Several decisions of the Ontario Superior Court of Justice have held that the standard to dismiss an employee without notice under the Ontario Employment Standards Act (“ESA”) is higher than the standard to dismiss an employee for “cause” at common law.
It is difficult to understate the significance of these decisions given the June 2020 bombshell decision Ontario Court of Appeal decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391. In Wasdale, the Court that held a “termination for cause” clause in an employment contract that allows the employer to terminate the employee’s employment without notice in circumstances when the employee would be entitled to notice under the ESA is void. As a result, a dismissed employee whose employment contract contains a void termination for cause clause will be entitled to reasonable notice of dismissal even if his or her employment contract contains a properly drafted termination without cause clause and the employee was not terminated from his or her employment for cause
Sections 2(1)(3) and 9(1)(6) of ESA Ontario Regulation 288-01 of the ESA 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.”
Justice Brown explained why in Khashaba v. Procom Consultants Group Ltd., 2018 ONSC 7617 at para. 53 why the ESA “wilful misconduct” standard is higher than cause at common law:
Wilful misconduct involves an assessment of subjective intent, whereas just cause is a more objective standard. Wilful misconduct is colloquially described as “being bad on purpose.” Careless, thoughtless, heedless, or inadvertent conduct, no matter how serious, does not meet the ESA wilful misconduct standard. By contrast, common law just cause for dismissal may be found on the basis of prolonged incompetence, without any intentional misconduct.
See also: Oosterbosch v. FAG Aerospace Inc., 2011 ONSC 1538 at paras. 16-19; Plester v. Polyone Canada Inc., 2011 ONSC 6068 at paras. 53 to 57, aff’d 2013 ONCA 47; and Cummings v Quantum Automotive Group Inc., 2017 ONSC 1785 at paras. 70 to 74.
For example, in Oosterbosch 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.
It is common in Ontario for employment contracts to contain a termination clause that states that the company can terminate the employee’s employment without notice for cause. These termination clauses are now, arguably, void.
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