Wrongful Dismissal

What is a wrongful dismissal?

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A wrongful dismissal is a termination of employment that is contrary to the law. As a matter of law, an employer can terminate an employee’s employment for any reason or no reason at all (subject to only a few exceptions like that employment being part of a collective agreement, protection under human rights or worker compensation legislation, or protected leave under the BC Employment Standards Act).

A wrongful dismissal is not a moral indictment on the employer. Instead, a wrongful dismissal occurs when an employee is terminated without adequate notice or pay in-lieu of notice. Payment in-lieu of notice is often referred to as “severance”.

How is a wrongful dismissal different from constructive dismissal?

A constructive dismissal is simply a type of wrongful dismissal. Where the vast majority of wrongful dismissal claims involve a clear and direct decision by the employer to end the employment relationship, a constructive dismissal claim alleges that the employer’s conduct has indicated an intention to no longer be in an employer-employee relationship.

Essentially, these situations are where the employer is trying to bully or push the employee to quit the job without dismissing the employee.

The claim for compensation between a wrongful dismissal and a constructive dismissal are generally the same unless there is conduct that can be described as “bad faith” (see below).

What kind of conduct results in constructive dismissal?

Employment LawyerAn employer can constructively dismiss an employee through a single unilateral change to the employment relationship or a series of acts that show the employer does not wish to employ the employee any longer.

If it is a single unilateral change, then the employer must be breaching an express or implied term of the employment contract and this breach must substantially alter an essential term of the employment. In assessing these claims, the Courts ask whether a reasonable person in the same situation as the employee would have believed that an essential term of the employment relationship was substantially changed.

If it is a series of acts, then the Court would look at the whole series of actions by the employer and determine if that conduct in light of all the circumstances would lead a reasonable person to conclude that the employer no longer intended to be bound by the terms of the contract. Courts have held that there is an implied fundamental term of any employment relationship that the employer treat the employee with civility, decency, respect, and dignity.

A change to compensation and benefits, a change to a job assignment, a reassignment to a different location, unpaid suspension and temporary layoffs, and employee harassment can all – in the right circumstances – constitute constructive dismissal. It is important that you recognize the change and decide whether to resign alleging constructive dismissal or accept the change within a reasonable time after the change has taken place.

As a result, these decisions require help in the moment to assess the circumstances of the case. That is where we can help you. We offer free consultations to help you evaluate your options and decide what is your best course of action.

How do I know if my severance is fair?

Severance is based on the theory that an employee is entitled to a certain amount of notice that their job is ending before their job is actually over. Essentially, the law implies a requirement that employers must give a warning to their employees prior to terminating an employee’s employment. This notice can be written notice prior to the termination date where the employee is still expected to work (i.e. “working notice”) or the employer can choose to forego the waiting period and simply pay the employee for the wages that they would have earned if the employer would have given working notice (i.e. “pay in lieu of notice”). That is why severance is often calculated in terms of weeks or months because it represents compensation for the time an employee would have worked had the employer given proper notice.

There are three sources to determine what notice an employer must give to an employee.

First, every employee in British Columbia is entitled to the minimum statutory entitlements under the  BC Employment Standards Act. Under section 63 of this legislation, an employee becomes entitled to one week of wages after 3 months of service, 2 weeks’ after 12 months’ service, 3 weeks after 3 years service, and an additional week per year of service up to a maximum of 8 weeks. These are the minimum entitlements at law.

Second, the courts have implied a term into every working relationship that – unless there is a contract varying this term – an employee is entitled to reasonable notice of termination. Common law reasonable notice considers several “factors” and comparable cases to arrive at a range of notice that would be reasonable for the employee in the circumstances. These factors are the age of the employee, the tenure of the employment, the nature of the employment (e.g. whether it was managerial or was in a highly specialized field), and the reasonable availability of similar employment. There are other considerations that arise in case by case situations, such as whether the employee was recruited from previously secure employment and whether the employee’s tenure should include past history or part-time work.

