One of the most common reasons that prospective clients first contact us is because their employment has been terminated ‘without cause’. Being terminated without cause is a stressful experience, and employees are left wondering about what happens next. Understanding the legal requirements behind ‘without cause’ terminations and an employee’s rights if they are terminated can help employees to move forward from a traumatic and difficult experience.
What Does Termination ‘Without Cause’ Mean?
In Ontario, an employee can be terminated in two ways—with cause or without cause. A ‘without cause’ termination means that an employer can terminate an employee without a reason.
Is Termination Without Cause Legal in Ontario?
Yes, an employer can terminate an employee without cause legally. However, there are a few rules that employers have to follow when they terminate an employee without cause in Ontario.
Without Cause Terminations Must Come with Notice
First, for an employer to terminate an employee without cause, an employer must provide an employee with either reasonable notice of dismissal or pay in lieu of notice.
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.
Without Cause Terminations Can’t Be Discriminatory
Second, an employer cannot terminate an employee for discriminatory reasons thanks to the Ontario Human Rights Code. For example, if your boss learns that you intend to start a family and decides to terminate you because they believe you’ll miss too much work taking care of a child, this would be discrimination based on ‘family status’ and would be an illegal termination.
If your employer terminates your employment for discriminatory reasons, you should contact us immediately.
Without Cause Terminations Can’t be to ‘Get Back’ at Employee Enforcing Rights
An employer cannot terminate an employee without cause to ‘get back’ at an employee for enforcing certain rights, such as your right to a safe work environment under the Ontario Occupational Health and Safety Act or your right to payment of wages under the Employment Standards Act. Doing so would be an illegal termination.
If your employer terminates your employment in retaliation for you enforcing your rights under the Employment Standards Act, the Occupational Health and Safety Act, or the Human Rights Code, you should contact us immediately.
No Contracting Out of the ESA
Similarly, your employer 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.
If your employer attempts to terminate your employment under protected grounds or attempts to limit your entitlements below the minimum, you should contact our firm immediately.
Without Cause Provisions in Employment Contracts
If your employment contract has a termination clause, it may say something like “You will receive your minimum entitlements pursuant to the Employment Standards Act”. If your contract references the Employment Standards Act (“ESA”) in a termination provision, your employer is likely trying to minimize your notice entitlements to the bare minimum allowed for by law. The ‘common law’—the law created and maintained by the courts—offers employees far more notice than the ESA. For this reason, employers like to ‘contract out’ of the common law by stating employees will get the minimum under the ESA.
What is common law reasonable notice in Ontario?
If you are terminated without cause and your employment contract does not have an enforceable termination clause, 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.
This is why employment contracts try to limit your notice entitlements. However, many termination clauses in employment contracts are unenforceable in Ontario. This means that despite attempts to limit an employee’s entitlements on termination without cause, the employer is still required to pay common law notice.
Invalidating a Termination Clause
In the 2020 decision of Waksdale v. Swegon North America, the Ontario Court of Appeal held that ‘without cause’ and ‘with cause’ termination clauses in employment contracts must be read together. This means that if a ‘with cause’ provision violates the ESA, then the ‘without cause’ portion of the contract gets thrown out too. This trick can be used to invalidate a perfectly drafted ‘without cause’ provision and increase an employee’s entitlements to compensation after being let go.
Ontario Courts have continued to build on the precedent set in Waksdale v. Swegon North America. The 2024 decision in Dufault v. The Corporation of the Township of Ignace ruled that language that is commonly found in ‘without cause’ termination provisions would invalidate those provisions. The Court specifically said that language that says that an employer may terminate an employee without cause “at its sole discretion” and “at any time” will invalidate a termination clause. This will be far from the last time that the Court will make a decision that completely shakes up whether a ‘without cause’ termination provision is valid or not.
Because of these decisions, a large majority of termination clauses in employment contracts in Ontario are now void. There are many other reasons why a termination provision may be legally unenforceable. If you have just been terminated ‘without cause’ or you are offered a severance package that limits you to your ESA entitlements, you may benefit by having a lawyer review your contract to see if you can get more compensation than your contract suggests.
If understanding the complexities of termination without cause in Ontario 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 ‘without cause’. Our experienced team is committed to helping you understand the nuances of without cause terminations, termination clauses in employment contracts, 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.
