Category: Employment Law

Losing your job can be incredibly unsettling. As you’re confidently planning your week, the next moment you’re packing up your desk, wondering what might have gone wrong. In Ontario, while employers do have the right to end employment, they are required to follow clear rules about notice, pay, and fairness to ensure everyone is treated respectfully. When these rules aren’t followed, it can lead to a wrongful dismissal under Canadian common law.

According to Statistics Canada’s Labour Force Survey, thousands of Ontarians face job separations every quarter. Many assume they have no recourse, but the truth is that Canadian courts routinely hold employers accountable when they fail to provide reasonable notice or rely on unproven allegations of cause.

Wrongful dismissal isn’t about whether it was fair to fire someone. It’s about how the employer ended the employment relationship and whether the process and compensation complied with the contract and the law.

 

Key Takeaways

• Wrongful dismissal occurs when an employee is terminated without just cause and without reasonable notice or pay in lieu.
• Employers can dismiss for any reason; as long as they comply with contractual and legal notice obligations.
• Just cause requires serious misconduct or dishonesty; mere poor performance or conflict rarely qualifies.
• Constructive dismissal occurs when an employer changes core employment terms (e.g., pay, role, benefits) enough to force resignation.
• Federally regulated employees (banks, telecom, interprovincial transport, etc.) may file unjust dismissal complaints within 90 days instead of suing in court.
• Remedies include pay in lieu of notice, benefits, bonuses, and, in some federal cases, reinstatement.

What Is Wrongful Dismissal?

In simple terms, wrongful dismissal occurs when an employer terminates an employee’s employment without providing reasonable notice or pay in lieu.

The Supreme Court of Canada explained this in Honda Canada Inc. v. Keays (2008 SCC 39), stating that the obligation to provide reasonable notice is an implied term in every employment contract. When that term is breached, the employee is entitled to damages, which essentially is the income and benefits they would have received during the proper notice period.

For example, if an employer tells a ten-year employee to leave immediately and offers only the minimum notice required under Ontario’s Employment Standards Act, 2000 (ESA), the worker might still be owed months of additional pay at common law.

Signs your termination may be wrongful:

• You were suddenly dismissed, without warning or progressive discipline.
• Your employer claimed “cause” without proof or investigation.
• You received less than a few weeks’ pay despite your long service.
• Your benefits or commissions stopped immediately.

This claim isn’t meant to punish your employer; it’s simply there to ensure you’re compensated for the income you lost during the reasonable notice period.

What Counts as Just Cause for Termination?

Employers can only terminate without notice, for just cause, but courts interpret the definition of just cause narrowly. Misconduct must be so serious as to destroy the trust essential to the employment relationship.

In McKinley v. BC Tel (2001 SCC 38), the Court said the test is contextual: the misconduct must be proportionate to the punishment. A single act of dishonesty or poor performance isn’t automatically cause.

Examples that may constitute cause:

• Theft or fraud
• Workplace violence or harassment
• Repeated insubordination after warnings
• Serious conflict of interest or breach of confidentiality

Examples that rarely constitute cause:

• Occasional lateness
• Poor performance without clear coaching
• Personality conflicts or restructuring
• Refusing unsafe work

Ontario courts also expect employers to investigate fairly and use progressive discipline when possible. If they skip those steps, the claim of cause usually fails.

Constructive Dismissal: When You’re “Forced” to Quit

At this point, we have to note that not every dismissal involves the words “you’re fired.” Sometimes, an employer changes the job so drastically that the employment relationship has effectively been terminated.  The law calls this constructive dismissal.

The Supreme Court’s decision in Potter v. New Brunswick Legal Aid Services Commission (2015 SCC 10) remains the leading case. The Court found that even an indefinite suspension with pay, if carried out without proper authority or notice, can amount to termination.

Common triggers in Ontario:

• A significant pay cut (often 10–15 percent or more)
• A demotion or major loss of responsibility
• A transfer to another city without consent
• Removal of key benefits or bonuses
• Creation of a toxic or hostile work environment

In each case, the court asks: Would a reasonable person see the employer’s conduct as ending the employment relationship? If the answer is yes, the employee can treat the contract as terminated and sue for damages.

