Damages in Employment Claims – a Dispute or Dismissal

Badre Law - Employment Lawyers - Damages in Employment Claims

In an employment dispute or wrongful dismissal claim, there are a number of potential heads of damages or areas of compensation that you may be able to pursue from your employer. Some of the damages in employment claims include compensation for:

  • Termination pay (notice period);
  • Human rights damages;
  • Aggravated damages; and
  • Punitive damages.

Termination Pay

Termination pay includes various salary and other entitlements that you are legally entitled to receive when your employer terminates your job without cause. There are three basic aspects to termination pay, including (i) pay in lieu of notice; (ii) severance pay; and (iii) other financial compensation entitlements.

When you are terminated without cause, your employer is supposed to give you advanced notice, or pay in lieu of notice. Most wrongful dismissal claims allege that the amount of notice or pay received was too little. As your employment lawyers we will seek you recover for you compensation for the period of notice that you should have appropriately received when you were let go. This amount will vary depending on a number of different factors.

You may also be entitled to severance pay. Severance pay is different from pay in lieu of notice. Severance only applies if one of the following two conditions exist:

  • You are one of 50 or more employees who were terminated within a 6-month period because your employer permanently discontinued part or all of their business;

or

  • Your employer has a payroll of $2.5 million or more at the time of your termination.

When severance pay applies, you are entitled to be paid one week salary for every year employed with the company.

Lastly, you may be entitled to other compensation if there was other payments you should have received if you were never terminated, that fall within your applicable notice period. For example, if you receive a Christmas bonus every year, and your termination notice period falls over the Christmas holidays, you can claim your bonus as part of your termination pay in your lawsuit.

Human Rights Damages

Your termination may have been due to a protected ground under Ontario’s Human Rights Code, the legislation in Ontario that protects employees from discrimination on the basis of certain protected grounds. These protected grounds are: race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, gender identity, gender expression, age, record of offences, marital status, family status, or disability.

Common examples where human rights damages apply are where your employer fires you for a reason not permitted under human rights legislation, such as because of a disability. If you prove an allegation of discrimination, you may be entitled to additional compensation for infringement of your human rights.

To prove discrimination, you must show that:

  • You have a characteristic that is protected by the Code.
  • You were treated differently.
  • The characteristic was a factor in your differential treatment.

Aggravated & Punitive Damages

Aggravated and punitive damages are meant to provide additional compensation above and beyond other provable damages. Both are very rarely awarded and difficult to prove.

Aggravated damages are meant to be compensatory, and exist where other damages are insufficient to compensate you for your losses after your termination. For example, if you were terminated under harsh circumstances resulting in severe mental anguish, you may be entitled to aggravated damages beyond your notice period. This claim, however, would require proof, such as a psychologist’s report. You cannot simply claim that you suffered mental anguish without any proof.

On the other hand, punitive damages are meant to punish the employer, as opposed to compensating the employee. For punitive damages to be awarded, there must be some sort of malicious, oppressive, or high-handed conduct proven. Punitive damages are almost never awarded.

It is important to understand that just because your employer claimed they had cause to fire you, but turned out to be wrong, this in itself is not sufficient to justify aggravated or punitive damages. An employer is entitled to allege cause and be wrong, as long as the employer had a reasonable basis which they relied upon for proof of cause.

Entitlements under the Employment Standards Act

If you are entitled to pay in lieu of notice upon termination, there are three different ways to calculate your potential entitlement:

  • Entitlements under the Employment Standards Act.
  • Entitlements under common law.
  • Entitlements under your employment contract.

In Ontario, it is the Employment Standards Act or “ESA” that applies to most employment situations, with some professions being exempted. The ESA is known as “floor legislation” which means that it establishes minimum standards that apply to employees and employers, such as benefit entitlements, hours of work and overtime pay, vacation, and permitted leave of absence from work.

