Termination Without Cause Includes Lay Off
December 15, 2014
The employee signed an agreement at the start of his work, which included a clause limiting his entitlement if his employment was terminated without cause. The contract stated: “… unless an employee is terminated for cause, an employee’s entitlement may be terminated at the sole discretion of the Employer and for any reason whatsoever upon providing the employee with one (1) weeks [sic] notice or pay in lieu thereof, subject to any additional notice, pay in lieu thereof or severance that may be required to meet the minimum requirements of the Employment Standards Act…“
The employee worked for the employer for approximately seven years, and was then purportedly “laid off” from work. Within a couple of months the employer paid to the employee his termination pay entitlement under the Employment Standards Act. The employee brought an action for damages for constructive dismissal against the employer.
There was no dispute that the purported lay off constituted a constructive dismissal, which in law is the same as a termination without cause. There was also no dispute that the employee had received his minimum statutory entitlement and the amount required under his employment agreement. The employee asserted, however, that because the employer laid him off rather than outright terminating him, it was not entitled to rely on the termination provision as limiting the employee’s entitlement. Further, the employer defended the action on the basis that it had cause to terminate the employee and since it failed in that defence it could not rely on the agreement’s termination provision. The employee was partially successful at trial.
A unanimous three-member panel of the Ontario Divisional Court disagreed with the employee. The panel held that even though the employment agreement did not address lay-off of the employee, a lay-off is tantamount to a termination without cause which the agreement explicitly addressed. The employer was entitled to the benefit of the negotiated termination provision.
On the question of whether the employer was precluded from relying on the termination provision following an unsustained allegation of cause for dismissal, the panel had no hesitation concluding that the failure to establish cause meant a finding of termination without cause, and this was directly addressed in the contract. The appeal was dismissed.
Simpson v. Global Warranty, 2014 ONSC 6916 (CanLII)
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