In law, wrongful dismissal, also called wrongful termination or wrongful discharge, is a situation in which an employee's contract of employment has been terminated by the employer, where the termination breaches one or more terms of the contract of employment, or a statute provision or rule in employment law. Laws governing wrongful dismissal vary according to the terms of the employment contract, as well as under the laws and public policies of the jurisdiction.
A related concept is constructive dismissal in which an employee feels no choice but to resign from employment for reasons that result from the employer's violation of the employee's legal rights.
Forms of wrongful dismissal
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.
Reporting a Violation of Law to Government Authorities: also known as a whistleblower law, an employee who falls under whistleblower protections may not lawfully be fired for reporting an employer's legal violation or for similar activity that is protected by the 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 the company's own termination procedures: In some cases, an employee handbook, company policy, or collective bargaining agreement outlines the procedure that must be followed before an employee is terminated. If the employer fires an employee without following required procedure, the employee may have a claim for wrongful termination.
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.
Many jurisdictions provide tribunals or courts that hear actions for wrongful dismissal. Although available remedies are dependent upon the type of claim and the laws of the jurisdiction, potential remedies for a proved wrongful dismissal include:
reinstatement of the dismissed employee;
monetary compensation for the wrongfully dismissed.
Probationary employees
One way to avoid potential liability for wrongful dismissal with newer employees 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.
United States
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.
In all U.S. states except Montana,[1] workers are considered by default to be at-will employees, meaning that they may be fired at any time without cause.
Some employees have contracts of employment that limit their employers' ability to terminate them without cause. Other employees may be members of unions and benefit from a collective bargaining agreement that defines disciplinary proceedings and limits when an employee may be terminated. Employees who work for government agencies normally benefit from civil service protections that restrict termination. Those employees, if terminated, may attempt to bring wrongful termination claims under the terms of the contract or agreement, or civil service law.
Termination of at-will employment
Although at-will employees are protected from termination by civil rights laws and other laws that prohibit retaliatory termination, in the absence of a contract of employment or collective bargaining agreement, or civil service protections extended to government workers, they have few protections from being fired.
In some situations an at-will employee may be able to claim wrongful termination. Three leading grounds for claiming wrongful termination are:
Implied contract: In some situations a court might find an implied contract of employment that restricts the employer's ability to terminate an employee without cause. For example, the terms of an employee manual may support an employee's claim that the employer must follow a defined disciplinary process prior to termination.
Public policy: In many states it is possible to argue that the employer's reasons for terminating an employee, although not in violation of a statute, violated the state's public policy such that a wrongful termination claim should be allowed. For example, a court might allow a claim by an employee who was fired for refusing to take an action that was in violation of the law, for reporting a violation of the law to an enforcement agency, or for otherwise exercising the employee's rights under the law.
Covenant of good faith and fair dealing: In what is in many senses an extension of public policy doctrine, some states allow an at-will employee to pursue a wrongful termination claim if the cause for the termination is deemed to reflect bad faith on the part of the employer. For example, a state might apply this doctrine to allow a claim against an employer that terminated an employee a week before that employee's pension benefits vested, for no reason other than to avoid paying the employee a pension.
Termination in violation of the law
In the United States, termination of employment is not legal if it is based on the worker's membership in a group protected from discrimination by law. It is unlawful for an employer to terminate an employee based upon factors including employee's race, religion, national origin, sex, disability, medical condition, pregnancy, or age (over 40), pursuant to U.S. federal laws such as Title VII of the Civil Rights Act of 1964,[2] the Americans with Disabilities Act of 1990[3] and the Age Discrimination in Employment Act of 1967.[4]
Many states also have civil rights laws that protect workers from discrimination. For example, those forms of discrimination are prohibited by the California’s Fair Employment and Housing Act (FEHA).[5]
Many laws also prohibit termination, even of at-will employees. For example, whistleblower laws may protect an employee who reports a legal or safety violation by the employer to an appropriate oversight agency. Most states prohibit employers from firing employees in retaliation for filing a workers' compensation claim, or making a wage complaint over unpaid wages.
Canada
In Canada, wrongful dismissal is based on two conditions: whether the worker was dismissed fairly, and whether the worker was adequately compensated.
When no written contract exists on how to end the employment relationship, the law implies that the relationship cannot end without "notice". Notice is advance warning an employer must provide an employee that their employment will be terminated. It is measured in units of time. There are two kinds of notice:
Working notice
Pay in lieu of notice
If an adjudicator determines a dismissal was unjust, the employer may be ordered to reinstate the employee with or without compensation for lost wages, pay compensation for lost wages without reinstating the employee, or do anything that is equitable to remedy any consequences of the dismissal.[6]
Working 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. There is a severance pay calculator based on common law "Bardal Factors" that predicts the amount of severance pay owed as determined by the court.[7]
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.[8] 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:[9]
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.