One of the most important and commonly referenced parts of the ESA are the termination provisions. Usually, if you are terminated without cause, the minimum notice or pay in lieu of notice periods that apply are as follows:

Length of EmploymentMinimum Termination
Notice or Pay Period
3 months to 1 year1 week
1 to 3 years2 weeks
3 to 4 years3 weeks
4 to 5 years4 weeks
5 to 6 years5 weeks
6 to 7 years6 weeks
7 to 8 years7 weeks
8 or more years8 weeks
ESA Termination Provisions

An employer cannot pay you less than these ESA minimum standards. If your employer terminates your employment without cause, you must receive either working notice, pay instead of notice, or combination of both that add up to the corresponding time you have been working for that employer.

However, the ESA minimum standards only apply if your employment contract explicitly states in writing that you agree to accept these minimum standards. In other words, you and your employer must expressly contract into the ESA minimum notice periods. Otherwise, you may be entitled to significantly greater notice periods.

An employment contract may fail to mention that the minimum standards apply. Or, the contract will attempt to apply the ESA minimums, but it will be worded improperly and cannot be enforced. When one of these situations occur, you may be entitled to far greater compensation.

Offer and Release

When your employer lets you go, they may offer you a termination package (also commonly referred to as a severance package or layoff package). As part of this package, the employer will offer you compensation but require you to sign a “Release” in exchange for this money.

The Release will be a legal document that says, by accepting the compensation, you give up your right to sue the employer for any additional benefits which you may be entitled to.

It is very important that you do not sign anything without speaking to a lawyer first. An employment lawyer will be able to advise you if the offer provides an appropriate and reasonable compensation package, and to advise you on what additional compensation or benefits you may be entitled to, if any.

If you have already signed a Release and are now second-guessing your decision, it may still be possible to have a court throw out the Release and treat the circumstances as if you never signed the document. For this to happen, you must be able to prove that you signed the Release because of unfair pressure and without a proper opportunity to seek legal advice before signing.

Common Law Notice Entitlements

If you are entitled to pay in lieu of notice upon termination, there are three different ways to calculate your potential entitlement:

  • Entitlements under the Employment Standards Act.
  • Entitlements under common law.
  • Entitlements under your employment contract.

The Employment Standards Act (“ESA”) set out minimum termination notice periods. However, when the ESA does not apply, you are entitled to what is known as “common law notice”. Common law notice is a period of time determined by a court by examining various factors as part of your employment circumstances. Most of the time, common law notice is significantly greater than minimum ESA standards. The ESA provides for weeks of notice, meanwhile the common law generally provides months of notice.

There are four key factors that a court will examine to determine the reasonable notice period applicable to your situation:

  • The character of your employment.
  • Your years of service.
  • Your age.
  • Availability of similar employment.

Character of employment examines your positions, duties, and overall role within the organization. This is not as simple as looking at your title. The focus is on how important or key your role is to the daily operations of the company. The same position could be more important in a smaller company than it would be as part of a large office. Generally, the more senior the role and the more important the duties, the greater the notice period.

Years of service is a factor that is easily assessed as the court will merely look at how long you have been employed. There is a rule of thumb that is often thrown around that says employees are entitled to one month of notice for every year employed. Be careful when you hear this, because courts have expressly rejected this notion. Years of service can become more complicated if you signed multiple employment contracts with the same company, or had extended breaks in your employment over the years.

When it comes to age, the older an employee, the inevitably closer that employee is to age of retirement. Generally speaking, someone who is closer to retirement will have a more difficult time finding new employment than their less senior counter-parts. For this reason, older employees are usually entitled to more compensation.

The final factor, availability of similar employment, considers the likelihood that you will find a similar position, with similar duties, and similar salary. If you were compensated above the usual rate for your role, you may be entitled to greater notice. This is also the case where you are in a position that is not in high demand, because it makes it harder for you to find another job, which entitles you to more notice.

Remember that no one factor on its own is determinative in assessing reasonable common law notice. The court will examine all factors collectively when coming to a decision.

Offer and Release

When your employer lets you go, they may offer you a termination package (also commonly referred to as a severance package or layoff package). As part of this package, the employer will offer you compensation but require you to sign a “Release” in exchange for this money.

The Release will be a legal document that says, by accepting the compensation, you give up your right to sue the employer for any additional benefits which you may be entitled to.

