Losing your job can be a stressful and emotional experience. Whether you were terminated due to downsizing, performance issues, or other reasons, it is essential to understand your rights and options. If you have been let go, here are some key things you need to know before signing any documents and as you navigate this challenging situation. Most employers offer only the minimum, which is often about a quarter or even less of what you are owed. Why? Because employees sign without seeking legal advice.

Do I Have to Sign a Termination Letter Right Away?

When your employer informs you of your termination, they may ask you to sign a termination letter immediately or within seven days. You do not have to sign immediately or within any timeframe they provide. It is crucial to pause and get legal advice immediately.

Understanding Your Rights

Under Ontario’s Employment Standards Act, 2000 (“ESA”), you have certain rights, such as the minimum statutory notice of termination or pay in lieu of notice, severance pay, etc. However, absent an enforceable termination clause that limits your termination entitlement to the ESA minimum, you are entitled to common law reasonable notice, which is generally much more than the ESA minimum standards.

Consequences of Signing Severance Documents

Termination letters often include a “full and final release” to prevent terminated employees from pursuing further rights after they sign it. In addition to statutory or contractual entitlements, employers usually offer extra benefits in exchange for signing this full and final release, such as additional severance pay, extended benefits, outplacement services, or other forms of compensation.

By signing the release, you agree to receive the extra benefits and give up your right to sue for any additional claims related to your employment or termination. In Hall v. ESC Automation Inc., 2023 HRTO 1676, an employee’s application at the Human Rights Tribunal of Ontario (“HRTO”) was dismissed because the employee had already voluntarily signed a full and final release. Therefore, they lost the right to submit the human rights claim to pursue extra entitlements.

Your Right to Seek Legal Advice

Your employer cannot force you to sign any termination documents right away. You have the right to seek advice from an independent lawyer before signing. If you are pressured or rushed into signing a severance agreement or final release without enough time to seek legal advice, you could challenge the validity of these documents. In Rubin v. Home Depot Canada Inc., 2012 ONSC 3053, the Ontario Superior Court of Justice found the employer pressured the employee, suggesting that he would only receive termination package benefits if he signed the termination documents, making the employee believe he had no other option. As a result, the signed termination letter and release were unenforceable. The employee was awarded a 12-month reasonable notice period under common law, almost doubling the 28 weeks offered by the employer.

Understand Your Options

You are not obligated to sign any termination documents, especially when the termination package is less than what you are legally entitled to. By choosing not to sign the release, you can retain the right to pursue additional claims or entitlements under common law and start your negotiation for a more favourable package with your former employer.

If the severance package is far below your legal entitlement and the negotiation does not result in any improvements, you may have to resort to legal procedures. Under Ontario’s Limitations Act 2002, you must file a claim in court within a maximum of two years from the date of termination to avoid losing the right to sue. Further, if your termination is a result of discrimination under the Ontario Human Rights Code (“Code”), you can also consider filing a case with the HRTO within one year from the termination date.

Practical Steps

Here are some practical steps to take after being let go:

1. Engage Legal Counsel: Have a qualified lawyer review any severance documents. These are complex documents understood by lawyers. Even a few words misplaced can entitle you to payment four times the minimum ESA standards.
2. Document Everything: Keep records of conversations, emails, and any evidence of your termination. This documentation can be crucial if you decide to pursue legal proceedings.
3. Timelines Matter: Contacting a lawyer immediately is your best strategy to protect your rights. While you have two years to sue there are obligations to mitigate by finding a job. Ultimately remember the two-year limit under Ontario’s Limitations Act 2002, and the one-year limit under the Code. If you are considering a legal proceeding, do not miss the deadlines.

Being let go is never easy, but do not rush to sign anything, even if your employer asks you to sign the severance documents within a specific timeframe. Consult an employment lawyer to ensure you are treated fairly and receive the compensation you deserve. Signing a release usually forfeits your right to seek additional compensation or take legal proceedings against your former employer. Ensure you fully understand the implications before signing.

The City of Toronto recently terminated 461 employees because they refused to get vaccinated. Prior to this, the City of Toronto had placed many of these employees on unpaid leave.

Many employers are taking this same approach: unpaid leave, followed by termination with cause. However, in most cases, employers cannot place an employee on an unpaid leave.

Generally, unless your employment agreement expressly says so, your employer cannot place you on an unpaid leave. In rare cases, employers may be able to do so if they have included a clause in your employment agreement that either permits a temporary layoff or justifies it as an unpaid suspension due to non-compliance with a workplace vaccination policy.

Some employers may try to claim they can lay you off pursuant to Ontario Regulation: Infectious Disease Emergency Leave (“IDEL”). However, this tactic is risky, as many employees may have a constructive dismissal claim if they have been placed on IDEL.

So, if you are placed on unpaid leave, your employer may have constructively dismissed you, and you could be entitled to damages for wrongful dismissal. Do not simply accept or agree to unpaid leave or temporary layoff.  Instead, consult an experienced employment lawyer immediately, because you could be entitled to a severance package, with longer term employees being entitled to up to 24-months in severance and benefits.

