ontario the same as severance pay?

No. Severance pay is not the same as termination pay.

Who is entitled to severance pay?

Severance pay applies to employees who have been employed with the same employer for five or more years, and where the employer has a global payroll of at least $2.5 million per year. Severance pay is an additional week of pay per year of service, up to a maximum of 26 weeks.

Severance pay is paid to a qualified employee when the employment is “severed.” Severed employment refers to situations where the employer:

  • Dismisses the employee, including in instances of bankruptcy or insolvency
  • Constructively dismisses the employee who resigns in response
  • Lays the employee off for 35 or more weeks in a 52-week period
  • Permanently discontinues all business at a location

Severance pay:

  • Compensates for loss of seniority
  • Rewards the employee for the development of firm-specific skills, and
  • Recognizes long service.

What happens if an employer does not have a job contract or termination clause in the contract?

In such a case, the employee is entitled to the common-law definition of “reasonable notice” or compensation in lieu of that notice.

In what cases does the law in Ontario prohibit termination?

Termination of employment in Ontario is prohibited for certain reasons, including:

  • Asking about or exercising a right under the ESA
  • Refusing to work more than the daily or weekly hours of work maximums, or
  • Taking a leave of absence the employee is entitled to.
  • For a discriminatory reason that violates a protected ground under the Ontario Human Rights Code, such as physical or mental disability, age, race, sex (including pregnancy), sexual orientation, religion.

Do you need advice on terminating employees?

Peninsula’s experts can help you develop company policies, and assist you with any other HR, health & safety, or employee management matters that arise. See how we have helped other small and medium businesses get their business compliant with provincial legislation.

To learn more about how our services can benefit your business, call an expert today: 1 (833)-247-3652.