Employees in Ontario can be formally dismissed or “terminated” from their jobs for just cause or without just cause. If a dismissal is for cause, such as in the case of serious misconduct, habitual neglect of duty or incompetence, for instance, no prior notice is required. Where an employee’s job is terminated without just cause, the employer must provide reasonable notice of termination to the employee. The length of the notice period will depend on factors such as the character of the employment, the length of the employee’s service, the age of the employee, the availability of similar jobs, etc. In some cases, working notice will be given and the employee will continue to work until the end of the notice period. In most cases, though, payment in lieu of notice (i.e. the payments that the employee would have received during the notice period) will be provided.
However, many terminations occur without the employer formally firing or dismissing the employee. An employee can be constructively dismissed where the employer’s conduct amounts to a repudiation of the employment contract. For example, an employer might unilaterally change a significant term of an employee’s employment such as imposing a pay cut and by doing give the employee the right to treat the employment contract as terminated. If the boss says that the employee now needs to work extra hours for less pay, it may be that the employee can leave the job and then seek compensation on the basis that the employee was constructively dismissed. The employment was effectively, but not formally, terminated by the employer.
Constructive dismissal was the finding in a recent decision of the Ontario Superior Court of Justice in a case involving a long-time farmhand. The claimant in the case had worked exclusively for one individual farmer (and the individual farmer’s companies) for over 40 years, his entire adult working life, employed as a farm labourer and manager in a mixed cash crop and livestock operation. In January, 2019, the claimant was told that he was laid off but that the layoff would be temporary and would last only a few months. The claimant actually continued to assist the employer from time to time with work tasks where needed during the layoff, but was not paid by the employer after January, 2019.
In May, 2019, the employer met with the claimant and told him that he could come back to work at the farm on the condition that the claimant continue to collect Employment Insurance benefits with the balance of his salary (about $55,000 per year) paid in cash. Also, the employer confirmed that the claimant would no longer have the assistance of a student for heavy lifting jobs, something that the claimant required because of a back injury suffered several years earlier when lifting a propane tank. In effect, the employer was asking the claimant to do the same job as before but on vastly different terms.
Justice G.D. Lemon did not hesitate to find that the claimant had been constructively dismissed by his employer when the employer: 1) told the claimant that there would be fundamental changes to his job duties, effective immediately; 2) required that the claimant agree to improper and illegal payment arrangements as compensation for the job; and, 3) having effectively terminated the claimant’s previous employment, failed to provide the claimant with any notice of the termination or payment in lieu of notice. Justice Lemon examined the relevant factors for determining the reasonable notice period and found that the claimant was entitled to 24 months of salary in lieu of working notice, amounting to just under $110,000.
The claimant also requested an order for payment of a retirement allowance from his former employer. At the time of his layoff in January, 2019, the claimant’s annual salary was approximately $55,000, an amount that had remained more or less unchanged for the previous 25 years. Also, prior to 1996, the claimant had been provided by his employer with an on-farm residence. After 1996, the residence was no longer provided such that the claimant’s overall compensation was significantly reduced. Nevertheless, the employer induced the claimant to continue to work for less money, even including overtime, on the basis of assurances and agreement that the employer would provide a retirement allowance to the claimant.
The claimant sought $250,000 for his retirement allowance. The employer had told the claimant that he would be well taken care of and would receive 8-10% of non-voting shares in one of the farm companies. The employer said that “the big money is at the end”, being a reference to a future sale of the company. The claimant learned in 2008 or 2009 that the company was sold for $2,200,000 and assumed that he would receive about $250,000. For that reason, the claimant continued to work on the farm, his concerns about a lack of a retirement safety net having been addressed.
Justice Lemon awarded the full $250,000 retirement allowance, finding that the claimant worked long hours at a “reducing income” in reliance on the employer’s assurances. Justice Lemon also awarded the claimant $5,000 for unpaid wages (for the “layoff” period when the claimant continued to work without pay), $50,000 for aggravated damages (based in part on the manner of termination of employment which left the claimant with “the embarrassment of having been betrayed and cheated by the man he had trusted for many years”), and $20,000 for punitive damages (for conduct overall that “drops to the level of being so malicious and outrageous that it is deserving of punishment on its own”).
Read the decision at: 2024 ONSC 3876 (CanLII).
