In Ontario, an employee can be terminated in two ways—with cause or without cause. A ‘without cause’ termination means that an employer can terminate an employee at any time without a reason.
Is Termination Without Cause Legal?
Yes, an employer can terminate an employee without cause legally, however, there are a few rules that come with doing this.
- Without Cause Terminations Must Come with Notice
First, for an employer to terminate an employee without cause, an employer must provide an employee with: 1) reasonable notice of dismissal; or 2) pay in lieu of notice.
Reasonable notice of dismissal is essentially a ‘heads up’ from an employer that the employee’s employment will end on a certain date. ‘Pay in lieu of notice’ means that an employer does not want the employee to continue working during their notice period and will instead pay an employee the amount that they would have earned if they continued working for that period.
Most employees are entitled to notice (either under the Employment Standards Act (“ESA”) or the common law), and this is usually based on how long an employee has worked for an employer—though other factors are considered at common law such as age, salary, and job title. Under the ESA, employees are entitled to statutory notice or pay in lieu of notice or a combination of both, plus statutory severance pay, if the employer has a payroll larger than $2.5M and the employee has worked for at least five years.
- Without Cause Terminations Can’t Be Discriminatory
Second, an employer cannot terminate an employee for discriminatory reasons thanks to the Ontario Human Rights Code. For example, if your boss learns that you intend to start a family and decides to terminate you because they believe you’ll miss too much work taking care of a child, this would be discrimination based on ‘family status’ and would be an illegal termination.
- Without Cause Terminations Can’t be to ‘Get Back’ at Employee Enforcing Rights
An employer cannot terminate an employee without cause to ‘get back’ at an employee for enforcing certain rights, such as your right to a safe work environment under the Ontario Health and Safety Act or your right to payment of wages under the Employment Standards Act. Doing so would be an illegal termination.
- No Contracting Out of the ESA
Similarly, your employer cannot limit your entitlements upon a termination without cause to notice, pay in lieu of notice, or a combination of both, to less than what is guaranteed by the ESA.
If your employer attempts to terminate your employment under protected grounds, or attempts to limit your entitlements below the minimum, you should contact our firm immediately.
Without Cause Provisions in Employment Contracts
If your employment contract has a termination clause, it may say something like “You will receive your minimum entitlements pursuant to the Employment Standards Act”. If your contract references the Employment Standards Act (“ESA”) in a termination provision, your employer is likely trying to minimize your notice entitlements to the bare minimum allowed for by law. The ‘common law’—the law created and maintained by the courts—offers employees far more notice than the ESA. For this reason, employers like to ‘contract out’ of the common law by stating employees will get the minimum under the ESA.
Invalidating a Termination Clause
In the 2020 decision of Waksdale v. Swegon North America, the Ontario Court of Appeal held that ‘without cause’ and ‘with cause’ termination clauses in employment contracts must be read together. This means that if a ‘with cause’ provision violates the Employment Standards Act, then the ‘without cause’ portion of the contract gets thrown out too. This trick can be used to invalidate a perfectly drafted ‘without cause’ provision and increase an employee’s entitlements to compensation after being let go.
Because of this decision, a large majority of termination clauses in employment contracts in Ontario are now void. There are many other reasons why a termination provision may be legally unenforceable. If you have just been terminated ‘without cause’ or you are offered a severance package that limits you to your ESA entitlements, you may benefit by having a lawyer review your contract to see if you can get more compensation than your contract suggests.
Please note that this article is only to be used as general information and it does not constitute legal advice. We encourage employers and employees to contact Levitt Sheikh directly to better understand ‘without cause’ issues and seek legal advice to their questions.
