A well-drafted termination clause is one of the most important risk-management tools an Ontario employer can have. In simple terms, a termination clause is the section of an employment agreement that defines what an employee will receive if their employment ends, whether they are terminated without cause or for cause.

When enforceable, a termination clause can significantly reduce an employer’s exposure by limiting termination entitlements to the employee’s minimum statutory entitlements under the Employment Standards Act, 2000 (“ESA”). When unenforceable, employers may face common law reasonable notice, which can mean the difference between paying a few weeks of compensation versus several months, in addition to potential legal costs and litigation risk.

Courts continue to scrutinize termination clauses closely

Ontario courts have made it clear that termination clauses will be interpreted strictly. Even where an employer never intended to apply a clause unlawfully, a clause may be struck if it could violate the ESA in any circumstance.

This means “template” clauses, particularly older ones, can create real risk.

Less is more

Recent cases suggest that simpler termination language is often stronger than complicated drafting.

For example, in Bertsch v. Datastealth Inc., the Ontario Court of Appeal confirmed that a termination clause may be enforceable where it clearly limits entitlements to ESA minimum standards, without adding language that introduces ambiguity or risk.

For employers, the takeaway is straightforward: over-drafting can backfire. In many cases, simply confirming that the employee will receive their ESA minimum entitlements on termination (including termination for cause, to the extent required by the ESA) may be enough.

What you define as “just cause” matters

One of the most common reasons termination clauses fail is that the agreement attempts to define “cause” more broadly than the ESA permits.

The ESA only allows an employer to deny notice or pay in lieu in cases of wilful misconduct or wilful neglect of duty (a very high threshold). However, many agreements include language suggesting an employee can be terminated “for cause” without notice for broader categories such as poor performance, breach of policy, or general misconduct.

Even if an employer would never apply the clause that way, Ontario courts have repeatedly found that this type of drafting can render a termination clause unenforceable.

Ontario courts have also confirmed that if any part of a termination provision breaches the ESA, the entire termination provision may be unenforceable (Waksdale v. Swegon North America Inc., 2020 ONCA 391).

“At any time” language

Termination clauses should also avoid language suggesting an employer can terminate “at any time,” regardless of the circumstances.

This type of wording has recently been scrutinized by the courts, and employers should watch closely as the law continues to develop. (Notably, the Baker v. Van Dolder’s Home Team Inc. (2025) decision, which addressed problematic “at any time” language, is currently under appeal.)

All forms of compensation

Termination language should account for the employee’s full compensation package, especially what must be maintained and paid throughout the ESA notice period.

Many disputes arise where clauses fail to address items such as benefits continuation and employer RRSP/pension contributions (if applicable). Employers should also ensure the employment agreement and any bonus or incentive plan language work together, especially in termination scenarios. Clear, restrictive language may limit bonus entitlements beyond ESA minimums but cannot contract out of ESA entitlements.

Takeaways

If your organization has not reviewed its employment agreement templates in the past few years, or if you are relying on older “standard” language, it may be time for an update.

Our firm regularly assists employers with:

• termination clause reviews and updates
• employment agreement templates
• termination risk assessments
• bonus and incentive plan drafting

If you would like to discuss your organization’s agreements or template language, we would be pleased to assist.

Please note: This article is provided for general informational purposes only and does not constitute legal advice.

New requirements for Publicly Advertised Job Postings

For Ontario employers with 25 or more employees, new obligations in effect January 1, 2026, for publicly advertised job postings.

A “publicly advertised job posting” is defined as an external job posting that an employer or person acting on behalf of an employer advertises to the public in any manner.¹

Under the ESA Part III.1, publicly advertised job postings are subject to the following new requirements:

• Compensation range: Publicly advertised job postings must include information about the expected compensation for the position or a range of expected compensation, except for positions that have an expected compensation amount of more than $200,000 annually (or the high end of the compensation range is expected to be more than $200,000 annually). If a range is used, the difference between the top and bottom cannot exceed $50,000. “Compensation” has the same broad definition as “wages” within the meaning of the ESA. See ESA section 8.2 and O Reg 476/02.

• Artificial intelligence: Publicly advertised job postings must include information about whether artificial intelligence is being used to screen, assess or select applicants for a position. “Artificial intelligence” is defined as a machine-based system that, for explicit or implicit objectives, infers from the input it receives in order to generate outputs such as predictions, content, recommendations or decisions that can influence physical or virtual environments. See ESA section 8.4.

• Existing vacancy: Publicly advertised job postings must also include a statement about whether the posting is for an existing vacancy. See ESA section 8.5.

• Ban on Canadian work experience: Also, it is prohibited for publicly advertised job postings to include any requirements related to Canadian work experience or any associated application form. See ESA section 8.3.

• Duty to inform in interviews: Employers are now required to inform interviewees for a publicly advertised job posting of whether a hiring decision has been made within 45 days after the date of the interview, or if the employer interviews the applicant more than once, within 45 days after the date of the last interview. The information may be provided in-person, in writing, or using technology. See ESA section 8.6.

¹ A publicly advertised job posting does not include:
• a general recruitment campaign that does not advertise a specific position;
• a general help wanted sign that does not advertise a specific position;
• a posting for a position that is restricted to existing employees of the employer; or
• a posting for a position for which work is to be:
  • performed outside Ontario; or
  • performed outside Ontario and in Ontario, and the work performed outside Ontario is not a continuation of work performed in Ontario.

• Mandatory Fraud Policy and Mechanism to Report: For those who operate a job posting platform, they are required to have a written policy on fraudulent publicly advertised job postings that includes information on how the person will address fraudulent postings, and other information as prescribed. Those who operate job posting platforms are also required to ensure there is a mechanism or procedure in place for users to report fraudulent publicly advertised job postings and to display such mechanism or procedure in a conspicuous place on the platform. See ESA section 7.

