Wrongful dismissal, also called wrongful termination or wrongful discharge, is a legal phrase, describing a situation in which an employee's contract of employment has been terminated by the employer if the termination breaches one or more terms of the contract of employment, or a statute provision in employment law. It follows that the scope for wrongful dismissal varies according to the terms of the employment contract, and varies by jurisdiction. The absence of a formal contract of employment does not preclude wrongful dismissal in jurisdictions in which a de facto contract is taken to exist by virtue of the employment relationship. Terms of such a contract may include obligations and rights outlined in an employee handbook. Being terminated for any of the items listed below may constitute wrongful termination:
- Discrimination: The employer cannot terminate employment because the employee is a certain race, nationality, religion, sex, age, or (in some jurisdictions) sexual orientation.
- Retaliation: An employer cannot fire an employee because the employee filed a claim of discrimination or is participating in an investigation for discrimination. In the US, this "retaliation" is forbidden under civil rights law.
- Employee's refusal to commit an illegal act: An employer is not permitted to fire an employee because the employee refuses to commit an act that is illegal.
- Employer is not following own termination procedures: Often, the employee handbook or company policy outlines a procedure that must be followed before an employee is terminated. If the employer fires an employee without following this procedure, the employee may have a claim for wrongful termination.
Wrongful dismissal will tend to arise first as a claim by the employee so dismissed. Many jurisdictions provide tribunals or courts which will hear actions for wrongful dismissal. A proven wrongful dismissal will tend to lead to two main remedies: reinstatement of the dismissed employee and/or monetary compensation for the wrongfully dismissed.
A related situation is constructive dismissal in which an employee feels no choice but to resign from employment for reasons imposed by the employer.
One way to avoid potential liability for wrongful dismissal is to institute an employment probation period after which a new employee is automatically terminated unless there is sufficient justification not to do so. The dismissed employee may still assert a claim, but proof will be more difficult, as the employer may have broad discretion with retaining such a temporary employee.
In the United States, there is no single “wrongful termination” law. Rather there are several state and federal laws and court decisions that define this concept. Employers typically designate their employees to be "employees at will." Even in these cases, however, it is usually deemed a "wrongful termination" to dismiss an employee on a legally prohibited basis. In the United States, wrongful dismissal has become the most common labor claim.
In California if a termination was based on your membership in a group protected from discrimination by law, it would not be legal. An employer may not discriminate or terminate a person because of race, religion, national origin, gender, sexual orientation, disability, medical condition, pregnancy, or age, pursuant to the California’s Fair Employment and Housing Act (FEHA) and Title VII of the Civil Rights Act of 1964.
A 2016 study found "robust evidence that one wrongful-discharge doctrine, the implied-contract exception, reduced state employment rates by 0.8% to 1.7%. The initial impact is largest for female and less-educated workers (those who change jobs frequently), while the longer-term effect is greater for older and more-educated workers (those most likely to litigate). By contrast, we find no robust employment or wage effects of two other widely recognized wrongful-discharge laws: the public-policy and goodfaith exceptions."
In Canadian law, absent a written contract which addresses how to end the employment relationship, the law implies into the employment relationship a term that it will not be ended without "notice" of its termination.
Notice is advanced warning an employer must provide an employee that their employment will be terminated. It is measured in units of time. The employer has the option to provide one of two kinds of notice:
- working notice, or
- pay in lieu of notice
Working notice is legal in Canada. Therefore, if the employee is provided a reasonable amount of working notice, the employer owes the employee no additional money.
Pay in lieu of notice
Pay in lieu of notice, sometimes referred to as termination pay, is the amount of money the employer must pay the employee if the employer seeks to immediately terminate the employee without working notice.
Notice is measured in two different ways: statutory notice and common law "reasonable notice".
Employees may be entitled to either statutory or reasonable notice, which ever is greater, but at the very minimum, must receive statutory notice. Provincial legislation such as Ontario's Employment Standards Act, delineates statutory notice by way of a formula.
Reasonable notice, on the other hand, has no formula. The common law dictates how much reasonable notice an employee is entitled to. In this regard, the length of reasonable notice depends on a number of factors, best described by McRuer CJHC in the 1960 Ontario decision of Bardal v Globe & Mail:
There could be no catalogue laid down as to what was reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of the service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.
The Supreme Court of Canada has significantly expanded the scope of wrongful dismissal in Canadian jurisprudence:
- Wallace v United Grain Growers Ltd holds that extra damages will be recoverable when an employer handles a termination in circumstances that constitute bad faith;
- Honda Canada Inc v Keays incorporated Hadley v Baxendale into Canadian employment law, as well as holding that awards are not affected by the type of position an employee may have had;
- Seneca College v Bhadauria holds that human rights violations do not constitute independent actionable wrongs in wrongful dismissal cases, and they must be pursued through the separate schemes provided under human rights legislation.
- Wilson v Atomic Energy of Canada Ltd provides that, where a jurisdiction provides a remedy for terminations arising from unjust dismissal, it cannot be displaced through severance packages (with connected releases) provided by an employer.
An employer is entitled to dismiss an employee according to the terms of the employment contract. There are oral employment contracts, and written employment contracts, and combinations of oral and written employment contracts. In Canadian common law, there is a basic distinction as to dismissals. There are two basic types of dismissals, or terminations: dismissal with cause and termination without cause. An example of cause would be an employee's behaviour which constitutes a fundamental breach of the terms of the employment contract. Where cause exists, the employer can dismiss the employee without providing any notice. If no cause exists yet the employer dismisses without providing lawful notice, then the dismissal is a wrongful dismissal. A wrongful dismissal will allow the employee to claim monetary damages in an amount that compensates the employee for the wages, commissions, bonuses, profit sharing and other such emoluments the employee would have earned or received during the lawful notice period, minus earnings from new employment obtained during the lawful notice period. In Canadian employment law, in those jurisdictions where a remedy for unjust dismissal is not available, it has long been the rule that reinstatement is not a remedy available to either the employer or the employee—damages must be paid instead.
Although Canadian employment law provides some of the above remedies, each (provincial) jurisdiction may treat employment law differently. It is important to determine which jurisdiction the employment occurs in or is regulated by, then seek appropriate legal advice relevant to that jurisdiction and its particular employment laws.
- Jane Mundy (January 5, 2011). "Wrongful Termination Lawsuits on the Rise".
- Discrimination Prohibited by the FEHA
- Autor, David H; Donohue, John J; Schwab, Stewart J (2006-05-01). "The Costs of Wrongful-Discharge Laws". Review of Economics and Statistics. 88 (2): 211–231. doi:10.1162/rest.88.2.211. ISSN 0034-6535.
- Bardal v Globe & Mail, 24 DLR (2d) 140, 145 (Ont. H.C. 1960).
- Wallace v United Grain Growers Ltd 1997 CanLII 332,  3 SCR 701 (30 October 1997)
- Honda Canada Inc v Keays 2008 SCC 39,  2 SCR 362 (27 June 2008)
- where a breaching party is liable for all losses that the contracting parties should have foreseen, but is not liable for any losses that the breaching party could not have foreseen on the information available to him.
- Seneca College v Bhadauria 1981 CanLII 29,  2 SCR 181 (22 June 1981)
- Wilson v Atomic Energy of Canada Ltd 2016 SCC 29 (14 July 2016)
- Fine, Sean (July 14, 2016). "Supreme Court ruling protects federally regulated workers from unfair dismissal". The Globe and Mail.