It is very important that you do not sign anything without speaking to a lawyer first. An employment lawyer will be able to advise you if the offer provides an appropriate and reasonable compensation package, and to advise you on what additional compensation or benefits you may be entitled to, if any.

If you have already signed a Release and are now second-guessing your decision, it may still be possible to have a court throw out the Release and treat the circumstances as if you never signed the document. For this to happen, you must be able to prove that you signed the Release because of unfair pressure and without a proper opportunity to seek legal advice before signing.

Contractual Entitlements

If you are entitled to pay in lieu of notice upon termination, there are three different ways to calculate your potential entitlement:

  • Entitlements under the Employment Standards Act.
  • Entitlements under common law.
  • Entitlements under your employment contract.

If you have a written employment contract, your contract may provide for a different notice period upon termination than the minimum standards set out in the ESA. Your employer is not allowed to provide less notice than the ESA periods, but it is possible to limit your entitlement to some other, greater amount, as long as it is more than what you would otherwise receive under the ESA.

There are two common examples where contractual rights will supersede the ESA or your common law entitlements.

  • You are an indefinite employee with an employment contract that provides for specific termination pay entitlements.
  • You are a fixed-term employee with a contract that has a pre-determined termination date.

When your contract clearly states you will receive a certain amount of notice or pay upon termination, that contractual provision must be clear that the amount you are entitled to will always be more than the ESA minimums. For example, your contract may state that you will receive 10 weeks of notice or pay in lieu of notice regardless of how long you have been employed. In such circumstances, because the 10 weeks under the contract would be greater than the maximum 8 weeks provided under the ESA, this would be a permissible contractual entitlement. This means that, regardless if you were employed for 1 year or 15 years, you would only receive 10 weeks of notice or pay.

Conversely, you may be a fixed-term employee. In other words, you may have signed an employment contract that has a pre-determined termination date (e.g. a 1-year contract). In these cases, if your employment is terminated, you are entitled to notice or pay in lieu of notice for the remainder of your contractual term as of the date of termination, unless your contract provides otherwise. This means that if you were terminated 6 months into your 1-year contract, you would be entitled to an additional 6 months of notice or pay. Alternatively, if you were terminated 10 months into your 1-year contract, you would be entitled to an additional 2 months of notice or pay.

Difficulties with Employment Contracts

You may have signed multiple fixed-term contracts over an extended period of time. When this happens, a court might decide that you are not a fixed-term employee, but rather an indefinite employee. This problem arises when an employer tries to circumvent the law by having their employee sign a 1-year contract every year. Courts will not allow such loopholes.  

Another aspect that could determine whether your employment contract applies is whether the nature of you employment changed since you signed your original contract. For example, if you were promoted or received a significant change in your duties, then your old contract may no longer apply. Your employer should provide you with a  fresh employment contract every time there is a fundamental change to your employment. If your employment contract does not apply, then neither will the termination provisions.

Sometimes an employer will rely on a handbook or manual to claim they have just cause for your termination and to avoid paying you your entitlements on termination. Just because a handbook or manual exists does not mean it forms part of your actual employment contract. Usually, for the handbook or manual to apply as if it were part of your employment contract, and for the employer to be allowed to rely on it, you must have had the opportunity to review and accept the handbook or manual as part of your condition for employment in the first place.

Offer and Release

When your employer lets you go, they may offer you a termination package (also commonly referred to as a severance package or layoff package). As part of this package, the employer will offer you compensation but require you to sign a “Release” in exchange for this money.

The Release will be a legal document that says, by accepting the compensation, you give up your right to sue the employer for any additional benefits which you may be entitled to.

It is very important that you do not sign anything without speaking to a lawyer first. An employment lawyer will be able to advise you if the offer provides an appropriate and reasonable compensation package, and to advise you on what additional compensation or benefits you may be entitled to, if any.

If you have already signed a Release and are now second-guessing your decision, it may still be possible to have a court throw out the Release and treat the circumstances as if you never signed the document. For this to happen, you must be able to prove that you signed the Release because of unfair pressure and without a proper opportunity to seek legal advice before signing.