• Record retention: Employers will be required to retain (or arrange for some other person to retain) copies of every publicly advertised job posting and any associated application form for three years after access to the posting by the general public is removed. Interview information must also be retained for three years after the day the information was provided to the applicant. See ESA section 15 (7.1).

Employment Information Requirements for New Hires

For employers with over 25 employees on the employee’s first day of work, and in effect as of July 1, 2025, amendments to the ESA Ontario Regulation 285/01 When Work deemed to be performed; Exemptions and special rules section 1.2, now require employers to provide a written “employment information” document to every new hire before or shortly after their first day. This is the information that is typically included in a written employment agreement or offer. The ESA now requires the written document to include:

• Employer’s legal name and contact details.
• The starting wage rate (hourly, commission, etc.) and pay schedule.
• A general description of anticipated work hours and primary work location.

Note this new obligation does not apply to assignment employees (employees employed by a temporary help agency).

Long Term Illness Leave- A New Category of Job Protected Absence

In effect June 19, 2025, a new long-term illness leave was established under the ESA, which provides an employee who has been employed by an employer for at least 13 consecutive weeks with an entitlement to an unpaid leave of absence if:

• the employee will not be performing the duties of their position because of a serious medical condition, and
• a qualified health practitioner issues a certificate stating that the employee has a serious medical condition and setting out the period where the employee will not be working because of the serious medical condition.

The maximum entitlement to long-term illness leave is 27 weeks in a 52-week period and leave must be taken in periods of entire weeks.

Employers are required to retain, or arrange for some other person to retain, specified records that relate to an employee taking long-term illness leave for 3 years after the day on which the leave expired. See ESA section 49.8.

Important Compliance Deadline under Accessibility for Ontarians with Disabilities Act, 2005, SO 2005, c 11 (AODA).

All Ontario businesses or non – profit organizations with 20 or more employees and designated public sector organizations must file an Accessibility Compliance Report by December 31, 2023. Filing a compliance report is a legal obligation under AODA.

The compliance report confirms that you have met your current accessibility requirements under AODA.

The information required to complete the AODA compliance report is comprehensive. We recommend starting the process well before the filing deadline to ensure it is completed in time.

If you don’t complete your Accessibility Compliance Report, you could face enforcement measures which can include financial penalties.

The compliance report form is available to be downloaded from: htpps://forms.mgcs.gov.on.ca/en/dataset/on00468

Additional information is available from the Ontario government on completing an Accessibility Compliance Report at: htpps://www.ontario.ca/page/comple4ng-your-accessibility-compliance-report

After this initial deadline, Accessibility Compliance Reports must be filed every 3 years. Additionally, notifications in changes in address, primary contact information, number of employees, and status must be also submitted to ensure information is kept up to date.

OVERVIEW of AODA Requirements

All businesses and non- profit organizations with 1 or more employees

All designated public sector, businesses and non-profit organizations with 1 or more employees must provide training to:

• all employees and volunteers (paid and unpaid, full-time, part-time and contract positions)

• anyone involved in developing your organization’s policies (including managers, senior leaders, directors, board members and owners

• anyone who provides goods, services, or facilities to customers on your organization’s behalf (such as external contact centres or facilities management companies)

Organizations are not required to train employees working outside of Ontario. You must provide the training as soon as possible after an employee or volunteer joins your organization. Training must include:

• accessible customer service
• work related accessibility training that is relevant to your employees’ responsibilities
• the Ontario Human Rights Code (as it relates to people with disabili4es)
• changes to your accessibility policiesFree training modules that meet the training requirements of businesses and non-profit organiza4ons under AODA are available at: https://accessforward.ca/Organizations with fewer than 50 employeesIf you are a business or non-profit organization with fewer than 50 employees, you are required to:
  • create accessibility policies & maintain your policies (you are encouraged to update them periodically). Note, you are not required to document these policies (though doing so may help you with other requirements, including training employees), and
  • create a multi-year accessibility plan
  A sample accessibility policy is available at: Accessibility Policy Sample – Forms – Central Forms Repository (CFR) (gov.on.ca)
  A sample multi-year accessibility plan is available at: https://forms.mgcs.gov.on.ca/en/dataset/on00091
  Organizations with 50 or more employees
  If you are a business or non-profit organization with 50 or more employees, or a designated public sector organization, you must develop:

• a statement of commitment to accessibility and make it publicly available
• written accessibility policies and make them publicly available
• a written multi-year accessibility plan, update it at least once every five years and post it on your website (if you have one)
• if asked, you must provide your organiza4on’s statement of commitment, accessibility polices and plan in an accessible format, and;
• maintain training records including when AODA training conducted, who attended and how many people took the training

Website Accessibility Requirements under AODA
As of January 1, 2021, the AODA requires businesses or non-profit organiza4ons to make all public

websites accessible if you are either:

• a business or non-profit organization with 50 or more employees, or
• a designated public sector organizationThe organization that controls the website (either directly or through a contractual relationship) must meet the accessibility requirements. These requirements only apply to websites and web content published on a website after January 1, 2012.Websites and web content published on or after January 1, 2012, must meet WCAG 2.0 level AA. At a high level, this includes:
  
  • Distinguishable content
  • Navigable content
  • Readable text content
  • Predictable web pages
  • Input assistance
  • Internal websites (intranet or extranet) do not have to meet WCAG 2.0 levels A/AA.However, if an individual asks the organization to make content available to them in an alternate accessible format (such as large print or braille), the organization must work with the individual to meet their needs.The Ontario government has developed Accessibility Standards Checklist which is a self – assessment tool to help your business identify the requirements that apply to your organization under AODA and the applicable regulations. The checklist can be downloaded at: https://forms.mgcs.gov.on.ca/en/dataset/on00125

Lakhani Campea LLP is available to assist if you have any questions regarding these AODA compliance requirements.

