Employers May Still Have To Pay Statutory Notice And Severance Even If They Have 'Just Cause' To Fire An Employee

Can an employee who is fired for "just cause" be denied termination or severance pay under the Employment Standards Act, 2000, S.O. 2000, C. 41 ("ESA")? In light of last year's decision in Oosterbosch v. FAG Arospace Inc., 2011 ONSC 1538 ("Oosterbosch"), it appears "just cause" will not always be enough. An employee whose conduct is not "wilful" will still be entitled to statutory termination and severance pay even if that conduct constitutes "just cause" for dismissal at common law.

Both the ESA and the common law govern the termination of employees with and without cause in Ontario. Employers are required to fulfill obligations arising out of both regimes. While employers can limit an employee's common law rights by contract, they cannot contract out of their obligations under the ESA. Among these obligations is the requirement to provide termination and/or severance payments to employees who are fired, except in certain circumstances.

The ESA requires that a terminated employee receive one week of notice per year of employment, to a maximum of eight weeks or payment in lieu thereof, and, in certain cases, payment in respect of "severance" in the amount of an additional one week per year up to a maximum of 26 weeks.

The common law requires that terminated employees receive "reasonable notice" of termination. Unless expressly limited in a contract of employment, the notice period required by the common law, or payment in lieu thereof, will usually be significantly more than the one or two weeks per year required by the ESA.

Under both regimes an employer may have the right to terminate an employee without any notice where there is sufficient justification for doing so. Unfortunately, the requisite justification is different under each regime.

At common law, no notice or compensation is owed to an employee who is terminated for "just cause". Whether an employee is terminated for "just cause" depends on whether his or her conduct amounts to a repudiation of the employment relationship. An employee's conduct does not have to be "wilful" in order to repudiate the employment relationship and provide an employer with "just cause" to terminate without notice. Carelessness may satisfy the test.

However, under the ESA, the employee's conduct must amount to "wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer" (ESA, s.55; Termination and Severance of Employment, O Reg 288/01, s.2(1)...