Damages for Wrongful Dismissal — Ontario Employment Law
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About Damages for Wrongful Dismissal
When an Ontario employer terminates an employee without providing proper working notice or establishing legally valid "just cause," the employee is entitled to financial compensation. These financial awards are known as damages for wrongful dismissal. Unlike basic statutory severance, which acts as a minimum safety net, damages under common law are designed to put the employee in the exact financial position they would have enjoyed had the employer provided the correct amount of working notice.
Calculating these damages requires looking far beyond a worker's base salary. A comprehensive assessment of damages for wrongful dismissal captures the employee's entire compensation package. This typically includes lost wages, the continuation of health and dental benefits, accrued vacation pay under the Employment Standards Act, 2000 (ESA), employer pension contributions, and even regular allowances for things like vehicles or mobile phones. If an employee ordinarily receives commissions or an annual bonus, the average value of those incentives will usually be factored into the damages award, provided they would have been earned during the notice period.
The validity of a worker's employment contract plays a massive role in determining these damages. Employers frequently rely on termination clauses to restrict an employee's damages to the bare hourly minimums outlined in the ESA. However, Ontario courts heavily scrutinize these agreements. If a termination clause violates the ESA in any way—even in a hypothetical scenario—the entire clause is generally deemed void. When this happens, the court will award common law damages, which are almost always significantly higher than statutory minimums.
It is also important to recognize that damages are subject to a legal principle called "mitigation." If a terminated employee finds new, comparable work during what would have been their notice period, income from that new job is typically deducted from the damages owed by the former employer.
Because valuing lost benefits, bonuses, and mitigation deductions involves intricate legal math, attempting to calculate exact entitlements alone can lead to leaving substantial money on the table. Having a legal professional review the specific financial nuances of your previous compensation package is the most effective way to ensure a severance offer properly reflects your full wrongful dismissal damages.
Frequently Asked Questions
What exactly is included in damages for wrongful dismissal in Ontario?
Damages for wrongful dismissal encompass your total compensation package, not just base salary. This includes lost benefits (like health and dental), employer pension matching, car allowances, accrued vacation pay, and often bonuses or commissions you would have earned during the notice period.
Can I claim out-of-pocket medical expenses if my benefits are cut off?
Yes. If your employer wrongly cancels your health benefits instead of providing proper notice, you can claim the cost of replacement insurance or the actual out-of-pocket costs you incurred for medical and dental treatments during the notice period.
Does my employment contract restrict how much money I can get?
It might, but only if the termination clause perfectly complies with the Employment Standards Act (ESA). Ontario courts frequently invalidate restrictive clauses that are poorly worded, which allows the employee to claim much higher, unrestricted common law damages.
Will my damages be reduced if I find a new job quickly?
Generally, yes. Ontario employees have a duty to mitigate their damages by looking for new work. If you secure a new job during your notice period, your earnings from the new employer are usually subtracted from the wrongful dismissal damages owed by your former employer.
Can I get extra compensation if my employer was abusive when firing me?
If your employer acted in bad faith, was intentionally cruel, or lied during the termination process, a court may award additional "moral" or "punitive" damages. These are separate from standard wrongful dismissal damages, which only cover lost compensation.
How long do I have to sue for wrongful dismissal damages?
In Ontario, the Limitations Act, 2002 sets a strict two-year deadline from the date of your dismissal to officially file a legal claim. To ensure your compensation is accurately calculated and protected, consulting a lawyer well before this deadline is highly recommended.
Common Scenarios
- An executive is terminated without cause right before their annual bonus is supposed to be paid, and the court includes the full value of the lost bonus in the wrongful dismissal damages because it would have vested during the reasonable notice period.
- A worker's employment contract attempts to limit their payout to just four weeks of pay, but a court finds the contract wording violates the ESA, resulting in a damages award of ten months' total compensation under common law.
- An employee incurs $3,000 in unexpected dental surgery costs two months after being fired, which the employer is ordered to pay as damages because the employee should still have been covered by the company benefits plan.