Your employer could also terminate you with cause because you have not complied with their vaccination policy, and not provide you with notice or pay in lieu of notice. Employers will have a difficult time terminating you and not providing at least the Employment Standards Act, 2000, (“ESA”) minimum notice and severance. To do so, they would need to demonstrate your misconduct amounts to the high standard of “guilty of wilful misconduct, disobedience, or wilful neglect of duty that is not trivial and was not condoned by the employer.” In some workplaces, such as hospitals, the employer might succeed. However, in others, such as a fully remote business, it will be difficult for an employer to justify termination.

Alternatively, your employer may take a safer approach, and terminate you with cause, but provide at least your ESA minimum notice and severance. In this case, they would instead rely on the common law standard of cause or just cause to withhold your common law entitlements. However, if they cannot demonstrate that breach of a unilaterally imposed vaccination policy is sufficient to justify a common law cause termination, you could still be entitled to a full severance package.

Finally, you may also be entitled to damages pursuant Ontario’s Human Rights Code (“Code”) if your employer has failed to accommodate your Code-related reasons for refusing to get vaccinated. However, there is clear direction from the Ontario Human Rights Commission (“OHRC”) that vaccination requirements are generally permissible and compliant with the Code. Accordingly, this argument will likely fail in most cases.

We encourage you to seek assistance from Hum Law firm immediately if you are placed on unpaid leave, laid off, or terminated to ensure you are treated fairly.

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Question: We have had the same contract worker working for us full time for 10 years. Due to restructuring, we will no longer require their services and will sadly have to let them go. How much notice do we need to give and do we need to pay severance?

The first question to answer is if this contract worker providing services to you over the last 10 years is an independent contractor, dependent contractor, or employee. This difference is crucial because it determines what, if anything, your contract worker is entitled to on termination.

If they are truly an independent contractor, you do not owe them anything on termination, unless provided for by contract.  If they fall into the hybrid intermediate category of a dependent contractor, you will have to provide reasonable notice of the termination of their services, unless provided otherwise by contract.  If they are an employee, you will owe them common law reasonable notice, unless you have otherwise limited the entitlement by contract.

To assess if they are an independent contractor, dependant contractor, or employee, courts will look at the relationship between you and the contract worker. A court will look at several factors to determine if the contract worker is an independent contractor, the intermediate category of dependent contractor, or an employee, including:

• If the worker controls the method of doing work;
• If the worker can hire and fire other employees;
• If the worker relies on the employer for most of their income; and
• If the worker exclusively, or almost exclusively, works for the employer.

In your case, the most salient factor is that it appears the contract worker exclusively, or almost exclusively, works for you.

 

If the contract worker is an “independent contractor”

If the contract worker is an independent contractor, good news, the minimum standards of employment standards legislation do not apply.  If in Ontario, that means you are not obligated to provide notice or severance under the Employment Standards Act (ESA), nor would common law reasonable notice apply, unless it was provided for by contract.

While some employers have lawfully structured their organizations to accurately classify independent contractors as independent contractors and employees as employees. Many others have misclassified their employees as independent contractors to bypass the ESA. This is a dangerous practice, as it plainly contravenes the ESA.

 

If the contract worker is a “dependent contractor”

Even if the contract worker might be an independent contractor, since they are working exclusively or almost exclusively for you, another consideration is whether they might fall into the intermediate category of dependent contractor.

In McKee v Reid’s Heritage Homes Ltd., 2009 ONCA 916, the Ontario Court of Appeal stated that a dependent contractor is an intermediate category between an employee and independent contractor that is defined by a complete or near-complete exclusivity with the employer. Importantly, dependent contractors are entitled to reasonable notice of termination of their contract.

Note that dependent contractors are self-employed, remit their own statutory deductions such as CPP, EI and income tax, and share many of the characteristics of an independent contractor, but rely on you for all or most of their income.

 

If the contract worker is an “employee”

If your contract worker is found to be an employee, they would be entitled to reasonable notice of termination, unless they have a contract that has validly limited them to some other entitlement with enforceable termination provisions.  No contract can limit an employee’s termination entitlements to less than their minimum entitlements under the ESA.

Further, if your contract worker was found to be an employee, you could be in arrears for 10 years of CPP, EI, and income tax.

 

So, you are probably asking “what does this all mean for my business?”

The consequences of being employee or dependent contractor rather than an independent contractor are dramatically different on termination. Using this scenario as an example, if the worker is 45 years old, employed by you for 10 years, and earning $85,000 per year, that employee could be entitled to a total of 52 weeks’ common law reasonable notice, or $85,000 pay in lieu of notice! Remember that both employees and dependent contractors are entitled to reasonable notice of termination.

If you have a written contract with a valid termination clause, this could be limited to a minimum entitlement of 8 weeks’ notice of termination, plus severance pay of a further 8 weeks, for a total of $26,000, under the ESA.  An enforceable termination provision would potentially save you nearly $60,000 in pay in lieu of notice.

Finally, before terminating any worker, we encourage you to contact an experience employment lawyer for legal assistance, as the line between an independent contractor, dependent contractor, and employee can be blurry and complex.

We encourage you to contact Hum Law to assist you with structuring your organization to ensure ESA compliance.

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