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What Constitutes Termination in Ontario?

The Employment Standards Act, 2000 ("ESA"), specifically, S. 56(1), states that an employer terminates an employee in Ontario if: 

• the employer dismisses the employee or otherwise refuses or is unable to continue employing him or her; 

• the employer constructively dismisses the employee and the employee resigns from his or her employment in response to that within a reasonable period; or

• the employer lays the employee off for a period longer than the period of a temporary lay-off. 

What Obligations to Employers Have Upon Termination?

Understanding the obligations of an employer in Ontario upon terminating an employee can be somewhat convoluted, because the various rules governing termination are a combination of contract terms (the employment contract), legislation/statute (Employment Standards Act), and the common law (past judicial decisions with respect to employee rights). However, generally speaking, when an employer in Ontario terminates the employment relationship and the employee has been continuously employed for three (3) months, the employer must provide the terminated employee with reasonable notice or pay in lieu.

Types of Termination in Ontario: "With" and "Without Cause"

When an employee is terminated, it is characterized as either termination "with cause" or termination "without cause." This distinction is important because the obligations of employers and the rights of employees upon termination vary significantly depending on how the termination of employment is characterized.

         Termination "with cause" is relatively self-explanatory. 

The law recognizes an employer's right to summarily terminate an employee, whether that employee is an indefinite-term employee or under a contract of employment, where the employer has "just cause" to do so. An employer, for example, could dismiss an employee summarily in Ontario if the employee has been guilty of serious misconduct. If an employee is terminated with cause, the employee is not entitled to reasonable notice under the ESA or at common law.

        Termination "without cause" is less straightforward.

If an indefinite-term employee or an employee under a contract of employment is terminated without cause in Ontario, the employee is entitled to a period of reasonable notice or pay in lieu thereof under both the ESA and at common law, unless there is an enforceable termination clause in the employment contract which specifically stipulates that the employee is not entitled to reasonable notice at common law. Importantly, employers and employees cannot similarly contract themselves out of the reasonable notice standard included in the ESA. 

         Entitlement to Reasonable Notice under the ESA only

If an indefinite-term employee or an employee under a contract of employment in Ontario is (1) terminated without cause; (2) has a fixed-term contract or a contract of employment with an enforceable termination clause, the employee is only entitled to reasonable notice or pay in lieu thereof under the ESA.

        Entitlement to Reasonable Notice under the ESA and at Common Law

If an indefinite-term employee or an employee under a contract of employment in Ontario is (1) terminated without cause; or (2) does not have a fixed-term contract or a contract of employment with an enforceable termination clause, the terminated employee is entitled to reasonable notice or pay in lieu thereof under both the ESA (up to 2 months) and at common law (up to 24 months).