What is wrongful dismissal?
Author: Chris Forguson
In most of Canada, all employment contracts – even if there is nothing in writing – must comply with the common law. The common law is an evolving set of rules of conduct, which Canada adopted from England when Canada was a colony. We needed some laws and we were generally familiar with the laws of England so we adopted those laws.
Back then, the common law of England relating to employment was known as the laws of master and servant. Our modern employment law has evolved from the ancient laws of master and servant. One key principle that was imported from the law of master and servant was the concept that employee’s (servants) were entitled to some advance notice if they were going to lose their job.
This principle was not adopted in many American states where employment is “at will” which means that employment can be terminated at any time without any notice.
The common law requirement in Canada is that an employer must provide an employee with “reasonable notice of termination” unless the employer has “just cause” for dismissal without notice.
What this means is that the employer must provide the employee with advance notice that their job will end on a specified date in the future. The amount of notice that is required under the common law varies with each individual. This common law is what is referred to as “Judge made law”. There are no tables or charts. Each employee that seeks resolution in the Courts is assessed individually. However, the Courts strive for predictability and are guided by past precedent cases.
The most important factors in assessing a reasonable notice period are: the employee’s age, their length of service and the nature of their job insofar as their job is either more or less difficult to replace (to find another similar job).
One of the primary roles of employment lawyers is to provide a reliable estimate of what a Court might decide as a reasonable notice period based on past precedent. In this regard some cases are much more authoritative than others based on the similarity of the facts, the level and jurisdiction of the Court and the thoroughness of the analysis in the reported decision.
Courts typically assess reasonable notice periods in terms of months. Many long service employees are entitled to many months of advance notice of termination under the common law. Most employers are not keen to have an employee continue on after they have received notice that their job is ending. Most employers would rather terminate an employee immediately.
However, termination without advance reasonable notice is contrary to the common law.
So, wrongful dismissal is a termination by an employer without reasonable advance notice of termination.
Even if an employer offers a severance payment upon termination, the employer has still breached the employment contract by terminating the employee without notice.
Everything stated above is applicable only to employees that are not in a unionized setting. If an employee is in a unionized setting, the termination of their employment is not governed by the common law but rather the applicable collective agreement and the applicable labour statutes.
Furthermore, the obligation to provide reasonable notice only arises in the case of terminations, which are considered “not for cause”.
What is considered “just cause” in British Columbia?
If an employer believes that an employee has engaged in conduct that is so egregious that the employee has effectively breached the implied duties of loyalty, fidelity or trust, the employer can claim that it has “just cause” to terminate the employment summarily (without notice).
Because an employer can lawfully terminate an employee for any reason (subject to certain restrictions in applicable employment standards and human rights legislation) by providing the employee with reasonable notice, the threshold for conduct which allows an employer to terminate without notice is high.
There is no list of conduct which constitutes just cause. This is one area where a careful review of past precedent is required. Generally, the longer an employee has been employed, the more latitude an employee is entitled to. Employee conduct as supporting just cause for dismissal without notice is assessed by the Courts on a contextual basis. The same conduct by a junior employee with a spotty disciplinary record might support a dismissal for just cause whereas the same conduct by a long-term employee with an unblemished record might only warrant a stern warning.
Until recently, the law used to be that any dishonesty by an employee would constitute just cause for dismissal. Now, dishonesty must be assessed in the context of the incident as well as the overall employment history of the employee.
The topic of just cause is frequently misunderstood through confusion with the laws relating to dismissal in a unionized setting. In common law employment, it is not necessary to go through a process of progressive discipline in order to dismiss someone for cause. Sometimes a single incident is enough. Generally, dishonesty will still constitute cause however not every incident of dishonesty will cross the threshold.
While there is no requirement to apply a process of progressive discipline for underperformance or insubordination, it is very difficult to win a just cause case without a clear warning to the employee that specific improvement is required and meaningful opportunity to succeed.
The consequences of a lawsuit where just cause is alleged are significant. If the employer wins, the employee gets nothing and typically has to pay a portion of the employer’s legal fees. If the employee wins, the employer has to pay damages equivalent to what the employee would have earned if the employee had received reasonable notice of termination plus a portion of the employee’s legal fees. Because of this, most reported cause decisions involve employees that would have – absent the allegation of just cause – been entitled to relatively significant reasonable notice of termination.
Special cases for unions
When an employee joins a union, they effectively relinquish their rights to have disputes about their employment determined by the Courts pursuant to common law. They have agreed to have their disputes, including discipline and termination, resolved pursuant to the dispute resolution method set out in the applicable labour legislation (the BC Labour Relations Code and the Canada Labour Code for federally regulated employers).
Labour legislation has established a dispute resolution mechanism involving grievances, arbitration and ultimately appeal to labour tribunals. The union represents the employee and decides what course of action is appropriate. The employee does not have the right to opt out of this system. If the employee is not satisfied with the way his or her union is representing them in an employment dispute, the employee’s only remedy is to claim – the labour tribunal – that their union is not representing them “fairly”.
I only act for common law employees in the court system. If you are a union member, there is virtually nothing I can do to assist you in the Court system. There are many benefits to working in a unionized setting but access to the Courts to seek redress for workplace wrongs is a right that you have effectively relinquished in return for the benefits of union membership.
What is reasonable notice?
Reasonable notice varies from individual to individual. The best an employment lawyer can do is to provide as estimate of the range of reasonable notice you might expect if you were to go to Court. That range can be quite wide in circumstances where there are few similar precedent setting cases or where the precedents are inconsistent. The range can also be quite narrow in circumstances where there is recent, well reasoned British Columbia authority with similar significant circumstances.