Employers have a duty to accommodate their employees to the level of undue hardship and must do so where an employee’s circumstances engage a code protected ground. The duty to accommodate ends “where the employee is no longer able to fulfil the basic obligations associated with the employment relationship for the foreseeable future.” (Hydro-Québec v. Syndicat des employé-e-s de techniques professionnelles et de bureau d’Hydro-Québec, section locale 2000 (SCFP-FTQ), 2008 SCC 43)

In the employment context, frustration of contract is most commonly used as a way for employers to terminate employees who are on leave due to illness or disability with limited liability, since, if an employee who is totally disabled and unable to work accommodation is not possible.

The test used to determine whether a contract of employment has been frustrated involves deciding whether there is a reasonable likelihood that the employee is able to return to work within a reasonable time (see Fraser v. UBS Global Asset Management, 2011 ONSC 5448 at para. 3). It requires proof that the employee’s illness or disability has risen to the level required to frustrate the employment agreement.

When assessing whether a contract has been frustrated the original job duties are considered and whether the disability will for the foreseeable future prevent the employee from performing those original duties or require that the job be performed in a “radically different manner” than originally envisioned. The fact that the employee could return to work if the job were modified in some manner of if offered a different job has been treated as irrelevant in the application the doctrine of frustration (see Wightman Estate v. 2774046 Canada Inc. 2006 BCCA 424 (CanLII) at paras 55- 56.)

The courts have applied a contextual analysis to determining what amount of time is reasonable, including, but not limited to:

a) The terms of the contract including any provisions as to sickness pay and whether the employee returns to work, or appears likely to return to work, within the period during which such sick pay is payable.

b) How long the employment was likely to last in the absence of sickness. The relationship is less likely to survive if the employment was inherently temporary in its nature or for the duration of a particular job, than if it was expected to be long term or even lifelong.

c) The nature of the employment- If the employee is one of many in the same category, the relationship is more likely to survive the period of incapacity than if he occupies a key post which must be filled and filled on a permanent basis if his absence is prolonged.

d) The nature of the illness or injury and how long it has already continued and the prospects of recovery -The greater the degree of incapacity and the longer the period over which it has persisted and is likely to persist, the more likely it is that the relationship has been destroyed.

e) The period of past employment -A relationship which is of long standing is not so easily destroyed as one which has but a short history. The legal basis is that over a long period of service the parties must be assumed to have contemplated longer period or periods of sickness than over a shorter period. (see Dragone v. Riva Plumbing Limited, 2007 CanLII 40543 (ON SC)

When an employment contract is frustrated due to illness or disability, the contract is deemed to be terminated and accordingly an employee is not owed common law entitlements, including reasonable notice of termination. However, a legislated exception allows for entitlements under the Employment Standards Act, 2000 (“ESA”) in such circumstances. Under regulation 288/01 of the ESA, where a contract of employment is frustrated due to illness, the employer remains obligated to pay the employee’s minimum termination pay, and severance pay as of the date of frustration.

In a recent case, Hoekstra v Rehability Occupational Therapy Inc., 2019 ONSC 562 (CanLII), the plaintiff went on leave and wished to return to work upon improvement. The plaintiff’s physician changed their opinion from an “unlikely return to work”, to a definitive view that the plaintiff would not be returning to work. The court relied on this shift from non-permanent to permanent disability in assessing when the contract became frustrated. This case clarifies that neither party must do anything to effect frustration and held that, “Frustration of contract occurs as a matter of law… Once circumstances exist that have the effect of frustration, the terms of the contract, the contract is deemed terminated… This is particular so in the case of frustration due to illness or injury which is presumptively beyond the control of both the employee and the employer.”

In this case, the court awarded the employee to be paid severance and termination pay in accordance with the ESA.

‍

As of July 1, 2023, all publicly assisted universities and colleges of applied arts and technology (that receive regular and ongoing operating funds from the government), as well as private career colleges (collectively, “Institutions”), are required to comply with the measures introduced by Bill 26, Strengthening Post-secondary Institutions and Students Act, 2022, which amends the Ministry of Training, Colleges and Universities Act and Private Career Colleges Act, 2005 (collectively, the “Acts” amongst other requirements, institutions must have put in place a sexual misconduct policy by this date. At a minimum, a sexual misconduct policy must include the institution’s rules with respect to sexual behaviour involving employees and students and must provide examples of disciplinary measures that may be imposed on employees who contravene the policy. Further, it allows Institutions to define in their sexual misconduct policy the acts that they determine to constitute sexual misconduct for the purposes of the definition of “sexual misconduct” as prescribed.

These changes require that:

• An employee may be discharged or disciplined if they have committed an act of sexual misconduct towards an enrolled student.
• The discharge or discipline would be deemed to be for just cause for all purposes, and the employee would not be entitled to notice of termination or termination pay or any other compensation or restitution as a result of the discharge or disciplinary measure.
• In addition, the penalty could not be substituted by a labour arbitrator, arbitration board or other adjudicator, notwithstanding the Labour Relations Act, 1995 (s. 48(17)), the Colleges Collective Bargaining Act, 2008 (s. 14(17)) or any provision of a collective agreement or employment contract.
• An employee could not be reemployed by an institution which has discharged the employee, or where they have resigned, as a result of committing an act of sexual misconduct against a student.
• The institution is prohibited from entering into any agreement that directly or indirectly prohibits the Institution from disclosing the fact that a court, arbitrator or other adjudicator has determined that an employee has committed an act of sexual misconduct.
  Pursuant to these amendments, “sexual misconduct in relation to a student of an institution” is defined as:
  Physical sexual relations with the student, touching of a sexual nature of the student, or behaviour or remarks of a sexual nature toward the student by an employee of the institution where;

1. a)  the act constitutes an offence under the Criminal Code (Canada),
2. b)  the act infringes the right of the student under clause 7 (3) (a) of the Human Rights Code to be free from a sexual solicitation or advance, or;

c) the act constitutes sexual abuse as defined in the institution’s employee sexual misconduct policy or contravenes the policy or any other policy, rule or other requirement of the institution respecting sexual relations between employees and students, or;

d) any conduct by an employee of the institution that infringes the right of the student under clause 7 (3) (b) of the Human Rights Code to be free from a reprisal or threat of reprisal for the rejection of a sexual solicitation or advance.

