Ontario Wrongful Dismissal: Common Law Notice, ESA Minimums, and Damages

March 2026 · 14 min read

Wrongful dismissal is the most common employment law claim in Ontario. Unlike employment at-will jurisdictions, Ontario employees are entitled to reasonable notice of termination — or pay in lieu — at common law, in addition to the minimum statutory entitlements under the Employment Standards Act, 2000, SO 2000, c 41 (ESA). Understanding the relationship between ESA minimums and common law entitlements is fundamental to employment practice in Ontario.

1. The Two-Track System: ESA vs Common Law

Ontario employees have two parallel sets of rights on termination:

2. ESA Minimum Entitlements

2.1 Termination Pay

Under s. 57 of the ESA, an employer must provide notice (working notice) or termination pay (pay in lieu) of:

• 1 week for 1–2 years of service
• 2 weeks for 2–3 years of service
• Continuing at 1 week per year up to 8 weeks (8+ years)

During the ESA notice period, the employer must continue benefits and cannot reduce wages or hours. Termination notice may be given as working notice, pay in lieu, or a combination.

2.2 Severance Pay

Separate from termination pay, s. 64 requires severance pay if:

• The employee has been employed for 5 or more years; AND
• The employer has a total Ontario payroll of $2.5 million or more per year, OR the employee was severed as part of a mass termination of 50 or more employees in a 6-month period

Severance pay = 1 week per year (or partial year) of service, to a maximum of 26 weeks. Combined with termination pay, the maximum ESA entitlement for a long-service employee at a large employer is 34 weeks (8 weeks termination + 26 weeks severance).

3. Common Law Reasonable Notice — The Bardal Factors

At common law, an employee dismissed without cause is entitled to reasonable notice or pay in lieu. The leading case is Bardal v Globe and Mail (1960), 24 DLR (2d) 140 (Ont HC), which established the factors courts consider:

• Character of employment: Managers and professionals receive longer notice than hourly workers. Seniority, specialized skills, and supervisory responsibilities increase the notice period.
• Length of service: Generally the most important factor. Courts award approximately 1 month per year of service as a starting point, adjusted by other factors.
• Age: Older employees receive longer notice because they face greater difficulty finding comparable employment. Age 50+ typically extends the notice period.
• Availability of similar employment: The state of the labour market and the availability of comparable positions in the employee's specialty or industry.

Additional factors recognized by courts:

• Inducement to leave a secure job (inducement claims justify longer notice)
• Whether the employee was promised indefinite employment or job security
• Whether the employee was a key person or held a unique role

The current "soft cap" on reasonable notice is approximately 24 months — though courts have awarded up to 30 months in exceptional circumstances: Lowndes v Summit Ford Sales, 2006 CanLII 14 (ON CA).

4. What Is Included in Reasonable Notice Damages

The plaintiff is entitled to everything they would have earned or received during the notice period:

• Base salary (including any salary increases that would have occurred)
• Bonus and commission (based on prior earnings or expectation)
• Benefits — health, dental, life insurance, RRSP contributions, pension
• Share options or restricted shares that would have vested
• Car allowance and expense allowances

Bonus claims during the notice period have generated significant litigation. Courts have consistently held that where a bonus was an integral part of compensation, the employee is entitled to a bonus equivalent in the notice period even if the plan contains a "must be actively employed on payment date" clause — such clauses must explicitly extend to the notice period: Paquette v TeraGo Networks, 2016 ONCA 618.

5. Contractual Limitation of Notice

An employment contract may limit the employee to ESA minimums on termination — effectively excluding common law notice. However, the clause must:

• Be clearly worded to rebut the common law presumption of reasonable notice
• Not provide less than ESA minimums on its face (or it is void)
• Not have become unenforceable through subsequent promotion or changed duties

Courts have found termination clauses void in two circumstances:

1. ESA violation: If a clause, on its face or in any realistic application, could provide less than ESA minimums, it is void entirely — the employee receives full common law notice: Waksdale v Swegon North America, 2020 ONCA 391.
2. Changed circumstances: If the employee's role changed materially (promotion, significantly different responsibilities), the original employment contract may not govern the new role.

Waksdale established that courts will invalidate the entire termination clause — not just the offending provision — if any part of the clause violates the ESA. This has led many employers to re-draft their termination clauses and re-execute employment agreements with existing employees.

6. Constructive Dismissal

Constructive dismissal occurs when an employer makes a unilateral change to a fundamental term of employment so significant that the employee is treated as having been dismissed. The employee may resign and claim wrongful dismissal damages.

Constructive dismissal requires:

1. A unilateral change by the employer to a fundamental term of the employment contract
2. A reasonable employee in the circumstances would have felt their employment was substantially changed

Common constructive dismissal scenarios: salary reduction, demotion or significant change in duties, involuntary transfer to another location, withdrawal of a significant benefit, and persistent harassment or hostile work environment.

An employee who believes they have been constructively dismissed must resign within a reasonable time after the change — an employee who continues to work for an extended period after the change may be found to have condoned it.

7. Bad Faith Damages — Honda v Keays

The Supreme Court of Canada in Honda Canada Inc v Keays [2008] 2 SCR 362 confirmed that additional damages are available for the manner of dismissal where the employer acted in bad faith, causing mental suffering. The employer's conduct must be independently wrongful — bad faith in the manner of termination.

Unlike the prior Wallace v United Grain Growers [1997] 3 SCR 701 approach (extending the notice period), Honda v Keays awards these as aggravated damages — based on actual harm suffered, not an extended notice period.

Bad faith conduct examples: making false allegations of cause to force a resignation, providing a false reason for dismissal, humiliating the employee in front of colleagues, and failure to investigate before termination.

8. Mitigation

A dismissed employee has a duty to mitigate their damages by making reasonable efforts to find comparable employment. Failure to mitigate reduces the notice period damages by the income the employee could reasonably have earned.

The mitigation obligation is not absolute:

• The employee must make reasonable efforts — not take any available job
• The employee is not required to accept employment that is humiliating or at a substantially lower level
• The employee is not required to return to the same employer if that employer offers re-employment (unless the offer is reasonable in the circumstances)

Income earned through mitigation during the notice period is deducted from damages. The onus is on the employer to prove failure to mitigate — not on the employee to prove they mitigated: Evans v Teamsters Local Union No 31 [2008] 1 SCR 661.

9. Practical Considerations for Employment Counsel

• Review the employment contract first: Assess whether there is a valid termination clause limiting notice to ESA minimums. Apply Waksdale — review the entire termination section, not just the without-cause provision.
• Calculate ESA minimums precisely: Confirm employment start date, payroll threshold for severance, and whether the employee was part of a mass termination. ESA minimums are the floor — they must be met regardless of the contract.
• Demand package — compute all elements: Base salary, average bonus over 3 years, benefits continuation value, unvested equity. A missed bonus or benefit continuation claim can be as large as the salary component.
• Record mitigation efforts: Advise employee clients to keep a log of job applications, interviews, and rejections. This evidence is essential if the employer raises failure to mitigate.
• 2-year limitation period: Claims for wrongful dismissal must be brought within 2 years of the date of dismissal (date of last day of employment). The discoverability principle generally does not extend this period for wrongful dismissal.

Conclusion

Ontario wrongful dismissal law has become increasingly favourable to employees through judicial development of the Bardal factors, the broad application of Waksdale to void termination clauses, and the expanded bonus entitlement in the notice period. Employment counsel representing either side must be well-versed in both the ESA floor and the common law ceiling — and the significant contractual complexity that lies between them.