Wrongful vs. Constructive Dismissal

 

Category	Employer Action	Legal Consequence	Employee Remedy
Wrongful dismissal	Employer fires employee without cause or proper notice	Breach of contract	Pay in lieu of notice
Constructive dismissal	Employer makes major changes forcing resignation	Treated as employer-initiated termination	Same remedies as wrongful dismissal

 

Unjust Dismissal for Federally Regulated Employees

While most employees in the GTA are governed by Ontario’s ESA, some industries (like for example banks, telecommunications, airlines, and interprovincial trucking) all fall under the Canada Labour Code.

Sections 240–246 of the Code allow non-managerial employees with at least 12 months of continuous service to file an unjust dismissal complaint within 90 days of termination (Government of Canada, Labour Program, “Unjust Dismissal” Guide).

If successful, the federal adjudicator can order:

• Reinstatement to the previous job
• Back pay for lost wages
• Correction of the employee’s record of employment

This federal regime offers remedies broader than those available under Ontario law, but the complaint must be filed quickly.

Notice, Termination Pay, and Severance

Understanding your rights to notice and severance begins with clarity. Each province and territory has its own Employment Standards Act (ESA) that sets the minimum notice or pay in lieu.

For example, Ontario’s ESA provides:

• 1 week per year of service, up to 8 weeks (minimum)
• Severance pay (if you have more than 5 years of service and employers’ payroll is over $2.5 million) : 1 week per year, up to 26 weeks

These are minimums. The common-law reasonable notice period is usually much longer, unless the employment contract clearly and lawfully limits it. Courts will strike down ambiguous termination clauses that attempt to undercut ESA rights.

Key differences:

• Termination pay = compensation for lack of notice
• Severance pay = compensation for long service or loss of seniority
• Common-law notice = court-determined, based on individual factors

(Source: Ontario Ministry of Labour, “Your Guide to the ESA – Termination and Severance”)

How Courts Determine Reasonable Notice

Every situation is different, for this reason judges use the Bardal factors (from Bardal v. Globe & Mail Ltd., 1960) to decide how long notice should be:

1. Length of service
2. Age of employee
3. Character of employment (seniority, skill level)
4. Availability of similar work

For instance, a 55-year-old manager with 20 years’ service may receive 18 to 24 months of pay in lieu of notice. By contrast, a 28-year-old technician with three years’ service might receive three to four months.

Courts include:

• Base salary
• Benefits and pension contributions
• Vacation pay
• Bonuses or commissions that would have been earned during the notice period (Matthews v. Ocean Nutrition Canada Ltd., 2020 SCC 26)

If an employer wrongfully withholds a discretionary bonus during the notice period, the court may order payment unless the plan clearly excludes it.

Remedies for Wrongful Dismissal

The purpose of damages is to place the employee in the financial position they would have occupied had proper notice been given.

1. Pay in lieu of notice

Compensation equal to the salary and benefits for the reasonable notice period.

2. Continuation of benefits

Courts expect employers to maintain health, dental, and pension benefits during that period.

3. Bonus or commission entitlements

Following Matthews v. Ocean Nutrition, bonuses payable during the notice period are recoverable unless the plan language unambiguously excludes them.

4. Aggravated damages

If the manner of dismissal causes proven mental distress — for example, humiliation or reputational harm — courts may award additional sums (Honda v. Keays, 2008 SCC 39).

5. Punitive damages

Reserved for malicious or high-handed conduct meant to punish the employer rather than compensate the employee.

In Ontario, aggravated and punitive awards remain rare; most cases resolve through negotiated settlements reflecting the reasonable-notice range.

The Supreme Court in Honda v. Keays emphasized that aggravated and punitive damages are exceptional and require clear evidence of bad faith or mental distress.

Federal employees may also be entitled to reinstatement and back pay under the Canada Labour Code.

Timelines, Documents, and Next Steps

After a dismissal, timing and organization matter more than most realize. Knowing what to do and when, can make the difference between protecting your rights and losing critical compensation. Let’s break it down.

 

Limitation period: You generally have two years from the date of termination to file a civil claim under Ontario’s Limitations Act, 2002.