Determining whether an employee is entitled to bonus payments following termination requires close consideration of the employment agreement or bonus plan language and whether the bonus payment is an integral part of the employee’s compensation package. If it is, then consideration moves to whether the terms of the employment agreement or bonus plan unambiguously take away or limit that common law right? [emphasis added]

The courts have determined the following bonus plan language, without more, to be insufficient to displace the employee’s common law entitlement to damages for bonus payments; namely:

• language requiring “active employment” on the date of bonus payout;
• language stating that no bonus shall be earned or payable “where an employee resigns or the employee’s employment is terminated” prior to the payout of a bonus; and
• language purporting to remove an entitlement to the bonus upon termination “with or without cause” similarly did not remove the right to damages for loss of the entitlement to earn that bonus during the reasonable notice period.

The courts reasoned that using termination as a basis for nullifying entitlement is in effect, the same as a requirement of “active employment “at the date of bonus payment. Moreover, for the purposes of calculating wrongful dismissal damages, the employment contract is not treated as “terminated” until after the reasonable notice period expires.

Recently, the Court of Appeal considered bonus payment entitlements on termination in the following two cases:

In Nader v University Health Network, 2022 ONCA 856, the employment agreement in question provided for discretionary performance-based bonus up to 25% of salary. In determining whether the employee was entitled to bonus payment over the termination notice period, at issue was the meaning of “salary” which was undefined in the employment agreement. The employee successfully argued that bonus was a substantial and integral part of overall compensation and salary. The court held that the termination deprived employee of opportunity to earn bonus over the reasonable notice period and it was reasonable to infer he would have otherwise earned it. 

In Celestini v Shoplogix 2023 ONCA 131, the court reasoned that the use of the words “employment terminates” and “termination of employment’” in the bonus agreement, must mean a lawful termination and a lawful termination only takes place at the end not the beginning of the reasonable notice period.  Further, it called the period between the end of the last bonus period and the termination the “stub period” and held the employee is also entitled to a bonus both for the stub period and the reasonable notice period. In calculating the appropriate amount of bonus, the court determined that use of a three-year average was a proper method of calculating the bonus for the notice period where there is no evidence of what the bonus would have otherwise been.

Key Takeaways:

• Damages for wrongful dismissal generally includes all compensation and benefits that the employee would have earned during the notice period, which may include bonus payments the employee would have been entitled to had they continued to be employed during the notice period.

• Determining entitlement to bonus payments will always depend on actual language of the employment agreement. A well drafted bonus plan in an employment contract can assist employers in limiting an employee’s bonus entitlement upon termination.

Paquette v. TeraGo Networks Inc., 2016 ONCA 618

Lin v Ontario Pension Plan 2016 ONCA 619

Matthews v Ocean Nutrition Canada Ltd. 2020 SCC 26, see also Veer v Dover Corp (Canada) Ltd. (1999) 120 O.A.C. 394)

The recent resignation of Toronto Mayor John Tory arising from his extramarital romantic relationship with a subordinate employee has again raised the issue of romance in the workplace and implications for employers.

While no employer should poke its nose into the bedrooms of its employees, the fact of the matter is love and romance is complicated and can give rise to a host of adverse issues which have a detrimental impact in the workplace and can be costly for employers to address. 

Sexual harassment claims often arise in romantic relationships between supervisors and subordinates given the power imbalance but may also arise in relationships between coworkers when an employee’s affection is not reciprocated or the relationship sours. Employees may claim that they were treated poorly after ending a relationship or after rebuffing unwanted advances especially if that employee is later terminated or passed over for promotion. The demise of a co-worker relationship may also lead to harassment claims if one party continues to pursue the other. Other detrimental impacts include retaliation, targeting or adverse treatment following the end of a relationship, favoritism, conflict of interest, not to mention gossip, quarrels and distracted employees adversely impacting morale and productivity.

To mitigate these risks, employers should consider implementing the following measures:

While an outright ban on dating in the workplace is likely not realistic given that many people in fact meet their partner at work, prohibiting relationships between people in a reporting relationship is a recommended policy. The Occupational Health and Safety Act defines a reporting relationship to be where a person has the power to confer or grant or deny a benefit. Relationships between people in a reporting relationship are the riskiest areas for harassment claims. 

• Implement guidelines on expected conduct for those in a personal relationship, including a positive obligation to inform the employer at the outset of a relationship forming which allows the employer to plan and mitigate any actual or potential conflicts of interest, favoritism and allows employer to proactively mitigate and manage any necessary changes in work responsibilities or reporting relationships. 

• Require employees involved in personal relationships to provide a written acknowledgment that their relationship is consensual, and they agree to abide by the expected standard of conduct (sometimes called a “love contract”), despite their personal relationship. Such acknowledgment can serve to protect employers from potential liability for   sexual harassment claims if the relationship sours or potentially ends badly. A written acknowledgement is also a useful tool for pre-emptively rooting out problematic behaviors (favoritism or public displays of affection) and helps establish a comfortable workplace environment for everyone. 

• Ensure that harassment and violence in the workplace policies as well as training programs are regularly reviewed and implemented. This ensures employees are aware of the standard of conduct expected in the workplace, how to make a complaint, and when an investigation into a complaint or concern is required.

On March 23, 2023, the Ontario government tabled its 2023 Ontario Budget: Building a Strong Ontario. Announcing, amongst other things,  that the paid Infectious Disease Emergency Leave (Paid IDEL) expired on March 31, 2023, the date set out by Ontario Regulation 228/20 made under the ESA. 

Paid IDEL entitles eligible employees to a maximum of three days of Paid IDEL, although the number of days may have been reduced depending on an employee’s contractual entitlements.

Employers should ensure applications for reimbursement of Paid IDEL are made on a timely basis for any Paid IDEL days taken by employees prior to March 31, 2023.

