Wednesday, October 20, 2010

Ontario Employment Law: Your Entitlements Under The Employment Standards Act and The Question of Mitigation

Generally, when a non-unionized employee is terminated without cause, the employer must immediately pay that person his or her entitlements under the Employment Standard Act, in addition to any other entitlements recognized at law.

Typically, an employee's most significant statutory entitlements following a termination without cause are for termination pay and severance pay.

Let's briefly discuss how each of these two statutory entitlements works, in general.

Termination pay

The maximum an employee can receive in termination pay is eight (8) weeks, for eight (8) years or more of service. All Ontario employees are entitled to either notice of termination or termination pay of one week per year or less of service, to a maximum of eight (8) weeks, upon a dismissal without cause.

Severance pay

The maximum an employee can receive in severance pay is 26 weeks base salary, for 26 years or more of service. Severance pay is only available for employees who have five years of service or more, working for an employer with an annual payroll of at least $2.5 million.

What happens where there has been a wrongful dismissal?

For the purpose of calculating any termination pay and severance pay that might be owing, an employee's period of employment is deemed to include the period of statutory notice that should have been given, but wasn't.

So, let's say you were a twelve (12) year employee working for a large organization and were dismissed from your job in January 2010. Your minimum statutory entitlements would be 20 weeks' base salary under the Ontario Employment Standards Act, 2000, being eight (8) weeks' termination pay plus twelve (12) weeks' severance pay.

Is there a Duty of Mitigation

But what happens if that same wrongfully terminated employee secures a new job during this twenty (20) week period? Will the income he or she earns during this time frame be considered mitigation income that would reduce the statutory amounts that the employer is required to pay under the Act?

In Boland v. APV Canada, a leading Ontario case on the subject, the Court provides a resounding and unqualified "no":

I agree with the position of the intervenor. ESA entitlements are not linked, as damages are, to the criteria established in Bardal[12] such as the age of the employee, the likely length of time to find another position, the actual finding of another position etc. They are payable in any event. In my view, it is illogical to suppose that the Legislature intended that such payments would become ‘damages’ if sought in an action, but not when sought administratively. They are minimum sums to be paid by the employer and subjecting them to reduction by reason of sums received from others removes their character as minimum. Their character as minimums was clearly recognized in Machtinger[13] and in Re Rizzo[14]. In the latter case, Farley J. said at pages 454-5:

The statutory obligation appears to be absolute; it is not based upon any actual loss. It must be paid in two weekly instalments following dermination. There is no statutory provision for repayment if new employment is found after [termination], but within the calculation period. It should also be noted that severance pay is in addition to termination pay. It would not appear to me that the concept of mitigating damages, which might be awarded in a civil action for wrongful dismissal, has any legal relevance to an employer’s minimum statutory obligations with respect to termination pay and severance pay.

Employment Standards Act entitlements reflect statutory minimum entitlements. At common law, in what are commonly known as wrongful dismissal claims, additional damages may also be available as pay in lieu of reasonable notice. As discussed previously, in Ontario, these damages may reflect a notice period of up to one month per year of service, or even more in certain exceptional circumstances. Those common law damages are indeed subject to mitigation.

They may be reduced to the extent of any alternate income earned during the notice period - but only income earned outside the statutory entitlement period may be used to effect such reduction.

In the event that you are terminated, legal advice should be obtained as to your specific entitlements.

- Robert Tanha, Toronto

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