Documents to collect:

• Your employment contract and any policy manuals
• Termination letter and Record of Employment
• Pay stubs and benefit statements
• Performance reviews or disciplinary warnings
• Any emails or notes showing changes to your role or treatment

Immediate actions:

1. Do not sign any release or severance offer without legal advice.
2. Document conversations with HR or supervisors.
3. Apply for Employment Insurance (EI) but keep records — EI does not prevent you from claiming wrongful dismissal damages.
4. Seek legal guidance early to calculate both ESA minimums and common-law entitlements.

Employees can also file ESA complaints to the Ministry of Labour for unpaid minimum entitlements, though those do not replace common-law lawsuits for higher damages. If you file a complaint, you cannot later sue for common law notice.

Federal vs. Provincial Jurisdictions

The vast majority of employees are covered by provincial law. However, if your employer’s business is under federal jurisdiction— such as airlines, banks, railways, trucking or telecom companies — you may be under the Canada Labour Code instead.

To confirm, ask HR which statute governs your workplace. The federal Labour Program publishes an updated list of regulated industries (Government of Canada, Labour Program, “Termination, Layoff or Dismissal”).

Understanding the distinction matters, because federal unjust dismissal complaints can lead to reinstatement, while provincial wrongful dismissal actions usually result in compensation only.

Why Employment Contracts Matter So Much

A properly drafted employment contract can limit or expand your rights on termination. Many employers use standard clauses that attempt to cap notice at the ESA minimums. If those clauses are poorly worded or conflict with the Act, Ontario courts will declare them unenforceable, leaving the employee entitled to full common-law notice.

The Ontario Court of Appeal has consistently emphasized that ambiguity is construed in favour of the employee. Even a small drafting flaw (an outdated reference or missing continuation-of-benefits clause) can void an entire termination provision.

Employees should always review contracts before signing and again at termination. What seems like fine print often determines whether you receive weeks or months of pay.

The Human Side of Dismissal

Legal analysis aside, job loss hits hard. It’s emotional, disruptive, and often embarrassing. Courts recognize this human reality. In Wallace v. United Grain Growers Ltd. (1997 3 SCR 701), the Supreme Court acknowledged that termination can be traumatic and that employers owe a duty of good faith in the way they dismiss employees.

Although later cases refined the law (replacing the so-called “Wallace bump” with evidence-based aggravated damages) the principle remains: employers must act honestly, fairly, and respectfully.

In practice, that means providing clear reasons, avoiding false allegations, and handling the process with empathy. When they don’t, courts may increase damages to reflect the unnecessary harm caused.

Practical Example

Imagine a 52-year-old project manager in Toronto earning $90,000 annually, employed for 12 years. She’s suddenly told her position is “no longer required” and offered eight weeks’ pay. Her contract has a vague termination clause referencing the ESA but no benefits continuation.

If that clause fails to comply with the ESA and is void, she could claim 12 to 14 months’ pay under common law, including lost benefits and a pro-rated bonus. At roughly $90,000 per year, that’s a difference of more than $80,000 — all stemming from the employer’s failure to provide lawful notice.

Final Thoughts

Wrongful dismissal law in Canada balances fairness and flexibility giving employers freedom to manage their workforce while protecting employees from abrupt, unjust terminations.

If you were dismissed suddenly or under questionable circumstances, review your employment terms carefully and seek legal advice early. Whether through court action or the federal complaint process, Canadian law ensures you have the right to fair notice, fair pay, and fair treatment.

Stress is an everyday part of life, but what happens when it affects your ability to perform your job. Poor mental health, left unchecked can cause undue hardship and impact your well-being.

If you are suffering from a mental health issue and contemplating taking stress leave, it’s important to understand your employment rights.

Eligibility Criteria for Stress Leave in Ontario

In Ontario, sick leave is covered by the Employment Standards Act (ESA) . The ESA allows eligible workers to take sick leave for a personal illness, injury, or medical emergency. This includes mental health conditions such as stress, depression, anxiety and burnout.

Your rights are also protected by the Ontario Human Rights Code (Code). If your mental health issue is deemed a disability, your employer is obligated to make a reasonable accommodations for you.

Because stress can impact people differently, mental health leaves can vary. You may also be entitled to disability benefits under your employment contract, a group disability insurance policy, or your union’s collective agreement.

If you are suffering stress-related struggles, you need an employment lawyer who will fight to ensure you get the disability benefits you deserve.

The team at Walter Law Group is available to provide advice and guide you through the process of going on stress leave in Ontario.