Regular unpaid IDEL remains in effect for as long as COVID-19 is designated as an “infectious disease” by O. Reg. 228/20. Currently, there is no specified time limit on that designation.

Unpaid IDEL for employees remains available where the employee will not be performing work for one or more of the following reasons in relation to COVID-19:

1. The employee is under individual medical investigation, supervision or treatment.
2. The employee is subject to an order of a medical officer of health or a court under the Health Protection and Promotion Act.
3. The employee is in quarantine or isolation or is subject to a control measure, including self-isolation, that is undertaken because of information or directions issued by a public health official, qualified health practitioner, Telehealth Ontario, the government of Ontario or Canada, a municipal council or a board of health.
4. The employer directs the employee to stay at home because of concerns that the employee might expose other individuals in the workplace to the designated infectious disease.
5. The employee is providing care to a specified family member, including because of closures of schools and daycares.
6. The employee is directly affected by travel restrictions preventing the employee from returning to Ontario.
7. Any prescribed reason.
8. All requests for unpaid IDEL should continue to be assessed on a case-by-case basis.

Employers continue to be able to “ask for evidence reasonable in the circumstances,” “at a time reasonable in the circumstances,” to verify the unpaid IDEL but are prohibited from requiring employees to obtain medical certificates to justify the leave. 

In Ontario, all employees are entitled to vacation pay and vacation time, unless exempt under the ESA. Per section 35.2 of the ESA, vacation pay must be at least:

1. 4% per cent of the gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (where that applies) for employees with less than five years of employment; or
2. b)  6% of the gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (where that applies) for employees with five or more years of employment. 

A greater benefit or entitlement may be provided under an employee’s employment contract or collective agreement, but not less.

Vacation pay is calculated as a proportion of the “wages” an employee receives. The ESA Part I, s. 1(1):, defines “wages” to mean monetary remuneration payable by an employer to an employee under the terms of an employment contract, oral or written, express or implied, but do not include any sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency. [emphasis added].

Where a bonus is predictable and an expected element of regular pay such as commission payments, safety compliance or performance bonus pay or profit-sharing bonus allocations, and not truly dependant on an employer’s discretion, it ought to be included in the vacation pay calculation of wages.

 Tim Wilkins Pontiac Buick Ltd. d.b.a. Lorne Brett Motors Ltd. v Ojamae et al (October 2, 1980), ESC 878 (Davis)

 Technica Group Inc., Applicant v. Dustin Agular, and Director of Employment Standards, Responding Parties (Aug. 2, 2019), OLRB Case No. 2669-18-ES and 3236-18-ES (Ont. Lab. Rel. Bd.)

In Pohl v. Hudson’s Bay Company 2022 ONSC 5230, the plaintiff, a 53-year-old sales manager, was terminated without cause after 28 years of service. At the time of termination, the plaintiff was offered amongst other things, 40 weeks of notice, continued employment in a demoted capacity, a requirement that the plaintiff relinquish his common law entitlement to reasonable notice, a reduction in pay and a possible reduction in hours with no guarantee of minimum hours. The plaintiff declined to accept the offer and sued for wrongful dismissal.

The Ontario Superior Court of Justice found, amongst other things, that the plaintiff was entitled to 24 months of reasonable notice. In addition, the court awarded the plaintiff $45,000 in aggravated damages for the employer’s bad faith in the manner of dismissal based the following:

• The unduly insensitive treatment by the employer by walking the plaintiff out the door after the termination of his employment, where the plaintiff had not committed any misconduct.
• The misleading offer of continued employment in a lower position, with less pay, on terms that extinguished his common law notice entitlements or any certainty of hours, without offering any corresponding compensation or benefit in lieu. 
• The employer violated the Employment Standards Act (ESA) by payment of the plaintiff’s statutory notice as a salary continuance, rather than as a lump sum as required by the ESA.
• The employer did not issue the plaintiff’s record of employment within the time required by the Employment Insurance Act (EIA).

The court found that the employers actions resulted in a violation of the employer’s duty of good faith and fair dealing at the time of termination, and that it was within the reasonable contemplation of the employer that its conduct would cause the plaintiff mental distress. In addition, the court awarded the plaintiff $10,000 in punitive damages for the employer’s violation of the ESA and the EIA.

Key Takeaways:

• Employers must meet their duty of good faith and fair dealing when terminating employees, including being mindful of the employee’s particular vulnerability in the circumstances and to not mislead. 
• Any material changes to employment terms, without adequate consideration (exchange of value), gives rise to risk that employee will sue for constructive dismissal and termination pay, including aggravated damages, if done in an unfair or misleading manner.
• When terminating employees, maintain compliance with applicable statutory requirements by ensuring that:

• the minimum statutory termination pay in lieu of notice is paid in lump sum (not as salary continuation) no later than seven days after the employment ends and the day that would have been the employee’s next pay day.  
• electronic ROE’s are issued within five calendar days after the end of the pay period in which an employee’s interruption of earnings occurs. Paper ROE’s are to be issued within 5 calendar days after the first day of interruption of earnings.

Under section 64 of the Employment Standards Act, 2000 (ESA), employees in Ontario with more than five years of service are entitled to severance pay in addition to termination pay if their employer has a payroll of at least $2.5 million at the time of termination.

A new ruling from Ontario’s Divisional Court has clarified how to calculate payroll for the purposes of determining which employees will be entitled to severance pay. While the case law has been inconsistent, it was generally the case that the $2.5 million payroll threshold for the purposes of calculating severance pay applied to Ontario payroll only. The Divisional Court has now ruled that global payroll should be considered.

Prior to 2014, decisions by the Ontario Labour Relations Board (“OLRB”) indicated that the employer’s payroll in Ontario was to be used for determining entitlement to severance, guidance which is still reflected in the ESA Policy and Interpretation Manual. In 2014, that scope was expanded in the case of Paquette v Qaudraspec Inc., 2014 ONCS 2431 (“Paquette”) to include an employer’s national payroll in Canada.

