We know that an employee cannot pursue both a “wrongful dismissal” lawsuit and a claim for termination and severance pay under the Employment Standards Act. That is the effect of Sections 97 and 98 of the Ontario ESA. Often, an employee would be entitled to greater damages if they pursued the lawsuit, but most employees do not have the money or time to retain a lawyer and spend two years in litigation to recover their contractual entitlements. A quicker, cheaper route is to simply fill in an ESA complaint and recover their minimum entitlements under the ESA.
So even though a contract might require the employer to provide the employee with, say, 7 months notice of termination, an employee may end up settling for the 6-8 week’s notice the ESA entitles them to. Its a great tradeoff for employers. Not so much for employees.
But here is a legal puzzle for you. Can an employee claim entitlement to “reasonable notice” damages in a claim for unpaid “wages” in an ESA complaint, and thereby forego the need to file a costly and time-consuming wrongful dismissal complaint?
I’m not aware if there are any cases directly on this point, so if you know of one, please let me know. My sense is that this claim is rarely raised, but there is a pretty good argument that the Act does permit this. Let’s walk through the statutory language.
Damages for Unpaid Wages During a Period of Reasonable Notice are “Wages” Within the Meaning of the ESA
Start with the definition of “wages”. It says that wages means any “remuneration payable by an employer to an employee under the terms of an employment contract“. This definition incorporates into the ESA machinery any terms of the employment contract that require payment of remuneration to an employee.
What is a “wrongful dismissal” lawsuit? It is just a claim for wages that should have been paid to the employee during a period of notice of termination required by the contract. If the employee had been given the proper contractual notice, they would have received their wages for that period. So pause here to note then that a claim for wrongful dismissal is really just a claim for “remuneration payable by an employer to an employee under the terms of an employment contract.” This seems to suggest that “wrongful dismissal” damages [unpaid wages for a period of contractual notice] are wages within the meaning of the ESA.
A Period of “Reasonable Notice” in a Contract Term Is Usually a ‘Greater Benefit’ than the Statutory Minimum Notice
Now note that Section 5(2) says that when a term in an employment contract requires a greater benefit to an employee than a minimum standard in the ESA, then the contract term applies and not the minimum standard. That is why if you make a claim for unpaid wages under the ESA, and your pay rate is $20 per hour, you will be entitled to $20 per hour and not the minimum wage in the ESA. You are allowed to recover in an ESA complaint contractual benefits that are higher than the ESA benefits.
Note now that the ESA also deals with the situation of an employer who dismisses an employee without providing notice, in Section 61. That section says that an employer can terminate an employee without notice provided they pay the employee the wages and benefits they would be entitled to under the ESA period of minimum notice. However, if the contractual notice period (“reasonable notice”) is greater than the notice period required by Section 57 (which it often will be), then the contractual notice period supersedes the Section 57 notice period for the purposes of the ESA on a clear reading of the ESA.
Is that right?
This brings us back to the original question: If an employment contract requires that the employer pay wages to an employee with 8 years service a period of, say, 7 months’ “reasonable notice” before the contract can be terminated, then that contract term supersedes the requirement in Section 57 (and Section 61) for the employer to pay the employee wages for a period of at least 8 weeks. If that is a correct interpretation of the ESA, then it follows that the employee should be able to recover the 7 months’ wages by filing a complaint under the ESA, rather than pursue a civil lawsuit in a court for wrongful dismissal.
This approach would simplify matters considerably for employees, lower enforcement costs, and keep many wrongful dismissal complaints out of the courts. It would require employment standards officers and the OLRB to calculate periods of “reasonable notice”, something that is usually the domain of courts and judges. However, calculating reasonable notice has become more a mechanical exercise than one requiring great sensitivity and legal judgement. Lawyers are using computer software or tables of prior decisions to estimate a number in the ballpark of what is reasonable given an employee’s seniority and type of job, and increasingly courts are deciding wrongful dismissal cases in summary judgements without a trial due to the uncomplicated process involved in determining reasonable notice. This isn’t rocket science.
The Statutory Cap on Wage Recovery Damages Means This Interpretation Would Primarily Assist Low Wage Workers
Of course, the ESA sets very low caps on the damages awards. Section 103(4) says that maximum amount of “wages” that an employer can be ordered to pay is only $10,000. Most employees would reach that threshold pretty quickly if notice damages were based on contractual “reasonable notice” rather than statutory minimum notice. But that just means that in those cases, the ESO or OLRB would not actually need to calculate the precise period of minimum notice. They would just need to decide if that notice period is at least long enough to bring the damages to the $10,000 threshold. Because of the low damages threshold, employees who would be entitled to large notice damages in a court (because they have long service, they are managerial types, and/or receive high pay) would find little value in going the ESA route discussed here to recover notice damages. But if recovering wages for the contractual notice period by filing an ESA complaint were possible, many employees at the lower end of the pay scale would find value in it. They would have a better chance of recovering more of the amounts they were contractually entitled to in the first place without having to bother with the cost and hassle of a lawsuit. Wouldn’t that be a good thing in terms of equity and access to justice?
Can anyone explain to me why the ESA does NOT permit employees to recover wages for the period of reasonable notice through an ESA complaint? What section undermines the argument described above?
If this is possible, why do you think more employees don’t try this approach?