Navigating the Process: How to Apply for Stress Leave

Work can be challenging, and some days are worse than others. However, if you are experiencing excessive stress, you should speak to a health-care professional about your issues and whether taking a medical leave would help.

There may have been a workplace incident that has impacted your mental health. Document any relevant information and tell your health practitioner.

You will need to provide your employers with written or oral notice. You will likely need a doctor’s note that outlines your condition. A medical note can also include the duration of an appropriate mental health leave.

There are legal options available if an employer refuses to acknowledge an employee’s medical condition or grant any stress leave. For example, an employee could be held liable for violating provisions in the ESA, the Ontario Human Rights Code or the Occupational Health and Safety Act .

An employee who is refused stress leave for a legitimate mental health issue may also be able to bring a claim for constructive dismissal and be eligible for severance pay.

Role of Healthcare Professionals in Stress Leave Documentation

Stress can lead to other mental health issues, such as anxiety, depression, and substance abuse. Researchers have also found a link between stress concerns and domestic or sexual violence. That is why it is essential to speak with your healthcare provider as soon as you are feeling overwhelmed.

Taking stress leave can be a challenge if you fail to take all the necessary steps. For example, you should keep track of what you are experiencing, write it down and report it to your doctor. Documented mental health information may help ensure you get the sick leave you require to help you get better.

A healthcare professional may be able to use that information to support their diagnosis of your ailment. And, in the end, it could result in a more complete medical note explaining the steps you have taken to recover and why a sick leave is warranted.

Understanding Employment Contracts and Sick Leave Provisions

Under the ESA most employees have the right to take up to three days of unpaid job-protected leave each calendar year due to a personal illness, injury or medical emergency. This is known as sick leave. Special rules apply to some occupations.

To be eligible, you must work for your employer either part-time or full-time for at least two full consecutive weeks prior to taking the time off.

If you are in a union with a collective agreement or you signed an employment contract, you may be entitled to additional sick leave and disability benefits over and above what is legislated by the ESA. You may even have extended health care benefits for psychological treatment.

This means you may qualify for sick leave beyond the minimum three days mandated by the ESA.

You are entitled to the greater protection provided either by an employment agreement or the ESA. For example, if your contract does not provide a greater right or benefit, then the ESA sick leave standard would apply.

It should also be noted that if you take one paid sick day off under your employment agreement, then you are deemed to have also taken one sick leave day under the ESA.

In addition, unused sick leave days cannot be carried over to the following year.

The Impact of the Ontario Human Rights Code on Stress Leave

“Every person has a right to equal treatment in employment without discrimination or harassment based on disability, among other grounds,” according to the Ontario Human Rights Code. That includes mental health disabilities and addictions.

That means an employer cannot fire someone or deny them a job or promotion if that employee takes stress leave because of a mental health issue.

Under the Code, employers must provide accommodations for workers up to what is considered undue hardship. In addition, employees are entitled to take stress leave for an extended period to recover from mental health and stress issues.

Your employer also has to accommodate a return to work to the same or comparable job when you are ready return to work.

Short-Term vs. Long-Term Disability: What Covers Stress Leave

Many employees are offered the chance to participate in workplace insurance plans when they are hired. Benefit plans vary, but your insurance policy can include such protections as bereavement leave, provisions for a nurse practitioner and income replacement.

You may have short-term disability (STD), long-term disability (LTD) coverage, or both.

As the name implies, short-term disability covers you for a limited period. Typically, STD benefits can last up to six months. If an employee takes a stress-related leave under an STD policy, their stress must be severe enough to make them totally disabled and unable to work.

After STD benefits end, long-term disability insurance benefits begin. If you don’t have short-term disability coverage, you may need to take an unpaid mental health leave and until your LTD claim is approved.

Employment Insurance and Stress Leave

If you are unable to work due to intense stress, and your employer does not provide STD benefits, you may be eligible for Employment Insurance (EI) sickness benefits, which can provide up to 26 weeks of income replacement, offering 55 per cent of your earnings up to a maximum of $668 weekly.

To qualify, you must have paid premiums into EI and prove that:

• you’re unable to work for medical reasons;
• your regular weekly earnings from work have decreased by more than 40 per cent for at least one week; and
• you accumulated 600 insured hours of work in the 52 weeks before the start of your claim or since the start of your last claim, whichever is shorter.

