What is "Wrongful Dismissal?"

For that matter, what is "unjust dismissal" or "constructive dismissal?" This article provides some brief definitions for these and other bits of employment law legalese.

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What is wrongful dismissal?

“Wrongful dismissal” is when an employer fires an employee without enough advanced notice.

That’s it. The adjective “wrongful” has nothing to do with the employer's reasons for terminating the employee. Generally, as long as an employer provides appropriate advanced notice, the employer has the legal right to terminate an employee for whatever reason (or no reason at all), no matter how misguided. A dismissal only becomes “wrongful” when the employer gives insufficient notice.

Employers are not allowed to fire employees for discriminatory reasons or as a reprisal against employees who assert workplace rights. But we don’t call these situations “wrongful dismissals.” These would be described as claims for “discrimination” or “reprisal.”

What is working notice?

“Working notice” refers to when an employer allows an employee to continue working through their “notice period” up to the last day of work. The law expects the employee to work as though it’s business as usual. An employer who gives sufficient working notice may not have to pay the employee any additional compensation at the end of the notice period.

What is Pay in Lieu of Notice?

Employers often choose to provide equivalent pay instead of working notice. This is sometimes called “pay in lieu of notice.” This sounds fancier than “pay instead of notice,” but it means the same thing.

If the employer offers enough pay, the employee will have nothing to complain about. Even though this is still technically a “wrongful” dismissal, the employee has been fully compensated for the wrong.

What is Termination Pay?

“Termination Pay” is a defined term under the Employment Standards Act (the “ESA”). It refers to the pay an employer must provide an employee if they choose not to provide the minimum notice required under the ESA.

The ESA establishes minimum requirements only. Under general contract law, employees are often entitled to more notice than the bare minimum under the ESA. Strictly speaking, the phrase “termination pay” refers only to the ESA entitlement. As such, the phrase “termination pay” is not interchangeable with “pay in lieu of notice.” It specifically means “pay instead of the minimum notice under the ESA.”

What is Severance Pay?

“Severance pay” is a another entitlement under the Employment Standards Act which provides an employee with pay upon dismissal. It has nothing to do with “notice” and cannot be satisfied with “working notice.” It is only owed in certain circumstances. But, when it is owed, it is in addition to ESA termination pay.

In common parlance, the term “severance” is often used to refer to any pay offered to an employee upon dismissal. This can cause confusion because, strictly speaking, the phrase “severance pay” refers only to the specific ESA entitlement and does not have this broader meaning. In common parlance, no one would use the phrase “common parlance.” I apologize.

What is “Reasonable Notice?”

Unless there is a valid written termination provision that says otherwise, it is an implied term of every employment contract that the employee can only be dismissed with “reasonable notice.” The entitlement to “reasonable notice” is greater than the minimum entitlements to “termination pay” and “severance pay.” (But payment of the ESA amounts can partially satisfy the “reasonable notice” amounts owed.)

What is “reasonable” varies from case to case and depends on a number of factors. I have previously written a review of all the “reasonable notice” awards made by judges in 2018 cases. The phrases “reasonable notice,” “pay in lieu of notice,” and “wrongful dismissal damages” broadly refer to the same legal entitlement.

What is a Constructive Dismissal?

An employee is constructively dismissed when an employer acts in a way that signals its intention to no longer be bound by the employment contract. This can happen when an employer makes significant, unilateral changes to a worker’s employment. Or it can happen when an employer maintains a toxic work environment which makes an employee’s continued employment objectively intolerable.

On its own, proof of a “constructive dismissal” doesn’t actually get an employee any additional compensation for the employer’s improper conduct. It simply permits an employee to quit and nevertheless obtain compensation as if they had been fired without notice.

In that sense, the compensation for a “constructive dismissal” is no different than a “wrongful dismissal.” In constructive dismissals, the employer has terminated the employee implicitly. In wrongful dismissals, the employer has done so explicitly.

When an employee quits a job, they are not typically entitled to any compensation. Proof of a constructive dismissal allows the employee to overcome this restriction.

What is Just Cause for Dismissal?

Sometimes, in instances of serious employee misconduct or prolonged incompetence, an employer can summarily dismiss an employee without notice or pay in lieu of notice. In these instances, we say the employer has “just cause” to terminate the employee (or we say the dismissal was “for cause”). When there is no allegation of “cause,” we say the termination is “without cause.”

“Just cause” dismissal is described as the “capital punishment” of employment law. Because it is difficult for employers to prove that misconduct rises to the level of “just cause,” many employers will dismiss an employee “without cause” even when perceived performance issues underlie its decision to terminate.

The “just cause” standard is only relevant to contractual “reasonable notice” awards. It does not apply to the ESA entitlements (termination pay and severance pay). An even higher standard of “wilful” misconduct exists under the ESA in order for an employee to lose their minimum entitlements. So, an employee may still be entitled to termination pay and severance pay under the ESA, even if an employer proves “just cause” for dismissal.

Many lawyers and judges don’t make this distinction and use the phrase “just cause” as an all-encompassing phrase to refer to any misconduct which disentitles employees to any notice or pay. That is an incorrect use of the phrase.

What is an Unjust Dismissal?

An employee cannot typically sue to get their job back after being terminated. But, in certain limited circumstances, reinstatement may be available. These are sometimes referred to as “unjust dismissal” claims.

Unlike most employees, some federal employees governed by the Canada Labour Code have the right to keep their job unless the employer can show “just cause” for the dismissal. A “without cause” termination of qualifying federal employees is considered an “unjust dismissal” (unless certain exceptions apply to the situation), and the employee can seek reinstatement.

Many unionized workers have similar protections under their collective bargaining agreements. Their union can pursue reinstatement on their behalf in appropriate circumstances, and this may be referred to as an “unjust dismissal” claim.

Reinstatement is also sometimes available when an employee is dismissed for discriminatory reasons or as a reprisal for asserting workplace rights. However, these don’t tend to be referred to as “unjust dismissals.”

What is a layoff?

When an employer has a shortage of work, they may place an employee on a “temporary layoff.” The employee is not dismissed and may be called back when work becomes available.

The Employment Standards Act defines the maximum length of a “temporary layoff.” If a temporary layoff exceeds this length, it is deemed to be a termination of employment.

The phrase “permanent layoff” should be avoided because it creates confusion. A “permanent” layoff is just a termination, and all layoffs are temporary.

In everyday usage, the term “layoff” or “laid off” may be used as a friendly euphemism for being fired. This is technically wrong and can cause confusion. Someone who has been laid off has not been terminated. Being laid off is not the same as being terminated without cause. The impulse to confuse these terms may stem from the perception that “termination” and “dismissal” carry the stigma of workplace misconduct even though they don’t technically imply any misconduct whatsoever.

A collective agreement or employment contract might define different types of layoffs applicable to that workplace. Unless an employer has a specific provision in the written employment contract permitting layoffs, no right of temporary layoff exists. (Although, sometimes this can be implied from the nature of the industry in which an employee works.) Placing an employee on a temporary layoff without the right to do so could be construed as a constructive dismissal.


 

Ben J. Hahn is an Ontario Employment and Civil Litigation Lawyer. Learn more about Ben here.

 

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