In Ontario, a wrongfully dismissed employee with no employment contract specifying severance entitlement is entitled to damages at common law. These damages are commonly calculated based on a reasonable notice period and pay in lieu of not being provided that reasonable notice of termination. Dismissed employees also have a duty to make reasonable efforts to seek and obtain similar employment to offset these damages (i.e., a duty to mitigate).
The seminal case in Ontario, Bardal v. The Globe & Mail Ltd., establishes the basic test to determine an appropriate notice period for an employee who has been terminated without cause. The Bardal test effectively requires the Court to undertake a very contextual analysis of the case, with special attention to certain factors, including the character of employment, length of service, age and availability of similar positions. These factors are generally examined on a case-by-case basis and they are weighted in each, specific case by the Court to calculate a reasonable notice period. Employers may also be forced to pay more damages if the manner of dismissal was unfair or in bad faith.
Many employers, employees and even some lawyers are confused by, or do not fully understand, the factors that are to be applied to determine a reasonable notice period and, therefore, how to calculate a dismissed employee’s potential severance pay.
Some lawyers may refer to the ‘one month per year of service’ approach – this is incorrect and not the law in Ontario. In fact, there is no cookie-cutter, mathematical formula to calculate severance pay; rather, these several factors must be examined contextually in each case and weighted based on their importance in the specific case.
DURATION OF EMPLOYMENT:
Length of service is only one factor to consider. While generally, the longer the length of service, the longer the reasonable notice period will be, this is not true in every case. Employees terminated after a relatively short period of employment may be entitled to a comparably longer notice period and, therefore, disproportionately more severance pay, depending on the other factors in the case.
Duration of employment, on its own, should not determine severance pay entitlement – it is a factor only, albeit a potentially important one in the case.
Generally speaking, older employees are entitled to more reasonable notice and, as a result, more severance pay. This is so to reflect the increased challenges older employees are likely to face in re-entering the workforce verses their younger counterparts.
However, again, age is not determinative of reasonable notice and younger employees should not assume they have no entitlement to severance pay – that is very likely not the case.
NATURE AND TYPE OF POSITION HELD:
Historically senior, managerial, supervisory or employees with specialized skills, training or responsibilities are likely entitled to more reasonable notice. However, a trend is emerging in Ontario to focus less on the position held on termination in favour of paying more attention to the availability of comparable opportunity to the employee and any challenges the employee may face in securing that alternative employment.
In any event, it is still the case in Ontario that an employee with more responsibility is generally entitled to more severance pay – it remains an important factor to consider.
In addition to the Bardal factors for calculating severance pay, other factors may also arise to amplify reasonable notice entitlement depending on the specific case, such as:
if the employee was effectively lured away from an existing position, recruited or induced to accept employment with the terminating employer;
if the employee is faced with non-competition, non-solicitation or other limitations or restrictions on his or her ability to find suitable, alternative employment (which typically arise in an employment contract);
if the employee suffers from a physical, emotional or mental health-related disability or condition, or has special family status obligations, for example, creating special challenges for the employee to mitigate his or her termination and resulting severance pay; and/or
if the employer alleges cause for the termination, refuses to provide a reference, or otherwise alleges justification for terminating the employee, making it more difficult for the employee to find alternative employment.
THERE’S NO APP FOR THAT:
Severance pay tools, apps and calculators are increasingly appearing online, sometimes by providers located outside of Ontario.
However, there is no specific formula available to calculate severance pay entitlement – every case will be different, based on the specific circumstances of that case. Generally, lawyers and the Court will consider awards in other, possibly similar cases, but no two cases are ever the very same.
Terminated employees should, therefore, be wary of relying on online tools to calculate entitlement to reasonable notice damages and severance pay. Truly, the best and most reliable way to determine your potential entitlements if you are wrongfully terminated is to speak to a qualified, experienced employment law lawyer.