Employer’s Obligations Under Ontario’s Employment Standards Act

The Employment Standards Act is the law that protects workers’ rights, setting down the minimum standards for basic conditions of employment, including wages, work hours, public holidays and vacations, overtime, leaves of absence, notice and severance pay obligations upon termination.

The Act sets out the legal rights and obligations of employers and employees. The minimum ESA standards cannot be ignored by employers and apply even if they are not included in your employment contract. An employee cannot sign away their ESA rights.

Challenges and Solutions: Handling Denied Stress Leave Claims

Unfortunately, stress leave disability benefit denials are not uncommon. Even though you may feel you are entitled to a sick leave, your insurance provider may find a reason to challenge your claim.

If your stress leave claim has been denied, you can request an internal appeal. Like your original claim, the appeal will be handled by the insurer. You can also start a lawsuit to obtain your benefits.

It is important to get sufficient medical documentation and seek the support of a specialist who can provide evidence of your medical condition. You must also undergo any necessary treatment. Insurers commonly deny claims because the claimant does not seek help for their mental health issue.

Attempting to get benefits during a stress leave can be frustrating, and dealing with an insurance company denial can exacerbate your condition. That’s why you should get legal advice.

The experienced employment and disability team at Walter Law Group are here to help you navigate the insurance denial process. We will work tirelessly to ensure you receive the benefits you deserve while on stress leave.

Legal Support and Resources for Employees on Stress Leave

For those on stress leave, there are government resources, such as federal EI sickness benefits and protections provided by the Employment Standards Act and the Human Rights Code.

The Ontario government also offers family responsibility leave, which gives up to three days of unpaid, job-protected leave in the event of a family illness, injury, or family-related emergencies.

For more than three decades, the team at Walter Law Group has been trusted as experts in employment, disability and personal injury law. We are here to protect your rights, and we will vigorously advocate on your behalf.

Contact us today so we can begin working for you.

Downsizing is an unfortunate fact of employment life, as witnessed by the many layoffs documented last year. And executives are not immune from this reality.

Being terminated can be traumatic and the steps you take when it happens can have a long-lasting impact on your life.

A World Economic Forum survey released in May 2023 found one-quarter of jobs are set to change within the next five years. Reuters reported about 69 million jobs will be created and 83 million eliminated by 2027.

The employment landscape is in constant flux. Both employers and employees face the challenge of labour market churn, the term used to describe the constant movement and turnover of workers.

Labour market churn reflects the changing demands of businesses, advances in technology and evolving consumer preferences. As companies strive to remain competitive, they will restructure, merge or even downsize.

Labour market churn can benefit employees, offering the chance for higher pay and career advancement. However, it can also lead to periods of unemployment.

If you have been “packaged out,” a severance package can help as you transition to the next stage of your career. That is why you should consult an experienced employment law firm that will work diligently to ensure your rights are protected. At Walter Law Group, we will examine every detail of your severance package with an eye to your future.

Using a severance pay calculator

It is not uncommon for people to go online to research employment law issues and severance entitlements. One supposedly helpful tool is a severance pay calculator. The idea is simple enough. You are prompted to answer such questions as your age, length of employment, salary and type of job. You then receive a range of what you can expect in terms of the months of severance with the proviso that the information is a guideline and not a substitute for legal advice.

You have basic severance entitlements under the law. The Ontario Employment Standards Act (ESA) mandates a minimum severance pay of one week of pay for every year employed up to a maximum of 26 weeks. Federally regulated workers can receive two days of pay for every year of service under the Canada Labour Code.

You qualify for severance pay under the ESA if your employment is terminated and:

• you have worked for the employer for five or more years (whether continuous or not) and;
• your employer has a global payroll of at least $2.5 million or severed the employment of 50 or more employees in a six-month period because all or part of the business is permanently closed.

Under the Canada Labour Code, you are entitled to severance pay if you have completed 12 consecutive months of continuous employment in a federally regulated industry.

It should be noted you would not be entitled to severance pay or even notice of termination if you have been fired for cause

A severance pay calculator is only helpful in providing the most cursory feedback in uncomplicated scenarios. However, as an executive, you are generally entitled to more financial remuneration and benefits than a regular worker. That is because the executive pay structure differs from what other employees receive and typically consists of salary, annual incentives, long-term incentives and benefits. This will have a bearing when determining the appropriate compensation package.