In its recently released decision, Hawkes v. Max Aicher (North America) Limited, 2021 ONSC 4290 (“Hawkes”), the Ontario Divisional Court affirmed the reasoning in Paquette finding that the employer’s global payroll is assessed when calculating severance entitlements, and not just its payroll in Ontario.

Mr. Hawkes was terminated from Max Aicher in October 2015. He filed a complaint to the Ministry of Labour, alleging that he was owed termination, severance and vacation pay. In 2017, the Employment Standards Officer ruled he was not entitled to severance pay because Max Aicher did not have an Ontario payroll of at least $2.5 million. He appealed this decision to the Ontario Labour Relations Board, who in 2018, determined that because s.3 of the ESA specifies that the ESA applies to “only Ontario-based employment and operations” so too is the payroll calculation for the purposes of severance pay restricted to Ontario.

Mr. Hawkes appealed this decision to the Divisional Court, who disagreed with the OLRB and ruled that global payroll should be considered when determining an employee’s entitlement to severance.

In overturning the OLRB decision, the Divisional Court made several notable findings:

• that while section 3 of the ESA explicitly limits its jurisdiction to Ontario based employment, there is no such restrictive language in section 64 [entitlement to severance pay] which would limit the calculation of payroll to just Ontario for calculating severance entitlements for individuals covered by the ESA. 
• confirming the remedial and benefit-conferring nature of the ESA and that it “ought to be interpreted in a broad and generous manner, and any doubt arising from difficulties of language should be resolved in favour of the claimant.”
• that previous decisions prior to 2014 which had limited payroll to Ontario had erred in law and had been incorrectly decided.
• that an Employment Standards Officer has the power to obtain information regarding the foreign payroll of an employer in Ontario under section 91 of the ESA, and as such, there were no procedural issues which would arise which would impede consideration of a global payroll.

This decision has significant implications for national or international employers with small operations within Ontario, who may have previously determined that no severance pay entitlements arose for their Ontario employees.

It is likely that higher courts will provide some finality with respect to this issue, but in the meantime, employers should consider their global payroll and be prepared to provide global payroll information when determining severance entitlements for their Ontario employees.

Employment Standards Act, 2000 (ESA) notice and termination must be given for all terminations, even those for just cause, except for “prescribed employees” (see section 55 of the ESA). The disentitlement provision is in the Termination and Severance of Employment regulation under the ESA, which provides that employees are prescribed for the purposes of section 55 of the ESA if they are guilty of wilful misconduct, disobedience or wilful neglect of duty that is not trivial and had not been condoned by the employer.

In Waksdale v. Swegon North America Inc., 2020 ONCA 391, leave to appeal to the Supreme Court of Canada denied, the Court of Appeal for Ontario ruled that an otherwise enforceable “without cause” termination provision in an employment agreement is rendered unenforceable where the employment agreement also contains a “just cause” provision that contracts out of minimum standards legislation. The “rule of Waksdale” holds that if a termination provision in an employment contract violates the ESA, all the termination provisions in the contract are invalid.

More recently, in Rahman v. Cannon Design Architecture Inc., 2022 ONCA 451 the Court of Appeal found the motion judge erred in law when they allowed consideration of the Plaintiff ‘s sophistication and access to independent legal advice, coupled with the parties’ subjective intention to not contravene the ESA, to override the plain language of the termination provisions of employment contract which otherwise violated the ESA. As a result, the termination provision was set aside, and the Plaintiff was entitled to reasonable notice.

Employers should have their employment agreements reviewed by legal counsel to ensure the termination provisions comply with the rule of Waksdale. An unenforceable employment agreement could be a significant liability for an employer, particularly with respect to longer service employees.

Canada has now approved two COVID-19 vaccines, and Prime Minister Justin Trudeau has stated that all Canadians, who want to be vaccinated, will be by September of this year. While this is promising, the government has not mandated vaccination and polls show that 25% of Canadians do not wish to get the COVID-19 vaccine. This presents an important question for employers: Can you force your employees to take the vaccine when it is available?

The short answer is no.

Given that some employees may have valid human rights objections to the vaccine, employers are advised against imposing policies mandating vaccination or providing incentives for employees to get the vaccine. If an employee raises a valid medical or religious reason for refusing the vaccine, that is beyond a political or personal opposition to it, their employer may have to accept their decision. As we know, employers must accommodate an employee’s human rights-based requests for accommodation up to the point of undue hardship. If an employer decides to terminate an employee for refusing the vaccine, and that employee has a valid human rights objection, the employer may be in violation of the Human Rights Code. In the unionized context, it will be far more difficult to terminate an employee refusing to get the vaccine due to the requirement for the employer to prove just cause. Refusing to get vaccinated will likely not meet the threshold for ‘just cause’. The human rights of employees must be balanced against an employer’s right and obligation to maintain a safe and healthy workplace. This obligation is heightened in high-risk workplaces such as hospitals or aged care homes, where there may be grounds to argue that mandatory vaccination is required in order for employees to safely perform their duties. Even in such circumstances, employers are advised to proceed with caution and properly assess any valid human rights concerns. Employers can take steps to mitigate the risk of COVID-19 spread in the face of vaccine refusals by continuing to use masks, work from home policies and social distancing measures. Once herd immunity is reached (i.e., when a large enough percentage of the population has been vaccinated), those who have refused to take the vaccine can presumably return to work and be protected against the virus. There are a number of ethical and legal issues involved in the rollout of the COVID-19 vaccines, which directly impact Canadian employers. The lawyers at Lakhani Campea LLP continue to assist our clients in navigating these unchartered waters and would be happy to help you with any COVID-19 related workplace issues.

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"Given the seemingly reduced responsibilities and liabilities, an independent contractor structure may be more appealing to some businesses and individuals. While this is so, care should be taken to avoid misclassifying workers who are actually employees as independent contractors."