Some places will suggest a rule of thumb of one-month severance per year of tenure with the employer. However, this rule has been firmly rejected at law. In practice, short-term employees tend to receive more notice than that rule suggests, and longer-term employees will tend to receive less. However, the range depends upon the number of factors that favour extending the notice period versus those that suggest a more limited notice period.

Third, the contract of employment can vary the entitlement to reasonable notice by including specific terms that address the amount of notice an employee is entitled to upon termination of the contract by an employer. These contracts should be entered into at the start of the employment relationship or in exchange for good and valuable consideration (e.g. increase in salary or benefits).

Accordingly, as an employer or employee evaluating how much notice is required the starting place needs to be the contract of employment [as an employer, if you do not have contracts of employment with all your employees then you should ask yourself why not?].

Most properly drafted employment contracts set out the terms of the employment relationship, including termination of the employment relationship. As long as the employment contract is compliant with the BC Employment Standards Act and the BC  Human Rights Code, the courts have found the contract is binding on the amount of severance that an employer needs to pay to an employee. This remains true even if the contract recites or references the Employment Standards Act.

The contract can become void if the amount of notice hypothetically results in less notice than the minimum guarantees in the Employment Standards Act. For example, if a contract of employment calls for one month notice to an employee regardless of tenure then that notice provision will be found void and unenforceable because the Employment Standards Act can hypothetically provide up to two months’ notice. The employee in that scenario would be entitled to claim common law reasonable notice.

We can help you evaluate your reasonable notice period and decide on whether the severance being offered is fair. We offer a free initial consultation and have flexible fee agreements that can work for many people who have lost their job.

We also offer help to employers looking at dismissing an employee. We can help keep your business in a strong position when it must terminate employees go and we can tailor the services for your type of business and your workforce.

What is just cause?

A termination “with cause” is an allegation that the employee has misbehaved so significantly that it has resulted in a break of the employment relationship. Another way of describing this type of dismissal is with “just cause”.

The courts evaluate these types of dismissals very carefully and employers need to know that it is not just a matter of opinion. At court an employer needs to be able to prove that they had sufficient evidence to prove just cause, i.e. a fair reason to consider the employee’s misconduct (or multiple instances of misconduct) resulted in a fundamental break in the employment relationship. Theft, breach of trust, and insubordination are common examples of misconduct that can result in just cause. It is less common to establish just cause from incompetence or not being very good at the job. An employee must be given several warnings and chances to improve before incompetence can really be considered sufficient for just cause.

All allegations of misconduct are considered in the context of the employment relationship and whether ongoing employment was reasonable in the circumstances. Even instances of significant misconduct can be excused if an employer cannot establish the full extent of the misconduct or the court finds that the employment relationship could continue.

Employers considering terminating an employee for cause would be wise to speak to legal counsel about the events and the evidence available prior to deciding. Employees being accused of serious misconduct would also be well advised to seek legal counsel on the exact consequences of any allegations against them

What does it mean for an employer to act in bad faith?

When an employer decides to terminate an employee, they have an implied obligation to act in good faith and fair dealing with the employee in the manner of dismissal. A failure to adhere to this obligation can constitute an “actionable wrong” and is sufficient to result in an award of either aggravated or punitive damages against an employer.

The obligation on employers includes a requirements to investigate allegations of misconduct and give employees the opportunity to respond as well as requiring employers not to fabricate grounds for just cause, maintain unfounded allegations of cause, or treat an employee in a humiliating manner.

These types of cases are very fact specific and look at the circumstances of the employment and the conduct of the employer in that situation. It is often tempting for employees to bring forward an entire list of complaints about how an employer operates their business. However, the focus of bad faith claims is on the manner of dismissal (which in constructive dismissal cases can include managerial decisions). If the employer was upfront, transparent, and made reasonable efforts in the dismissal then bad faith will not be found.

However, if the employer did breach this obligation then the employee can seek either aggravated damages (seeking for example damages for causing mental health concerns beyond those normally suffered after losing a job) or punitive damages (seeking compensation for conduct that is viewed objectively as harsh, vindictive and malicious).

If you have been subject to such conduct, then you should seek legal advice and we can help you evaluate your claim. If you or your business are being accused of such conduct, then you should also seek legal advice.