Because only basic information is required to calculate severance entitlements, critics view severance pay calculators as little more than marketing ploys to entice potential clients to book consultations.

The danger is the lack of detailed information could result in users having an overinflated estimate of their entitlements. Conversely, if someone gets a low estimate, they could be inclined to settle for an inferior package offered by the employers, leaving thousands of dollars on the table. This is why it is essential to seek advice from a lawyer who is experienced in severance issues.

Factors influencing your severance package

Some established factors help guide employers and employees when it comes to determining an executive severance package. They can include age, length of service, salary, benefits, commission, bonuses, pension or RRSP contributions, profit sharing, stock options and future employability. However, there is no universal formula that applies in each situation. Determining severance can be a complex process and will largely be determined by individual circumstances.

Your severance package can be limited to what has been agreed to in your employment agreement. However, it is important to remember that these contracts are not always as iron-clad as your employer would have you believe. It can come down to how the specific language contained in the agreement is interpreted.

An experienced severance lawyer will do a deep dive into your contract. Did your duties or responsibilities change during the course of your employment? If so, were you offered a new contract? Courts will not hesitate to invalidate an employment agreement that fails to meet the letter of the law. That is again why it is in your best interest to consult with a knowledgeable lawyer who can determine if your rights have been breached.

The Employment Standards Act provides a framework for severance pay in this province but common law supplements ESA minimums when it comes to your notice period. In Ontario, an employee must be given notice of termination if they have worked continuously for a company for three months. If not, the employee could be entitled to damages.

Several other factors can have an impact on an executive severance package, including company size, competition for high-performing executives, type of industry, employee performance and economic conditions.

How to negotiate a severance package in Canada

The internet provides a wealth of information on a seemingly endless variety of topics including employment law. Unfortunately, it is not always accurate, which is why it makes sense to seek qualified advice when negotiating your severance package.

During the shock of a termination, your employer may pressure you into accepting a quick deal. But before you enter any negotiation, it is imperative that you understand your legal rights and obligations. Does your severance agreement contain a non-compete clause limiting your employment options? Is that clause enforceable?

In a negotiation, you want to clearly understand your legal rights and ensure you get what you deserve.  Monetary details such as severance pay, stock options and bonuses will be paramount. But don’t forget to include such things as health insurance along with outplacement and retraining services.

Prepare for counteroffers and weigh every concession and trade-off. A release from a restrictive covenant such as a non-compete clause may be worth taking less severance pay if it means you can move on to a new job.

The importance of legal counsel

Employment law can be complicated and negotiating an executive severance package can present challenges that require legal expertise. A lawyer can help minimize your legal risks and exposure.

Many people are facing termination for the first time but the team at Walter Law Group has decades of experience and can protect your interests, negotiate better terms and offer the emotional distance that can provide peace of mind during a tumultuous period in your life.

Chances are, if you are considering hiring an employment lawyer you already need one. Even if you are still undecided, it is in your best interest to sit down with someone to discuss the merits of your case. Seek out a lawyer who is proficient in executive severance negotiations. Someone current on the latest developments and court rulings in employment law can guide you through challenging legal waters.

A knowledgeable severance lawyer is also able to negotiate a payment structure to lower taxes and liabilities and ensure that any necessary release terms do not impose any unreasonable requirements.

We are severance lawyers you can rely on

When someone has been terminated, they typically just want to put the ordeal behind them so they can move forward with their lives. At Walter Law Group, we understand that.

However, before you sign anything, talk to a lawyer who will negotiate, advocate and litigate expertly on your behalf. Our team will do a comprehensive Severance Package Review to determine if you are being treated equitably.

The compensation you receive should be based on your circumstances and take into account what you were paid at the time of dismissal, including salary, bonuses and/or incentive payments, allowances, stock options, profit sharing, restricted share units and long-term incentive plans. There are other details, such as payment for unused sick days and vacation days or provisions for retraining which may not seem significant but may still need to be considered.

Remember too that even though you may have an employment agreement that spells out your severance entitlements, it is not uncommon that these provisions are unenforceable or fail to fully protect your legal rights.

Don’t take a chance with your future, contact us today.