Companies can engage workers in a variety of different ways beyond the traditional employer employee structure. One such alternative is an independent contractor relationship. A company’s obligations to an independent contractor, particularly upon termination, are very different from its obligations to an employee. Employees are afforded all protections under the Employment Standards Act including notice of termination or pay in lieu thereof; independent contractors are not. Employers must deduct and remit EI, CPP and tax from their employees’ wages whereas independent contractors handle such affairs themselves. Given the seemingly reduced responsibilities and liabilities, an independent contractor structure may be more appealing to some businesses and individuals. While this is so, care should be taken to avoid misclassifying workers who are actually employees as independent contractors. If an independent contractor is deemed to be an employee of a company, the company and individual could face significant liability.

As such, it is important to understand the distinguishing features between the two types of relationships so as to avoid misclassifying workers. The recent decision of the Supreme Court of British Columbia in Farren v. Elite Service Group Inc. 2020 BCSC 23 (CanLII) provides a useful guide on the issue.

Issue

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This was a wrongful dismissal action commenced by Kevin Farren, who, for a period of almost four (4) months was contracted by Elite Service Group Inc. (“Elite”), a Canadian repair and maintenance company, to provide handyman services. Elite terminated Mr. Farren’s contract without notice, claiming he was not entitled to it because of his independent contractor status. Mr. Farren claimed that he was an employee of the company and therefore entitled to notice of termination.

Elite applied to the Supreme Court of British Columbia for a summary trial on the issue.

Facts and Findings

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In determining whether Mr. Farren was an independent contractor or an employee of Elite the Court analyzed the facts against the following four factors:

• Who controls the relationship?
• Who owns the tools?
• Does the independent contractor have a chance of profit or risk of loss?
• How integrated is the contractor into the business?

1. Who controls the relationship?

Independent contractors generally control their own work schedules whereas employees typically have set hours and pay.

On the issue of control, the Court found that the following strongly suggested that Mr. Farren was an independent contractor:

• He was free to either accept, decline or request changes to assignments.
• Farren provided cost/time estimates when requested to do so and was free to establish his own schedule for completing assignments within agreed upon time frames.
• Elite provided little training or oversight to Mr. Farren.
• Farren invoiced Elite through his corporation, 101, and included GST in such invoices. When paying Mr. Farren’s/101’s invoices, Elite made no deductions or remittances for EI, CPP, tax or worker’s compensation. This payment structure was typical of an independent contractor relationship.
• There was no evidence to suggest that Mr. Farren was economically dependent on Elite.
• There was no evidence to suggest that Mr. Farren’s relationship with Elite was exclusive. Indeed, Elite’s evidence was that he was free to take on outside work.
• Farren hired and paid his own workers to assist him with his assignments.

2. Ownership of equipment or tools

Independent contractors supply their own tools and equipment to complete their job duties.

Mr. Farren used his own truck and tools to complete his assignments. He invoiced Elite for this and for supplies he purchased. There was no further evidence of Elite providing Mr. Farren with any tools or equipment to perform his duties.

3. Opportunity for profit or loss

A contractor is an entrepreneur and will generally have more opportunity to profit from or absorb losses in regard to their work.

The Court determined that Mr. Farren did have some opportunity to profit from his relationship with Elite. As Mr. Farren was paid fixed rates for his services, he was able to pay the workers he hired a lesser rate than the rate he was charging Elite. He was therefore able to make some additional, albeit nominal, profits from his work with Elite.

4. Business integration

Independent contractors are less integrated in a company’s business operations than employees, and, as such, may be seen as more expendable.

Mr. Farren was not found to be a crucial part of Elite’s business. He was not irreplaceable, and the termination of his services did not significantly affect Elite’s operations.

Mr. Farren did not wear a uniform and was not representing Elite’s business to the public.

Neither party submitted any evidence about the anticipated length of their working relationship. Indeed, Mr. Farren’s contract was terminated after only 4 months. Generally, more lengthy engagements represent some degree of permanency in the relationship more akin to an employer/employee scenario.

The services Mr. Farren performed for Elite were described as “routine and repetitive”. Elite did not rely on Mr. Farren to complete work in order carry on its general operations. While Elite’s manager of operations did communicate with Mr. Farren frequently about work assignments, Elite did not closely coordinate its business with Mr. Farren’s activities.

Ultimately, the Court found that the about factors pointed to Mr. Farren being an independent contractor and not an employee of Elite. He was therefore not entitled to any notice of termination.

The findings in the Farren decision can be contrasted with the British Columbia Supreme Court’s decision in TCF Ventures Corp. v. Cambie Malone’s Corp., (“CMC”) [2016] B.C.J. No. 1755, (decision on status affirmed on appeal) another wrongful dismissal action wherein the same factors were considered. This action was commenced by a corporation whose principal, Tim Fernback, provided financial services to the defendant, Cambie Malone’s Corp., for a period of three years. The Court found that although Mr. Fernback provided services and was paid through his corporation, and actively sought outside work while working with CMC, his relationship with the company was more akin to an employer/employee relationship. The Court determined that Mr. Fernback was hand-picked by CMC to provide personal, professional services as its CFO, although he provided such services through a corporation. Mr. Fernback also supervised employees at CMC. As well, the Court found that there was some permanency in the working relationship given that it lasted three years. The Court ultimately deemed Mr. Fernback to be an employee of CMC due to the highly integrated nature of his role with the company.

Concluding Remarks

What the above cases reflect is that no one factor or test will be determinative of the employee vs independent contractor distinction. All facts and circumstances must be considered together in order to determine the true status of a worker’s relationship with a company.

The distinction between employees and independent contractors is an important one. Employees are entitled to all of the rights and protections of the Employment Standards Act including notice of termination of pay in lieu thereof whereas independent contractors typically are not. The distinction is also important for tax purposes. Misclassifying a worker’s status may lead to financial liability and even litigation.

If you are experiencing issues regarding the classification of your workers, or require general information on the topic, please contact the lawyers at Bandhu Lakhani Campea LLP for assistance.

