Wrongful Dismissal Damages – Be Careful!

I often get asked, “How much money do I have to pay someone if I terminate their employment?”

These situations must be handled carefully, and there are a number of things you must take into consideration when determining the “Notice Period”. “Notice Period” refers to the amount of advanced warning you have to give someone when you terminate their employment.  If you are able to let the employee work during the Notice Period, it can be beneficial for both parties. If the employee is not able to work during the Notice Period, you must pay them for that Notice Period (referred to as “compensation in lieu of notice”).

The biggest point to remember is that the Employment Standards Act only provides a “bare minimum” of Notice.  Courts are constantly overturning these small amounts in favour of larger awards to the dismissed employee.

If they are being let go for “just cause” (actions that are so serious you fire them immediately) they are likely not entitled to a Notice Period or compensation in lieu of Notice. But be careful. The action(s) supporting termination of employment must be very serious and have serious impact on the company and/or other staff.

If you are terminating employment “without cause” (such as being permanently laid off or fired for reasons that are not as serious), they are entitled to a Notice Period, and the amount of notice depends on many factors.

You must consider the age of the employee and their skill level, as well as how long they have worked for you.  How likely is it that this person will be able to find another job with similar responsibility and pay level? (Think of a worker who is over 50 and has only high school education). The longer it is likely to take for them to find a new job, the more you would have to pay.

Also consider any non-competition clauses in the employment agreement. Are they “not permitted” to work for a period of time to avoid competition with your company? You would be required to pay them for that time as well.

But most of all, be very careful about how you handle the termination.  You must be very respectful of the person being terminated, and understand that it is a great blow to someone’s dignity to lose their job.  If an employer further aggravates the situation by threatening or intimidating the worker, or refusing to pay what is reasonably owed for a Notice Period, the courts will be very hard on the employer.

The courts in Ontario and other provinces provide for punitive and aggravated damages when the employer uses “just cause” as the reason for dismissal, when in fact there were not sufficient grounds for “just cause”.  In some cases, the employer went so far as to spread rumours about the dismissed person. These awards are in the hundreds of thousands of dollars and are over and above any money owed for the Notice Period.

For more information on punitive and aggravated damages, read the great article written by Attorney Andrew Cogswell (click here).