Wrongful Dismissal in Ontario

Wrongful dismissal is a common employment dispute in Ontario and arises when an employer ends an employee’s employment without providing the notice (or pay in lieu of notice) required by contract and/or the common law. While many terminations are described as being “without cause,” the key legal issue is often whether the employee received their full legal entitlements—both under Ontario legislation and, in many cases, under the common law.

This page provides an overview of wrongful dismissal principles in Ontario and the issues that frequently determine whether a termination package is enforceable or inadequate.

What Is “Wrongful Dismissal” in Ontario?

In Ontario, the term “wrongful dismissal” generally refers to a civil claim that an employer failed to provide proper notice of termination (or pay in lieu) when ending employment without cause. A wrongful dismissal claim is distinct from claims involving prohibited grounds of termination (e.g., discrimination), which may engage separate statutory regimes.

Wrongful dismissal is typically about notice: how much notice should have been provided, whether the employer can rely on a written termination clause, and whether any alleged “cause” was legally sufficient to eliminate the notice obligation.

“Without Cause” Termination: Notice and Pay in Lieu

Most Ontario employees may be terminated without cause, provided the employer gives:

• Statutory minimum notice and termination pay under the Employment Standards Act, 2000 (ESA); and potentially
• Statutory severance pay (in some cases); and/or
• Common law reasonable notice (unless a valid employment contract limits entitlements to the ESA minimums).

Where an employer provides only the ESA minimums but the employment agreement does not validly limit the employee to those minimums, the employee may have a claim for additional compensation for common law notice.

ESA Minimums vs. Common Law “Reasonable Notice”

ESA entitlements set the floor, not the ceiling. ESA minimums generally include:

• Termination notice or pay in lieu (often tied to length of service); and
• Continuation of benefits during the statutory notice period; and
• Severance pay for eligible employees where the statutory criteria are met.

By contrast, common law reasonable notice can exceed ESA minimums and is assessed case-by-case. Common law notice is typically expressed in months of compensation and may include salary and other forms of remuneration.

How Courts Assess Common Law Notice

Ontario courts consider a range of factors (often referred to as the Bardal factors), including:

• Length of service
• Age
• Position and character of employment (e.g., seniority, specialization, managerial responsibilities)
• Availability of comparable employment given the employee’s experience, training, and the labour market

No single factor is determinative. Two employees with the same tenure may have different notice entitlements depending on role, compensation structure, and employability.

The Employment Contract: When Termination Clauses Matter

A properly drafted employment agreement may limit termination entitlements to ESA minimums. However, Ontario courts closely scrutinize termination clauses. A clause may be found unenforceable where it:

• Contracts out of, or potentially provides less than, ESA minimum standards
• Is ambiguous or internally inconsistent
• Fails to address benefit continuation in a manner consistent with the ESA
• Includes “for cause” language that purports to remove ESA minimums in situations where the ESA would still require payment

If the limitation clause is unenforceable, the employee may be entitled to common law reasonable notice, not merely ESA minimums.

Termination “For Cause” and Allegations of Just Cause

Just cause is a high legal threshold in Ontario. An employer alleging just cause must generally establish serious misconduct or a fundamental breach of the employment relationship. The analysis is contextual and commonly considers:

• The nature and seriousness of the alleged misconduct
• Whether progressive discipline was applied (where appropriate)
• Whether the misconduct was isolated or repeated
• The employee’s length of service and disciplinary record
• Whether the employment relationship was irreparably damaged

Where “cause” is not proven, the termination is treated as without cause, triggering notice obligations.

What Compensation May Be Owed in a Wrongful Dismissal Claim

Wrongful dismissal damages typically aim to place the employee in the financial position they would have been in had proper notice been provided. Depending on the circumstances and the compensation structure, this may include:

• Base salary during the notice period
• Bonuses or incentive compensation, where applicable and not clearly excluded
• Value of benefits (including extended health, dental, disability, and pension contributions)
• Car allowance, commissions, and other regular compensation components

Bonus and incentive disputes often turn on plan wording, past practice, and whether the employee would have qualified during the reasonable notice period.

Mitigation: The Duty to Seek Comparable Employment

Under Ontario common law, a terminated employee must take reasonable steps to mitigate damages by seeking comparable employment. If suitable employment is found during the notice period, damages may be reduced accordingly. Employers may also attempt to show that the employee failed to make reasonable efforts to secure alternative work.

Mitigation is fact-specific and considers the employee’s industry, role, seniority, and available opportunities.

Common Early Issues After Termination

In the immediate aftermath of termination, key issues often include:

• Whether the employee was asked to sign a release in exchange for a severance package
• Whether the package includes only ESA minimums or more
• Whether benefits are continued properly
• How variable compensation (bonus/commission) is addressed
• Whether the employer is alleging “cause” and withholding pay
• Whether the employee has been provided a Record of Employment reflecting accurate circumstances

A release generally limits further legal claims relating to termination, making the terms of the offer—and its legal adequacy—significant.

Conclusion

Wrongful dismissal claims in Ontario frequently turn on the enforceability of termination clauses, the true scope of statutory entitlements, the appropriate period of common law reasonable notice, and the treatment of bonuses and benefits. Because termination disputes often involve contractual interpretation and fact-specific assessments, careful analysis of the employment agreement and the termination package is central to determining whether the employer has met its legal obligations.

The information on this page is provided for general informational purposes only and does not constitute legal advice. Reading this page does not create a solicitor-client relationship. Outcomes depend on the specific facts and applicable law.