“But why?” is often the most common question employees ask about their termination. Years of dedicated service and going above and beyond seem meaningless when they can be terminated anytime and without a reason. There is often a sense of betrayal, with the employee racking their brains about why they got terminated and how they will let those close to them know.
The difficult truth is that employers owe nothing to employees beyond obeying the law, treating them fairly, and providing their legal rights and entitlements. In most cases, an employer can terminate a non-unionized employee without cause, at any time, by providing them with a proper severance package according to the Employment Standards Act, 2000 (“ESA”) and the Common Law. However, this is only in most cases. There are exceptions, and those show why you should always get independent legal advice.
The Limits on Termination
In Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, the Court faced the typical employment case problem–determining if an employment contract’s termination clause was legal.
The reason why most cases come down to this single question is simple. An enforceable employment contract can limit an employee’s rights upon termination to their entitlements under the ESA, meaning they would not be entitled to get significantly more under the common law. However, an employment contract cannot be enforceable if it violates the law. The difference between these two amounts can be significant, as shown in Dufault.
The facts of the case were fairly simple. Ms. Dufault was employed as a Youth Engagement Coordinator with the Township. On November 24, 2022, she signed a new fixed-term contract for just over two years, ending on December 31, 2024.
The Township terminated her employment roughly two months later, on January 26, 2023, paying her two weeks of pay in lieu of notice.
Why Termination Provisions Are Key
In that case, the Court found that the Termination Clause was unenforceable for three reasons:
1) It said the employer could terminate the employee for cause, aka without notice or pay in lieu of notice, for reasons “including, but not limited to, failure to perform services, wilful negligence or disobedience not condoned by the Township or resulting in injury or damages.”
The Court correctly held that this is not the standard under the ESA, which limits terminations without notice or pay in lieu of notice to employees who are “guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer.” While these two standards may initially look very similar, the devil is in the details. For example, the termination clause would allow the employer to terminate the employee for any breach, while the law requires the breach to be non-trivial.
2) Per the termination clause, the employer could terminate the employee, without cause, by paying “the employee’s base salary for two weeks per year of service to a maximum of four months or the period required by the ESA, whichever is greater.”
The Court correctly held that this violated the ESA, which requires that the employee be paid all “regular wages,” not just “base salary.” Regular wages include salary, commissions, room and board, and any bonuses tied to hours, production, or efficiency. An employer is also prohibited from changing an employee’s entitlements during the notice period.
3) The Termination Clause gave “the employer “sole discretion” to terminate the employee’s employment at any time.”
The Court correctly stated that employers do not have an absolute right to terminate an employee without cause. The law prohibits an employer from terminating an employee in reprisal for asking about or enforcing their rights. An employer must also reinstate an employee returning from maternity or sick leave.
The outcome in Dufault v. The Corporation of the Township of Ignace
Most employees are employed per an indefinite term contract. If they are terminated, they are entitled to common law notice. Fixed-term contracts are different.
If a fixed-term contract is terminated early, the employee is entitled to the balance of the contract, absent a valid termination clause. Ms. Dufault was employed on a twenty-six-month fixed-term contract. The unenforceable termination clause meant she was entitled to an additional $157,081.57.
Key Takeaways
Dufault highlights why having a lawyer review any contract is critical, especially in employment. A missing word or unclear phrase can have massive financial ramifications. Employment law is a niche area where the normal rules of contracts do not apply, and decisions like Dufault come out regularly, changing the legal landscape.
This is why getting specific legal advice from an employment lawyer regularly, not just on termination, is important. A lawyer can review your contract with you before you sign to make sure you understand what you are agreeing to, make informed decisions, and help you with any issues during your employment.
The lawyers at De Bousquet PC are here to help you through the pain of being terminated by reducing stress and ensuring you get what you are owed. If you are on a fixed-term contract, have a new job offer, have issues at work, or have been terminated, call us today.