- A sales professional is wrongfully dismissed and their damages award includes a calculation of average monthly commissions based on their previous three years of performance, rather than just their base salary.
What You Should Know
- Do not assume your base salary is all you are owed; always factor in the value of your benefits, pension, and regular allowances when evaluating a severance package.
- Keep receipts for any mandatory medical, dental, or prescription expenses you pay out-of-pocket after losing your job, as these can be directly claimed as damages.
- Maintain a detailed, written log of your job search efforts (applications, interviews, networking) to prove you are actively trying to mitigate your financial losses.
- Never sign a release or accept a severance offer without having the employment contract's termination clause reviewed by counsel, as an invalid clause could drastically increase your financial entitlements.
Featured Cases
Ghazvini et al v. Canadian Imperial Bank Of Commerce
2025 ONSC 5218 (CanLII) · 2025-09-25Termination Provisions Unenforceable: Reasonable Notice and Damages Awarded
A case involving termination provisions under the Canada Labour Code, where the court found termination clauses unenforceable due to ambiguity and overreach. The court also awarded reasonable notice and damages for lost compensation, and rejected the employer's claim that the employees failed to mitigate their damages.
Henderson v. Slavkin et al.
2022 ONSC 2964 (CanLII) · 2022-08-10Wrongful Dismissal: Termination Clauses Invalidated, Damages Awarded
A wrongful dismissal case where the court invalidated ambiguous termination clauses in an employment contract, finding them non-compliant with the Employment Standards Act (ESA). The plaintiff was awarded common-law damages, and the court considered mitigation of damages in the context of the pandemic. CERB payments were not deducted from the damages award.
Fogelman v. IFG
2021 ONSC 4042 (CanLII) · 2021-06-02Constructive Dismissal and Wrongful Dismissal: Layoff and Employment Contract Dispute
A case involving the determination of employment status, a temporary layoff, and the enforceability of an employment contract. The court also assessed damages for wrongful dismissal, including notice period, vacation pay, and punitive damages for the employer's bad faith conduct.
Lamontagne v. J.L. Richards & Associates Limited
2021 ONSC 2133 (CanLII) · 2021-03-31Employment Standards Act Compliance: Termination Clauses and Reasonable Notice
A case involving the enforceability of termination clauses under the Employment Standards Act (ESA), including a determination of reasonable notice and damages for wrongful dismissal. The court applied principles from Machtinger, Waksdale, and Wood to assess the validity of the termination clauses and awarded ten months' notice and damages for lost benefits and out-of-pocket expenses.
Scharff v. Sears Canada Inc.
2017 ONSC 6757 (CanLII) · 2017-11-09Wrongful Dismissal: Plaintiff Awarded $765,395.38 for Refusal to Work Full-Time
A wrongful dismissal case where the plaintiff was terminated for refusing to work full-time in Toronto, despite an unsigned and altered employment agreement. The court found no lawful cause for dismissal and awarded damages of $765,395.38 USD equivalent in Canadian dollars based on an oral employment contract.
Aubin v. H.B. Group Insurance Management Ltd. (Dist. Ct.)
1987 CanLII 4410 (ON SC) · 1987-11-05Wrongful Dismissal: Resignation Under Threat Awards Notice Period
A wrongful dismissal case where an employee resigned under threat of dismissal, with the court determining the resignation was involuntary. The employee was awarded four months’ notice based on age, position, and length of service. The employer failed to prove just cause for termination, and the court held that philosophical conflicts do not constitute misconduct.
Robson v. General Motors of Canada Ltd.
1982 CanLII 2078 (ON SC) · 1982-05-04Wrongful Dismissal: Employee Performance and Notice Obligations
A wrongful dismissal case where an employee was terminated without sufficient warning or opportunity to address performance issues. The court examined whether the employer fulfilled its obligation to provide notice of deficiencies and whether the employee was bound by a month-to-month employment clause that was not adequately explained. The case also considered the entitlement to damages for expenses incurred due to wrongful dismissal.