A wrongful dismissal is a legal claim an employee can bring against an employer for not providing proper notice or severance pay, or not having a valid legal reason for termination.
Each Canadian province or territory has its own employment standards regulations, and employees can file a wrongful dismissal claim through the local labour ministry or sue in civil court.
Wrongful dismissal typically costs employers from 3-24 months’ of the employee’s compensation, though costs can be much higher if the court imposes extra damages for mental distress or bad faith conduct.
The best way to reduce the risk of wrongful dismissal claims is to build strong, fair employment relationships: clear processes, good documentation, and getting expert HR advice early when a problem comes up, rather than after it has escalated or the relationship has completely broken down.
MyHR supports over 2,000 individual employment relationships and in the past year, we've overseen more than 50 termination procedures. We've never had a successful wrongful dismissal case brought against a dismissal process we recommended to a client.
Here's what employers need to know about wrongful dismissals.
Wrongful dismissal is the legal mechanism for an employee to challenge the terms of a dismissal, because the employer either:
Failed to provide proper notice and any severance pay (in dismissals without cause).
Did not have a valid cause to dismiss (in dismissals with cause).
Employees can file a wrongful dismissal claim through the employment standards branch in their province or territory.
Complaints filed through the employment standard are mediated by the branch and look at whether the ESA minimum was met.
Alternatively, employees can file a civil claim through a lawyer for common law notice and reasonable severance (often with a 2-year limitation period).
Often employees will ask for advice from a lawyer when they are dismissed and feel like they did not receive adequate notice or compensation.
The lawyer then writes a letter to the employer requesting additional severance from the employer on the employee's behalf.
The employer can then negotiate with the employee through the lawyer or proceed to court.
Many jurisdictions hold a settlement conference or mediation before moving to an adjudicator or court hearing.
The grounds for wrongful dismissal center around employers failing to provide the correct termination notice and severance pay to an employee, or not having just cause to end the employment relationship, e.g. proven serious misconduct, persistent failure to perform duties.
We regularly see wrongful dismissal claims that arise from 3 key areas:
Dismissing an employee for cause without giving them enough opportunity to improve or not fully investigating the issue / gathering sufficient proof if the case involves something serious like theft.
Not checking the employment agreement and/or local employment standards to ensure the employee is given reasonable notice (or pay in lieu) and severance.
The employee quitting but claiming they had no other option due to the employer’s actions (e.g. making significant changes to the role or working conditions without consent) - this is also called constructive dismissal.
Many wrongful dismissal claims result from employers rushing through the termination process, failing to properly document performance or misconduct issues, failing to investigate situations, or not considering alternative solutions before termination, e.g. additional training, reassignment. The employment relationship is often strained or has broken down entirely.
Many incidents that spark wrongful dismissal claims occur in the first 12-24 months of employment.
Attracting, screening, and hiring the right people, and providing a clear, structured onboarding experience will all help reduce the chance of having issues that could lead to dismissal.
If you and your employees know what is required and expected, communication is open and regular, and processes for handling issues are transparent, the employee is much more likely to be a strong fit for the team.
If you do need to dismiss an employee - whether it’s because the business can no longer afford to keep them or they have been unable to perform in the role - following the right process for termination is essential. Be sure to:
Determine whether you have enough documentation or the situation is serious enough to dismiss the employee with cause.
If you are dismissing the employee “without cause,” make sure you are clear on what you owe them by way of severance from an Employment Standards perspective and the termination clause in their employment agreement.
Document the termination accurately. Meet with the employee to share your decision and provide them with a letter outlining the termination timeline and payment details.
If an employee or ex-employee makes a wrongful dismissal claim, don’t ignore it - even if it looks weak. Respond properly and on time, and get HR or employment advice early.
Before you respond, gather evidence of what actually happened. Pull together:
The employment agreement, especially the termination clause.
Emails, messages, and file notes about the employee.
Performance reviews and any warnings you issued.
What you paid on termination, including notice or compensation for length of service.
In British Columbia, the Employment Standards Branch deals with the minimums under BC’s Employment Standards Act. Employees generally have 6 months from their last day to file a claim.
The branch will contact you for your side of the story and tell you what the employee is asking for. It often suggests mediation.
If you haven’t met the notice or compensation minimums, the branch will require you to pay what’s owed.
If you have met them, the branch’s role ends there.
Meeting the minimums doesn’t stop the employee from making a separate claim in court for more.
This usually starts with a demand letter. The letter sets out what the employee says they would get under common law if they went to court.
Common law notice is often well above the ES minimums. Your exposure depends on two things:
Whether your termination clause clearly limits pay to the minimums.
Whether that clause is legally enforceable.
Many clauses don’t hold up, so get advice on yours.
Reply to the demand letter or statement of claim within the time it sets out. Missing a deadline can hurt your position.
You generally have two options:
Negotiate a settlement - this makes sense if the claim has some merit or fighting it would cost more than settling. Talks can be direct or through a mediator (an independent person who helps both sides reach agreement).
Decline to pay more - this can be reasonable if the claim is weak and the risk is low. Get good advice first.
Settling isn’t admitting fault. It’s often the cheapest, fastest way to close things out and part ways on fair terms.
If you can’t settle, the claim may go to:
Binding arbitration - a private alternative to court, usually faster and more flexible.
Court - for example, in British Columbia, smaller claims (up to $35,000) go to Small Claims Court. Larger claims go to BC Supreme Court. Court involves formal filings, document disclosure, and possibly a trial.
At this point it gets slower and more expensive, and you’ll want a lawyer.
Wrongful dismissal claims can get complicated fast. MyHR’s advisory team can help you work out where you stand and how to respond.
Dealing with employment disputes and wrongful dismissal claims can soak up a lot of time and resources. From investigating and responding to claims, to mediation or legal proceedings, you need the right sort of guidance.
With over 2,000 Canadian employees on our books, MyHR supports a lot of employment relationships. Our powerful software and expert HR advice create a wraparound platform for employers, ensuring your people-management processes are clear and legally-compliant, and you have the backing of on-call HR professionals.
Things don’t always go as planned, and we know that, despite the best intentions, employment relations can turn sour. This is when detailed knowledge of the legal landscape and adhering to proper process is crucial. Mistakes can be extremely costly.
In the past year, we’ve overseen multiple disciplinary procedures and we’ve never had a wrongful dismissal claim when we have helped with a termination. We have also never had a successful case brought against an employment process we recommended to a client.
If you’ve had a wrongful dismissal claim filed against you, we can advise the best path forward as well as providing ongoing HR advice to build strong employment relationships and minimize your risks. If you are considering terminating an employee, we can help you do it right and avoid wrongful dismissal claims.
And with MyHR, you pay a fraction of the cost you would if you had to turn to employment lawyers or HR consultants for help.