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Taking a Hard Line on Termination Entitlements Ends Up Costing More

In a recent Court of Appeal Decision, Elsegood v Cambridge Spring Services, the Court awarded common law damages to an employee whose employment was terminated under the Employment Standards Act, 2000 (the “ESA”), due to a lay off exceeding 35 weeks in a 52 week period.  In an attempt to avoid common law damages, the employer took a risky and unreasonable position, arguing that the employee was terminated only for the purposes of the ESA and was still employed under the common law.

The employer asserted that common law damages are only available for a termination at common law and not for a deemed termination under the ESA.  In essence, the employer argued that the common law and the ESA are two distinct regimes and that employee status as an employee is defined by the common law and not the ESA, which is confined to entitlement to remedies.

The court rejected this argument. Firstly, it held that the common law and the ESA do not represent two distinct regimes. The common law does not continue to operate independently of the ESA, as such, employment status cannot survive a termination under the statute. Secondly, accepting the employer’s argument would mean that an employee who has been laid off could claim to be constructively dismissed under the common law while still maintaining that they are still employed (albeit, laid-off) under the ESA.

Taking this unreasonable approach proved costly.  The claim originated in Small Claims Court, where the Deputy Judge awarded the employee $9,900 in damages and costs of $2,060.  By the end of the two rounds of appeal, the employer must have racked up a significant legal bill and in addition, was ordered to pay the employee costs of $15,000 by the Court of Appeal. If the employer’s goal was to avoid costs, this was not the way to go. Employers should be wary of taking unreasonable positions in an attempt to avoid paying an employee what they are likely entitled to.  This can end up being even more costly.

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