At-Will Employment Canada: Know Your Rights

A common misconception in Canada is that employment agreements can be terminated by either the employee or the employer ‘at-will’. While ‘at-will’ employment contracts are rare in Canada, they are commonly seen throughout the United States. The close economic relationship between Canada and the United States means that occasionally, some Canadian workers are asked to sign ‘at-will’ employment agreements.

What Does ‘At-Will’ Employment Mean?

At-will employment is employment that can be terminated at any time without cause or providing any reason or notice of termination, so long as the termination was not done for an unlawful purpose, such as discrimination or retaliation.

The term ‘at-will’ stems from the fact that these employment relationships can be terminated “at the will” of both parties. Either party can choose to end this type of employment at any time, without cause or notice.

Is ‘At-Will’ Employment Legal in Canada?

No. ‘At-will” employment and ‘at-will’ employment contracts are illegal in Canada. In Canada, employees can only be terminated for cause or without cause. Courts will refuse to enforce ‘at-will’ employment contracts.

No Contracting Out of the Employment Standards Legislation

‘At-will’ employment is illegal primarily because of employment standards legislation, such as the Ontario Employment Standards Act, 2000, SO 2000 c 41, as amended (the “ESA”). Legislation like the ESA sets minimum employment standards that all employers must comply with, including by requiring employers to provide minimum amounts of notice of termination.

Employers cannot “contract out” of the ESA by limiting your entitlements upon a termination without cause to notice, pay in lieu of notice, or a combination of both, to less than what is guaranteed by the ESA. Employment contracts that are ‘at-will’ do exactly this by stating that employees will not receive notice of termination.

If you have an ‘at-will’ employment contract, you should contact our firm immediately.

If You Signed an ‘At-Will’ Contract in Canada, Can You Be Fired for No Reason?

No.

Canadian courts will not enforce ‘at-will’ employment agreements. Instead, courts will treat the contract as if it can only be terminated by reasonable notice or for just cause or for wilful misconduct,  duty, disobedience or wilful neglect of duty.

Reasonable notice of dismissal is essentially a ‘heads up’ from an employer that the employee’s employment will end on a certain date. ‘Pay in lieu of notice’ means that an employer does not want the employee to continue working during their notice period and will instead pay an employee the amount that they would have earned if they continued working for that period.

Most employees are entitled to notice (either under the Employment Standards Act  (“ESA”) or the common law), and this is usually based on how long an employee has worked for an employer—though other factors are considered at common law such as age, salary, and job title. Under the ESA, employees are entitled to statutory notice or pay in lieu of notice or a combination of both, plus statutory severance pay, if the employer has a payroll larger than $2.5M and the employee has worked for at least five years.

If your employment is terminated without cause and your employer does not provide you either notice of termination or pay in lieu of notice, you should contact our experienced team immediately.

What is common law reasonable notice in Ontario?

‘At-will’ employment contracts are unenforceable in Canada, even if your employer terminates you without cause and provides you with the minimum required notice under the ESA.

If you are terminated without cause and your employment contract is ‘at-will’, you are entitled to reasonable notice under the common law. Common law reasonable notice will almost always be worth much more than the minimum requirements under the ESA.

This is for several reasons; chief among them is that common law notice is measured in months, not weeks. Second, employers are only required to pay up to 8 weeks in ESA notice (not including ESA severance pay). Courts on the other hand do not have a prescribed limit like the ESA does.  Courts can award up to 24 months in notice and, in exceptional circumstances, have gone as high as 30 months of pay in lieu of notice.

If You Signed an ‘At-Will’ Contract in Canada, Can You Resign Without Notice?

In most cases, the answer is no. In Ontario, employees who resign without reason are required by the ESA to provide notice of their resignation. Employees who fail to do this are at risk of being sued for wrongful resignation by their former employer, although these cases are extremely rare and exceedingly difficult for the employer to prove.

If understanding the complexities of ‘at-will’ employment in Canada feels overwhelming, you don’t have to go through it alone. At Levitt LLP, we specialize in guiding employees through their rights and entitlements after their employment has been terminated ‘at-will’. Our experienced team is committed to helping you understand the nuances of ‘at-will employment’, without cause terminations, and severance packages. Contact us for a consultation and take the first step toward protecting your rights and entitlements.

Please note that this article is only to be used as general information and it does not constitute legal advice. We encourage employers and employees to contact Levitt LLP directly to better understand ‘without cause’ issues and seek legal advice to their questions.