The Difference between Cause at Common Law and the Ontario Employment Standards Act, 2000
There is case law to support the position that the standard to dismiss an employee for just cause at common law is lower than the standard to dismiss an employee without notice pursuant to the ESA.
Sections 2(1)(3) and 9(1)(6) of ESA Ontario Regulation 288-011 of the Employment Standards Act states that an employer is not required to pay statutory notice or severance pay to ”an employee who has been guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.”
In the 2011 decision Oosterbosch v. FAG Aerospace Inc.2 the trial judge found that the employer had met its burden of establishing that it had just cause to terminate the employee. However, the judge held that the employer had failed to prove that the plaintiff’s “offending behavior” represented “wilful misconduct, disobedience or wilful neglect of duty” that would disentitle him to receipt of termination and severance payments under the provisions of the ESA. As a result, the plaintiff was awarded damages for the employer’s failure to pay him his statutory notice and severance under the ESA.
If FAG Aerospace is an accurate statement of law, termination clauses in employment contracts that purport to allow an employer to terminate an employee “for cause” at common law and also limit an employee’s entitlement to the minimum notice and severance to the minimum standards of the ESA are, arguably, unenforceable. The termination clause would represent an attempt to unlawfully provide the employee with no notice of dismissal in circumstances when the employee is entitled to statutory notice and severance. The determination of whether a termination clause in an employment contract is lawful is at the time the contract is formed. Therefore a termination clause is unenforceable and will not rebut the presumption of reasonable notice if it potentially breaches the ESA in the future. In this regard, see the British Columbia Court of Appeal’s decision Shore v. Ladner Downs.3
A properly drafted termination clause should, instead, reference the higher ESA standard – i.e. a termination without notice or pay in lieu of for “wilful misconduct, disobedience or wilful neglect of duty”.