Bill 47, Making Ontario Open for Business Act, 2018 is now law. As set out in our earlier blog post, the Act significantly amends the Employment Standards Act, 2000 (“ESA”). Most notably:

• Minimum wage is frozen at $14 per hour. Annual increases based on inflation will restart in 2020.
• The Personal Emergency Leave Amendments are repealed. Instead, employees are entitled to 8 unpaid leave days consisting of 3 days for personal illness, 2 days for bereavement and 3 days for family responsibilities.
• Employers are no longer prohibited from requiring an employee to provide a medical note in order to support an absence.
• The reverse onus, which required employers involved in legal proceedings to prove that an individual is an independent contractor and not an employee, if this was in dispute, has been repealed.
• Employers are no longer required to pay part-time, casual, temporary and temporary help agency employees the same rate as full-time employees. Differences in rates of pay based on gender are still prohibited.

In light of these amendments, the Ministry of Labour (“MOL”) has released a new ESA poster highlighting the most important employer and employee rights and responsibilities under the ESA.

Ontario employers must:

• Print (in black and white or colour) and display the new poster in a conspicuous area in the workplace, where employees will see it.
• If most people in your workplace speak a language other than English, a version of the poster in the most commonly spoken language in your workplace is to be displayed next to the English version.
• Provide a copy of the new poster to each employee. This can be done electronically.
• Provide a copy of the new poster to each new hire within 30 days of their date of hire.

Employers that fail to display the new poster and/ or abide by the above obligations may be subject to prosecution under the ESA and the following fines:

• $250.00 for a first contravention;
• $500.00 for a second contravention in a three-year period; and,
• $1,000.00 for a third contravention in a three-year period.

It is also important to note that new legislation is currently being debated which would remove Ontario employers’ obligation to display the ESA poster. Under the proposed Bill 66, Restoring Ontario’s Competitiveness Act, 2018, employers would still be required to provide employees with a copy of the ESA poster. Until Bill 66 is enacted, employers should continue to comply with all of the obligations set out above.

If you have any questions about your ESA obligations, please contact your regular BLC lawyer.

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The ability to purchase and use cannabis on a recreational basis has been legal in Canada for just over a month. Employers are concerned about the impact this landmark change will have on their workplaces.

While many of the concerns are likely misplaced, wise employers will consider preparing or updating drug and alcohol polices to address the legalization of cannabis.   In the absence of such policies, employees may be uncertain about their right to consume cannabis before or during work hours; many may simply assume that they are entitled to do so. This is of particular concern for employers with safety sensitive operations.

Below are some of the key considerations for Ontario employers.

Cannabis in the Workplace- Employer Responsibilities

Ontario law prohibits smoking or vaping in enclosed workplaces. Employers should exercise all reasonable measures to communicate and enforce the prohibition.[1] An employer that fails to comply with its obligations may receive a fine of up to $100,000 for a first offence of $300,000 for repeat offences.

While smoking or vaping is prohibited in enclosed workplaces, it is important to note that there is nothing in the new cannabis legislation directly prohibiting impairment in the workplace.

The Occupational Health and Safety Act requires employers to take every precaution reasonable in the circumstances for the protection of workers. As such, it is the responsibility of employers to implement policies which mitigate the risk of impairment in the workplace.

Drug and alcohol policies should explicitly prohibit cannabis usage during working hours, including breaks and lunches. Such policies should clearly set out an employer’s expectation that employees report to work in a non-impaired state and send a clear message that use during the workday is prohibited, particularly for employees in safety-sensitive roles. Employees should be made aware of the consequences of breaching such policies.

Accommodation Obligations

When preparing policies prohibiting use, employers must account for their accommodation obligations under the Ontario Human Rights Code (the “Code”).  The obligation could arise in relation to employees who use cannabis for medicinal purposes or for employees with dependency issues. Employers may be required to tolerate some degree of impairment in the workplace in order to accommodate medicinal users.

Employers should avoid zero tolerance policies that require automatic discipline or termination for cannabis use or impairment. Employers have a duty to inquire with employees who exhibit signs of being unwell or requiring disability-related accommodation.

Policies should require employees to disclose their need to consume medicinal cannabis or their addiction to the substance so that employers can consider risk mitigation and accommodation. Policies should state that failing to disclose may result in disciplinary action.

When dealing with a request for accommodation in regards to cannabis, an employer can inquire and seek documentation from employees to substantiate their requests. Employers are entitled to request confirmation from an employee’s physician that cannabis use does not  impair their ability to perform their duties effectively and safely.  Employers are not required to accommodate cannabis use or impairment if doing so would cause undue hardship.  This may be the case in safety sensitive workplaces.

Individualized assessments are crucial when dealing with accommodation requests.

Drug Testing

Testing for tetrahydrocannabinol (THC), the component of cannabis that produces a ‘high’, poses many challenges. Testing methods available today can detect the presence of THC in an individual’s system, indicating past use,  but not necessarily present impairment. As well, levels of impairment differ from person-to-person based on their tolerance and frequency of use.

As such, testing for cannabis impairment in the workplace is generally prohibited except in narrow circumstances.  The law does not recognize the validity of pre-employment testing or drug testing.   In certain circumstances, drug testing may be permitted where there has been a serious workplace incident or accident or where impairment in the workplace is suspected.

Training

Aside from formalized testing, training is key in mitigating the risks posed by impairment in the workplace. Supervisors and management staff should be properly trained on drug and alcohol and accommodation policies and on the signs of impairment.

Concluding Remarks

Concerns about the risks of the legalization of recreational cannabis in Canadian workplaces are most likely excessive.  Most employees who consume cannabis will not present for duty in an impaired state.  Further, your existing policies concerning drug and alcohol use in the workplace likely need minor adjustments in order to reflect the new legal reality.

The lawyers at Lakhani Campea LLP would be happy to help you revise or draft policies that will mitigate the risk of cannabis impairment in your workplace.

[1] Important information regarding signage requirements can be found here: https://www.ontario.ca/page/no-smoking-no-vaping-signs-businesses