The interplay between employment standards legislation and the common law rules of contract law can be confusing.
For example, while the ESA clearly recognizes and condones temporary layoffs, the common law treats a temporary layoff as a constructive dismissal, unless the contract clearly grants the employer the right to layoff. Employers who look to the ESA for guidance on how much notice of termination to give employees often find themselves in breach of the employment contract, since common law contractual “reasonable notice” is usually considerable more than the minimums expressed in the legislation. Complying with the ESA notice provisions doesn’t relieve an employer of its contractual duties to pay “reasonable notice” (unless of course the contract says that the employer only need give ESA notice).
The point is that there are a bunch of situations where an employer can be in compliance with the ESA, but still be in breach of their obligations under the employment contract and the common law rules that apply to those contracts.
On the other hand, sometimes employers who are in compliance with the employment contract and common law rules find themselves in violation of the ESA. This can happen for example when an employer dismisses an employee alleging cause. Under the common law rules, an employer is relieved of the obligation to give “reasonable” or contractual notice to the employee if the employee has repudiated the contract–committed a serious violation. This is known as summary dismissal in legal lingo. Under the ESA, an employer is relieved of the obligation to give statutory notice of termination and to pay severance pay if the employee is:
guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.
That rule is buried in ESA Regulation 288/01, ss 2(1). I have discussed the meaning of “wilful misconduct” before, including in this entry about two cases involving employee insolence and insubordination.
The key here is that the ESA definition includes an intent component. The misconduct or neglect must be “wilful”, whereas under the common law test for summary dismissal wilfulness is not a required component. That means you can–and do–find cases in which an employer has cause under the contract to dismiss employee without notice, yet still be required under the ESA to give notice of termination and pay severance pay.
That is what happened in a recent case called Oosterbosch v. FAG Aerospace Inc. The employer dismissed the employee without cause after a series of performance problems, which themselves followed a series of earlier disciplinary sanctions imposed by the employer for lateness and performance. The judge ruled that the employer had followed its progressive discipline policy and that there was sufficient documented poor performance issues and prior discipline to warrant a finding that there was cause for summary dismissal under the contract. Therefore, the employer was not required to pay “reasonable notice” to the employee.
However, the Court rejected the employer’s argument that the performance problems leading to the dismissal were “wilful” within the meaning of the ESA Regulation. Therefore, the employee was entitled to both notice of termination (8 weeks, amounting to $7,904) and severance pay ($17,127) under the ESA.
This case demonstrates a benefit to employees dismissed for alleged cause of bringing their claim for ESA entitlements by way of a lawsuit in court, since the employee can claim contractual notice (including “reasonable notice”) and statutory notice and severance in the same lawsuit. The court can order statutory damages even if no contractual notice was required. If the employee proceeds by bringing an ESA complaint for notice and severance, she can not recover contractual notice from an ESA adjudicator and cannot later sue for those damages (see section 97(2) of the ESA). Of course, the downside of proceeding by way of a lawsuit is the cost and time: actions in court usually cost was more since the employee will probably use a lawyer, whereas lawyers are not as necessary in an ESA complaint.
Do you think the system is wrong by allowing an employee to recover ESA notice and severance pay even though the Employer was within its contractual rights to dismiss the employee for cause without notice?