Market Insider By Peter Tremblay 406 Views

What’s the Meaning of Termination of Employment?

Terms such as ‘discharge’, ‘dismissal’, ‘fired’, ‘permanently laid off’ and ‘let go’ are often used to describe situations when employment is terminated.

In Ontario, the Employment Standards Act, 2000 (ESA) defines termination of employment in three ways. A person’s employment is terminated if:

  • The employer dismisses/stops the employing and employee due to factors like bankruptcy or insolvency.
  • The employer constructively dismisses an employee and the employee hands in their resignation letter in response within a reasonable timeline.
  • The employer lays off the employee for a period longer than a ‘temporary layoff’.

In most cases, employers are required to provide an employee with either a written notice or termination pay (or both) before laying off an employee who has been continuously employed for 3 months. The notice period given should be equal to the weeks of termination pay that the employee is entitled to receive.

Note that, ESA doesn’t require employers to give employees reasons why their contract is being terminated but there are situations where the employer cannot lay off an employee even if they are prepared to give a written notice and termination pay. For instance, an employer cannot terminate an employee because he/she raised concerns about working in excess of the daily or weekly hours of work maximums or due to taking leave.

Do you qualify for termination notice or pay in lieu?

Not all employees are entitled to notice of termination or pay in lieu. There are exemptions to notice of termination or termination pay under the ESA.

Examples of employees who are not entitled to notice of pay in lieu include:

  • Employees who are found guilty of misconduct or disobedience
  • Employees who willfully neglect their duty. The term willfully is used here to include only the situations where the employee either acted recklessly or intended the resulting consequences. Employees who are terminated due to neglecting their duty unintentionally or accidentally are generally not considered ‘willful’.   
  • Construction employees: This included employees who are working off-site or at the construction site.
  • Employees who have reached their age of retirement: This termination should not contravene the human rights code.
  • Employees on temporary layoff
  • Employees who refuse to accept a reasonable and alternative employment offer that is available under seniority system.
  • Employees who have been employed for less than 3 months
  • Employees who fail to return to work within a reasonable timeline even after being recalled from a temporary layoff.
  • Employees who have been dismissed because the contract of employment has become difficult to perform (it has become difficult for the employer to keep the employees working) or has been frustrated by an unforeseen event such as a fire or flood.

What is constructive dismissal?

Constructive dismissal is when the employer makes a significant change to the employee’s fundamental terms or working conditions without the employee’s actual or implied consent, often with the aim of forcing him/her to resign.

Common cases involve employers who make significant salary reductions or change the employee’s work location, hours of work or position. These significant negative changes can force the employee to resign. When this happens, the employee is said to be constructively dismissed.

Another common occurrence is when the employee is harassed or abused by the employer or the employer gives the employee an ultimatum to quit or be fired which forces the employee to resign.

Who is entitled to termination pay?

Termination pay is often given to an employee who doesn’t receive a written notice of termination during dismissal. This is simply a lump sum payment that is calculated based on the no. of hours worked every week and the regular wages that the employee would have otherwise been entitled to if he/she was given a notice period.

Employers are also required to pay all the contributions that would have been required if the employee would have still been employed throughout the notice period. Employers must ensure the termination pay includes any benefits or pension plans that applied to the employee through the notice period.

When is termination pay given to the terminated employee?

Termination pay must be paid to the employee either 7 days after their employment is terminated, or on the next regular pay date.

Recall rights

Some employees have recall rights even after being laid off. A recall allows an employee on a layoff to be called back to work by their former employer, usually under different terms and conditions of employment.

If an employee who has recall rights and is entitled to termination pay after a layoff of 35 weeks or more, is called back to work by their employer, he/she may choose to:

  • Keep their recall rights and not be paid termination pay
  • Give up their recall rights and receive termination pay

Should the employee, who is not represented by a trade union, fail to make a choice, the employer is required to send the full termination pay (and severance pay if applicable) to the Director of Employment Standards, where the money is held in trust.

For employees who are represented by a trade union, failure to make a choice entitles the employer and trade union to come to an agreement to hold the termination pay in trust on behalf of the employee. If the efforts to come to an agreement have failed, the employer must send the termination pay to the director of Employment Standards who holds the money in trust.

Recall rights can expire or the employee can choose to give up their recall rights. If this happens, the termination pay (and severance pay if any) held in trust is sent to the employee.

If the employee accepts a recall back to work, the money held in trust is sent to the employer.

What is wrongful dismissal?

ESA provides rules on termination and severance of employment but these are the minimum rules. Employees still possess their rights under the common law that can be considered more than the rights of notice of termination or payment in lieu under the ESA. This entitles employees to sue their former employers in court for ‘wrongful dismissal’. Employees who choose to sue their employers for ‘wrongful dismissal’ cannot claim the termination pay or severance pay for the same employment contract. One is required to choose one or the other. It is important to get the advice of an experienced wrongful dismissal lawyer concerning your rights.