What an employer doesn’t say in a termination letter can cause unnecessary problems down the road
It is the practice of most employers in a without cause termination to provide the recently terminated employee with a termination letter outlining the severance package being offered — which is a good practice. In a for cause termination, it is equally important to clearly communicate the decision not to provide a severance package. As a recent case suggests, failing to do so can negatively impact an employer’s ability to argue a limitation period defence.
In Ontario, wrongful dismissal claims are subject to a two-year limitation period pursuant to the province’s Limitations Act, 2002. Specifically, a terminated employee has two years from the date a claim is discovered (or ought to be discovered) to bring a civil claim against her employer.
In 2006, the Ontario Court of Appeal clarified when a limitation period runs in breach of contract or wrongful dismissal claims, ruling the limitation period starts when the employment contract is breached and the employer dismisses the employee without reasonable notice.
Termination date or some other date?
While an employee’s termination date will often mark the commencement of the limitation period, the Ontario Superior Court of Justice suggested in Webster v. Almore Trading & Manufacturing that this will not always be the case.
Almore Trading & Manufacturing terminated Sewell Webster’s employment on July 27, 2006, after five years of service on the grounds of theft. Webster commenced an action for wrongful dismissal on August 6, 2008. Almore brought a motion seeking the dismissal of Webster’s wrongful dismissal claim on the basis it was statutorily barred because it was more than two years after his termination date. Webster, on the other hand, argued he discovered the basis for his claim not on his termination date but after he returned from a pre-scheduled vacation when he received legal advice.
“Wrongful dismissal, in my view, raises a particularly difficult issue in the limitation context since it is not a dismissal per se that is actionable but rather dismissal without reasonable notice or salary in lieu of such notice, that is actionable. Accordingly, the limitation period for an action for wrongful dismissal does not necessarily run from the date of actual dismissal. It is activated when the cause of action is discovered – that is, the date that the terminated employee knew or ought to have known that he was discharged without cause and without notice or pay in lieu of notice and that a proceeding would be an appropriate way to get redress. The date of discovery may be later than the date of dismissal,” said the court.
The question then was: When did Webster discover (or ought to have discovered) the potential claim against Almore, the date of his termination or some other date?
Unfortunately for Almore, the answer was not clear and the court concluded the date upon which Webster discovered his claim was a genuine issue requiring a trial. The ultimate hurdle for the court was even though Webster knew he was terminated on July 27, 2006, it was not clear when he knew he would not be receiving pay in lieu of notice or when he ought to have known he needed to file a wrongful dismissal suit to seek a remedy. The court noted that Almore did not provide any evidence, either in the form of a termination letter or otherwise, to suggest Webster knew he was being terminated without pay in lieu of notice. The court also noted that a person with Webster’s background was not likely to have known he could be entitled to notice or pay in lieu of notice even if dismissed for dishonesty. Had Almore provided a termination letter that advised Webster he would not be receiving pay in lieu of notice, it would have been in a better position to convince the court that the limitation period commenced on his termination date and not later.
Tips for employers
It is good practice to issue clear, written communications for most workplace issues, and termination of employment is no exception. Preparing a comprehensive termination letter can serve a number of purposes, one of which is setting up the earliest possible commencement date of the limitation period. Termination letters, when properly drafted, can also reduce the likelihood of an employee bringing a wrongful dismissal (or related) claim in the first place, reduce exposure related to insurance conversion options, strengthen a termination for cause argument and remind the employee of obligations that survive the termination of her employment.
For more information see:
•Jones v. Friedman, 2006 CarswellOnt 120 (Ont. C.A.).
•Webster v. Almore Trading & Manufacturing Co., 2010 CarswellOnt 5595 (Ont. S.C.J.).
