The Costs of Bad Terminations: Jerry's Story

When I went to law school oh so many years ago, we used to do something called ‘issue spotting.’ The professor would lay out a scenario, and see if we could catch the legal issues and if we knew how to solve them.

As it turns out, many of those scenarios turned out to resemble some of the real-life situations that my clients are facing regularly. So, let’s take an example of a hypothetical client dealing with some of the issues that we see all the time, and how they could have been solved.

Jerry phoned me up in a panic. We’d never met, but he’d gotten our firm’s name from a friend of his who we had been able to help before.

Jerry’s been running a small business in Durham Region for over 20 years, and has a longstanding team of loyal employees, as well as some newer hires. He’s found some great younger workers, but the guys who have been with him since the start are like family - they stick by his side and he would do everything he can to make them happy.

Except one day Jerry found out that one of his employees crossed a line. One of his younger, female employees came to Jerry visibly upset, saying that one of the older guys in the back had harassed her. When Jerry asked for details, she said that at first this employee had been making inappropriate jokes, but then the jokes got worse, and he began making comments that made her very uncomfortable, and she was so upset she couldn’t handle it anymore. 

Jerry hit the roof! He prides himself on running a welcoming environment, and he’d never allow for that sort of treatment in his office. He phoned the employee down to his office, and fired him immediately for cause, yelling the entire time. The employee was forced to walk back through the shop floor in front of his colleagues with his tail between his legs, and was sent home midday with nothing.

Now, Jerry finds out that he’s being sued for wrongful dismissal, with the employee, who he thought was a friend, making all kinds of wild claims about how he was treated. He also claims that there was no employment contract, and is seeking serious financial compensation. 

So, what are some things that Jerry did wrong here? Even if he was trying to do right by his employee and stop harassment in his tracks, he made some costly mistakes along the way.

Mistake #1: No Written Employment Contract

The employee’s lawyer was right that there were no written employment contracts. When Jerry started the business, he hired his buddies from the neighbourhood because he knew that they were good guys and hard workers, so written contracts were the last thing on his mind. He’s never had an HR team, and as he says himself, he never thought he would need one.

What Jerry did not know is that he did have employment contracts, even if they were not written down. Anyone who works for wages in Ontario is presumed to have an employment contract, which for the most part is governed by the Employment Standards Act. Vacation pay, overtime, parental leave etc. are all set out under the law, and no employer can offer an employee less than the minimums. 

The one key difference, and where writing is crucial, is termination pay. Without a written contract, an employee’s termination pay is not limited to the minimums under the Act. Instead, it’s set out by what is called ‘reasonable notice’ - how long an employee in similar circumstances may take to find new work. In short, the difference can be paying an employee two months’ pay, vs. paying them two years’ without a written agreement. 

Even if an employee is terminated for cause, the law says that except for very specific circumstances, they are still owed their legal minimums under the Act. In other words, it’s exceedingly rare that an employee leaves completely empty-handed.

Mistake #2: No Investigation

Jerry tried to do the honourable thing. He knows that sexual harassment is inappropriate, and he would never want that sort of reputation tarnishing his business. So, when an employee came to him complaining of it happening behind the scenes, he felt he needed to put a stop to it immediately.

The trouble is that Jerry made his decision without asking the employee any questions, or doing any sort of investigation. The law is clear that while workplace sexual harassment is prohibited under the Occupational Health and Safety Act (“OHSA”), employers need to conduct some form of investigation that is ‘appropriate in the circumstances.’ For small incidents this can be done internally, but for more serious incidents it may require a third-party investigator.

In this case, Jerry and the employee had a longstanding history, so it would have been difficult for him to conduct a fully neutral investigation. Instead, a hired investigator may have been able to interview both employees along with any witnesses, and given the accused employee a fair chance to answer to the allegations that were made against him. 

If the investigator found the complaint was believable, and that the evidence supports a termination for cause, then Jerry may have been able to proceed with the termination. However, without that evidence, Jerry’s legal case is not a strong one. That’s not to say that the employee was lying, but it’s impossible to tell without that investigation.

Mistake #3: No Phone Call

If Jerry had taken a breath after hearing the complaint, and phoned me before weighing his options, I would have been able to walk him through the proper next steps. I likely would have recommended an external investigator (we have a few names handy), who could speak with the parties and help make a proper determination before Jerry made any rash decisions.

Otherwise, if he did not want to do an investigation but wanted the employee gone anyway, I would have helped Jerry structure an exit package to terminate this employee without cause. The employee could be fired at any time without cause, so long as they are paid that reasonable notice. While it still might have been an expensive termination given the employee’s age and tenure, it may have saved him a ton of aggravation and legal fees.

Lastly, I would recommend that Jerry implement written employment contracts and policies to help prevent this from happening again. While you can never prevent people from misbehaving completely, clear contracts and policies lay out what to do when that happens, and help protect you legally provided you’re taking the proper steps. It may cost a bit extra to bring in written contracts for long standing employees, but the savings in cases like these can be significant.

If Jerry’s story sounds at all familiar, it’s time to consult with an employment lawyer. At Mason Bennett Johncox we’ve been practising employment law in Durham Region for over 27 years, and yes, we’ve seen it all. We’re here to guide you through making sound employment decisions that protect both your employees and your business. Remember, we’re only a phone call away

Ian Johncox, Civil Litigation/Employment Lawyer/Mediator

Ian Johncox, Civil Litigation/Employment Lawyer/Mediator

Ian practices in the areas of employment law, occupier liability defence, franchise litigation and contract litigation. Ian is a trained mediator and conducts mediations in a wide range of civil (non-family) cases. His employment law practice includes acting for employers and employees, which gives him a balanced perspective to his clients’ issues.

Contact Us

Send us a message, complete with your contact information. One of our friendly staff will be in touch to discuss how we can help you.


79 Baldwin Street North, Brooklin, ON L1M 1A4
Phone 905-620-4499
Fax 905-620-7738


229 Mary Street, Port Perry, ON L9L 1B7
Phone 905-985-4141
Fax 905-620-7738
Your name is required.
Your phone is required.
Your email address is required.
A message is required.