Company's Insolvency Turns Good Case Into No Case Against Labour Ministry
Two employees, Michael Mosey and Eileen Tremblay, have commenced a well publicized, but potentially ill-fated, lawsuit against the Ontario Ministry of Labour, claiming it misled them as to their severance entitlement.
The only surprise here is it took so long for someone to bring such a lawsuit. Most employees now know that minimum standards are just that. While your minimum employment standards termination pay entitlement may be two, four or eight weeks, that does not stop a court from awarding you many, many months. For example, in one case an employee of two weeks tenure, with no employment standards entitlement at all, was awarded 12 months by the court. And that case is not unique.
However, the credulous and less-informed, may assume the government would accurately inform them what they are entitled to when being dismissed. In this case, it is alleged Mosey and Tremblay called the Ontario employment standards hotline, and were each told the maximum entitlement (under employment standards) was eight weeks, but were not told that a court might well award them many times that amount. Relying upon that advice each signed a release for eight weeks severance.
If the government hotline really did not clarify that the eight weeks was just pursuant to employment standards legislation or provide the caveat that they may be entitled to more at common law, that would, in my view, make the ministry negligent. However, it takes more than negligence to create a successful lawsuit, which is why this one appears doomed to failure.
It seems that these two – and all other employees of Trillium Screw – were dismissed because the company closed its doors. That makes the putative case against the ministry entirely academic. If the ministry had told them to consult a lawyer and they had sued for the 16 and 24 months the lawsuit alleges they were entitled to, and if the company was insolvent, it would have ended up paying them nothing, notwithstanding whatever paper judgement they may have received considerably later, after tens of thousands of dollars in potential legal fees.
Due to the serendipity of this company ceasing its operations, a good case appears to have turned into a very risky one. Wrongful dismissal claims are not secured claims on an insolvency unlike wages for time worked.
But it still stands a cautionary tale for dismissed employees to not rely on the ministry in ascertaining their legal entitlements. Doubtless there are many others who similarly relied on its advice and have good cases because their employers could have afforded to pay any judgement.
What are employees' entitlements when they are fired without legal cause? More than 99% of employees are dismissed without cause. Cause is reserved for the genuine incorrigible miscreants. Those who commit theft, fraud, are in a surreptitious conflict of interest or simply refuse to correct their serious misconduct after warnings. Lack of work, reorganization, personality conflict, simply sub-standard performance or simply not making quota is not legal cause. And without cause, an employee is entitled to severance.
What is the amount of that severance? Much as we all want one, the certainty of a formula does not exist for severance. A 35-year employee may be entitled to 15 months, as might a six-month employee. Courts might look at many factors besides years of service. My textbook cites more than 100 but the primary ones are re-employability in the same marketplace at the same level, position, length of service, age and representations made by the employer. If the employee was treated particularly reprehensibly, they may have other claims as well, but that occurs only in a minority of cases and unfounded bad faith allegations against the employer may reverberate.