Active While on Medical Leave From Work

Employees owe their employer a duty of honesty. Dishonesty toward the employer has been described as a duty that is fundamentally incompatible with an employee’s continued employment, and it is on this basis that courts often find that employees who have breached their duty of honesty toward their employer can be terminated without notice or pay-in-lieu thereof. But proving dishonesty is not an easy task, and employers would be prudent not to allege dishonesty where the evidence is less than compelling.

The employer in Evans v. Sobeys Capital Inc. learned this lesson. In this case, the employee’s job involved heavy lifting. The employee injured his back, and, on the advice of his doctor, took time off from work. After noticing some improvement in his level of pain, the employee asked his doctor for permission to go to his cabin in the woods. His doctor approved his trip to the cabin. The employee also told his employer that he would be going to the cabin. Upon advising his employer of his trip, the employee was suspended from work.

The employer in Evans v. Sobeys Capital Inc. learned this lesson. In this case, the employee’s job involved heavy lifting. The employee injured his back, and, on the advice of his doctor, took time off from work. After noticing some improvement in his level of pain, the employee asked his doctor for permission to go to his cabin in the woods. His doctor approved his trip to the cabin. The employee also told his employer that he would be going to the cabin. Upon advising his employer of his trip, the employee was suspended from work.

The employer eventually terminated the employee’s employment. It refused to pay the employee any pay-in-lieu of notice, arguing that the employee fraudulently abused the company’s medical disability plan. The trial judge, and the Court of Appeal, disagreed with the employer’s conclusion. Of critical importance in both the trial judge’s and the Court of Appeal’s decision were the facts that the employee did not attempt to hide his activities, and that the trip to the cabin was not inconsistent with an inability to perform a job which involved heavy lifting.

What is Notice of Termination?

In Ontario, when an employer decides to terminate an employee’s employment, the employer must, in the majority of cases, provide the employee with prior notice of termination or pay-in-lieu thereof.

How much notice or pay-in-lieu of notice is necessary is a question that can only be answered with reference to the specific facts of each case. For a general overview of employers’ obligations to provide notice or pay-in-lieu of notice, see “Notice of Termination: Minimum Requirements and Beyond”.

This article is concerned with a narrower issue: What constitutes notice of termination, and what is necessary to ensure that the notice is effective at law?

The court answered this question in Yeager v. R.J. Hastings Agencies Ltd. In that case, the employee alleged that he was wrongfully terminated from his job after 30 years of employment with the employer. Part of the employer’s argument was that the employee had been given sufficient notice of termination, such that his termination was not wrongful. In determining whether the employee had been given notice of termination, the court held that the following is required for notice to be effective at law:

• The notice of dismissal must be specific and unequivocal – this means that the employee must be made aware that his employment will come to an end on a specified date, and that the termination is not tentative or likely, but certain; and
• The notice of dismissal must be clearly communicated to the employee – a reasonable man must conclude, from the notice provided, that his employment will come to an end at a specified date in the future.

The employer bears the burden of proving that such notice has been given to the terminated employee.

All about Severance

“Severance Pay” and “Severance Package”
The terms “severance pay” and “severance package” are often used interchangeably. In strict legal terms however, the two are not synonymous. “Severance pay” refers to certain pay mandated by statute in certain circumstances. A “severance package” can include “severance pay”, but not necessarily.

In Ontario, the Employment Standards Act applies to all employees whose employers are provincially regulated. For employees who work for federally regulated employers, the Canada Labour Code applies. Each of these statutes provide for severance pay if certain conditions are met.

Severance Pay under the Employment Standards Act
Under the Employment Standards Act, an employee whose employment is terminated (including lay-off that becomes termination) through no fault of his own sufficient to constitute just cause for termination at law (or, simply put, on a without cause basis) is entitled to severance pay if the following conditions are met:

• The employee has been employed with the same employer for at least 5 years; AND

• The employer has an annual employee payroll of at least $2.5 million per year; OR

• At least 50 employees of the employer lose their employment within a six (6) month period due to lay-offs.

If these conditions are met, the employee will be entitled to one (1) week of regular pay for every year of service with the employer, up to a maximum of twenty six (26) weeks. It is important to note that for the purposes of calculating severance pay, it is not necessary that the employee’s employment be uninterrupted. All years of service in Ontario are taken into account when calculating severance pay. Generally speaking, any completed years of service for the same employer outside of Ontario are not taken into account. Interestingly, it has been held, in recent case law, that a determination of the employer’s payroll need not be restricted to its payroll in Ontario when determining an employer’s annual payroll, though there are several other cases that state the opposite with respect to this issue.

Severance Pay under the Canada Labour Code

Under the Canada Labour Code, an employee whose employment is terminated (including lay-off that becomes termination) through no fault of his own sufficient to constitute just cause for termination at law (or, simply put, on a without cause basis) is entitled to severance pay if the employee has been employed with the same employer for at least twelve (12) consecutive months of continuous employment.

Under the Canada Labour Code, the terminated employee will be entitled to two (2) days of pay for every completed year of service, with a minimum of five (5) days of severance pay.

Other Key Facts about Severance Pay

Severance pay cannot be given as working notice
Unlike the requirement to give notice, which employers have discretion to provide either as working notice or pay-in-lieu of notice, severance pay cannot be substituted with working notice. In other words, an employee cannot work his severance instead of receiving severance pay. An employer must pay the severance pay.

Payment of severance pay is, in most cases, only part compliance with statute
Compliance with the requirement to pay severance pay will not, in the vast majority of cases, absolve an employer of its statutory obligations arising from the termination of an employee’s employment. Both the Employment Standards Act and the Canada Labour Code prescribe other minimum requirements that must be met before the termination complies with the respective, applicable statute. For example, both the Employment Standards Act and the Canada Labour Code prescribe entitlement to notice or pay-in-lieu of notice (which is separate from severance pay), as well as payment of any accrued and unpaid vacation, any unpaid wages, etc.

Full compliance with legislation does not usually absolve employer of liability
Finally, full compliance with the applicable legislation does not necessarily mean that an employer has no further obligations toward the terminated employee.

Both the Employment Standards Act and the Canada Labour Code prescribe mandatory minimums only. However, employees are presumed at law to be entitled to reasonable notice or pay-in-lieu thereof, which is often in significant excess of legislative entitlements. Unless an employee’s employment contract rebuts the presumption of common law notice in clear language through a termination clause, the employee will be entitled to reasonable notice, or pay-in-lieu of notice, at common law.