If you throw all of the common law notice period cases together and average them out, you will probably come out with an average of about one month of notice for each year of service. However, there are several factors which can make this average calculation inapplicable for a specific individual.
One factor which tends to skew the average is the fact that there is a general consensus of a maximum notice period of 24 months. Thus, an employee with 35-years of service (are there any left?) would not be getting a month per year of service.
Also, typically, those short service employees that go to Court seeking damages for wrongful dismissal typically have some aggravating factor that justifies a notice period in excess of one month per year. So many of the reported decisions for short service employees (under 2 years service) result in notice periods much greater than one month per year.
Therefore the one month per year of service average tends to break down with the very short service employees and the very long service employees.
Factors such as age, job specialization, inducement from secure positions can have a significant impact on notice periods.
Many employees are unaware of their common law right to reasonable notice and do not question their employers when they are presented with a severance cheque for Employment Standards minimums of one week per year of service. Typically their common law entitlement to reasonable notice is significantly more.
What is constructive dismissal?
This is a thorny question. Because an employer must provide a senior long term employee with reasonable notice of termination in the range of one month per year of service, and because most employers do not want to provide actual working notice, the employer is typically faced with the prospect of making a significant severance offer to avoid a wrongful dismissal lawsuit.
Centuries ago in England, crafty employers (Masters) figured out that if they could force the employee to quit, they would not have to provide reasonable notice (or severance). The Courts quickly figured this out and determined that the way an employer typically tries to force an employee to quit is by imposing changes to the employment relationship: you will work twice as much for the same pay, you will work the same for half pay, you will no longer have you own office but will instead work outside, you were a vice president but now you are a junior clerk, etc.
The specifics of these forced changes are infinitely varied but what they have in common is a forced change that the employee finds unpalatable or demeaning.
The Courts developed a concept known as constructive dismissal to protect employees from this type of conduct. If significant changes, which pass a certain threshold, are forced on an employee, the employee can quit and sue the employer for damages equivalent to the amount the employee would have earned if he or she had been provided with reasonable notice of termination.
Constructive dismissal damages are generally equivalent to wrongful dismissal damages. However, there is one key difference. In a wrongful dismissal action, the employee only needs to prove that they have been dismissed without notice. In a constructive dismissal action the employee must prove that the employer made unilateral changes that went to the root of the employment contract (fundamental changes) and therefore the employee was justified in quitting.
While the Courts did manage to provide some protection from unscrupulous employers seeking to avoid reasonable notice, there are significant costs and risks in seeking this remedy. The precedents on what constitutes constructive dismissal are often difficult to reconcile.
One of the most succinct descriptions of the concept of constructive dismissal comes from Justice N.W. Sherstobitoff of the Saskatchewan Court of Appeal:
A constructive dismissal occurs when an employer makes a unilateral and fundamental change to a term or condition of an employment contract without providing reasonable notice of that change to the employee. Such action amounts to a repudiation of the contract of employment by the employer whether or not he intended to continue the employment relationship. Therefore, the employee can treat the contract as wrongfully terminated and resign which, in turn, gives rise to an obligation on the employer’s part to provide damages in lieu of reasonable notice.
Many employees feel aggrieved when changes are forced upon them. Generally an employer has the right to make reasonable changes within the workplace. The question of constructive dismissal is whether the change constitutes a fundamental change to the employment contract. The employer might not even intend for the change to be considered fundamental. The test for the Courts is objective: would a reasonable person view this unilateral change to be such that the employer is no longer performing its obligations in the employment contract?
What if I don’t have a contract?
Don’t worry! You do have a contract; it just might not be in writing. The fact that you work and do specific duties and get paid means that you have a contract. Your relationship with your employer is a contractual relationship and the terms of the contract can be inferred from past conduct. In employment law, the most important term for an employee that is facing dismissal is the term that the employer must provide reasonable notice of termination. That term is implied in every employment contract, even if you have nothing in writing.
Typically, employers require employment contracts that include termination provisions so that they can attempt to get the employee to agree to termination provisions that would be considered less than reasonable notice under common law. So if you don’t have a contract, you are often better off when facing termination. The only restriction on what an employer can require an employee to sign regarding termination provisions is that an employer cannot rely on a termination provision that provides for less notice and/or severance than the Employment Standards Act (one week per year – eight week maximum).
Often employers will seek to have an employee agree at the outset of employment that the employer can terminate the employment by only complying with the Employment Standards Act. After many years of service, the difference between the Employment Standards Act maximum (8 weeks) and common law notice (maybe 10 months after 10 years) becomes significant. If the employer did a good job drafting the termination provision, the employee can be stuck with a much-reduced severance as compared with their common law rights, which they signed away. In these circumstances, it is important to have an experienced employment lawyer look very carefully at the limiting clause. Sometimes a simple drafting error can open the door to common law reasonable notice.
How does a probation period affect dismissal?
Many employees are hired subject to a probationary period. The British Columbia Employment Standards Act provides that the right to statutory severance does not start until you have been employed for 3 months. Under the common law, there is no particular significance to a probationary period because every employee is entitled to reasonable notice of termination. However, since a significant component of the determination of a reasonable notice period is length of service, it is unlikely that a person terminated during an initial probationary period would be entitled to enough common law notice to justify a wrongful dismissal lawsuit. Typically, a written employment contract that specifically imposes a probationary period that complies with the Employment Standards Act and allows for termination during the employment probationary period without any notice will not support a cost effective wrongful dismissal suit.
What should I do if I think I will fired soon?
I have put together a brief checklist to make sure you get all the employment information you will need.
Think you have a case or still have questions about wrongful dismissal?
You can call Chris at 604 763-4533 or email at firstname.lastname@example.org