As the so-called "Bardal Factors" feature in hundreds of cases, predictive modeling is now possible.[10] Notwithstanding the above, the courts are open to creative interpretations of reasonable notice. For example, if an employee was persuaded to leave a job to come to another (i.e. inducement), the courts may take that into account in calculating the employee’s length of service and thus drastically increase the notice period.[citation needed]
The Supreme Court of Canada has significantly expanded the scope of wrongful dismissal in Canadian jurisprudence:
Seneca College v Bhadauria[14] 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.
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 behavior 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.
↑ "Frequently Asked Questions". Montana Department of Labor & Industry. State of Montana. Archived from the original on 22 December 2017. Retrieved 20 December 2017.
↑ "Unlawful Discrimination"(PDF). California Attorney General's Office. August 2001. Archived(PDF) from the original on 31 December 2016. Retrieved 20 December 2017.
↑ "Unjust Dismissal". Government of Canada. 31 July 2015. Retrieved 27 October 2018.
↑ 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.
In employment law, constructive dismissal, also called disguised dismissal, constructive discharge or constructive termination, occurs when an employee resigns due to the employer creating a hostile work environment. This often serves as a tactic to avoid payment of statutory severance pay and benefits. In essence, although the employee resigns, the resignation is not truly voluntary but rather a response to intolerable working conditions imposed by the employer. These conditions can include unreasonable work demands, harassment, or significant changes to the employment terms without the employee’s consent.
In United States labor law, at-will employment is an employer's ability to dismiss an employee for any reason, and without warning, as long as the reason is not illegal. When an employee is acknowledged as being hired "at will", courts deny the employee any claim for loss resulting from the dismissal. The rule is justified by its proponents on the basis that an employee may be similarly entitled to leave their job without reason or warning. The practice is seen as unjust by those who view the employment relationship as characterized by inequality of bargaining power.
Termination of employment or separation of employment is an employee's departure from a job and the end of an employee's duration with an employer. Termination may be voluntary on the employee's part (resignation), or it may be at the hands of the employer, often in the form of dismissal (firing) or a layoff. Dismissal or firing is usually thought to be the employee's fault, whereas a layoff is generally done for business reasons outside the employee's performance.
Dismissal is the termination of employment by an employer against the will of the employee. Though such a decision can be made by an employer for a variety of reasons, ranging from an economic downturn to performance-related problems on the part of the employee, being fired has a strong stigma in some cultures.
In United Kingdom law, the concept of wrongful dismissal refers exclusively to dismissal contrary to the contract of employment, which effectively means premature termination, either due to insufficient notice or lack of grounds. Although wrongful dismissal is usually associated with lack of notice sometimes it can also be caused by arbitrary dismissal where no notice was required but certain grounds were specified in the contract as being the only ones available but none existed.
An employment contract or contract of employment is a kind of contract used in labour law to attribute rights and responsibilities between parties to a bargain. The contract is between an "employee" and an "employer". It has arisen out of the old master-servant law, used before the 20th century. Employment contracts relies on the concept of authority, in which the employee agrees to accept the authority of the employer and in exchange, the employer agrees to pay the employee a stated wage.
Australian labour law sets the rights of working people, the role of trade unions, and democracy at work, and the duties of employers, across the Commonwealth and in states. Under the Fair Work Act 2009, the Fair Work Commission creates a national minimum wage and oversees National Employment Standards for fair hours, holidays, parental leave and job security. The FWC also creates modern awards that apply to most sectors of work, numbering 150 in 2024, with minimum pay scales, and better rights for overtime, holidays, paid leave, and superannuation for a pension in retirement. Beyond this floor of rights, trade unions and employers often create enterprise bargaining agreements for better wages and conditions in their workplaces. In 2024, collective agreements covered 15% of employees, while 22% of employees were classified as "casual", meaning that they lose many protections other workers have. Australia's laws on the right to take collective action are among the most restrictive in the developed world, and Australia does not have a general law protecting workers' rights to vote and elect worker directors on corporation boards as do most other wealthy OECD countries.
United States labor law sets the rights and duties for employees, labor unions, and employers in the US. Labor law's basic aim is to remedy the "inequality of bargaining power" between employees and employers, especially employers "organized in the corporate or other forms of ownership association". Over the 20th century, federal law created minimum social and economic rights, and encouraged state laws to go beyond the minimum to favor employees. The Fair Labor Standards Act of 1938 requires a federal minimum wage, currently $7.25 but higher in 29 states and D.C., and discourages working weeks over 40 hours through time-and-a-half overtime pay. There are no federal laws, and few state laws, requiring paid holidays or paid family leave. The Family and Medical Leave Act of 1993 creates a limited right to 12 weeks of unpaid leave in larger employers. There is no automatic right to an occupational pension beyond federally guaranteed Social Security, but the Employee Retirement Income Security Act of 1974 requires standards of prudent management and good governance if employers agree to provide pensions, health plans or other benefits. The Occupational Safety and Health Act of 1970 requires employees have a safe system of work.
Unfair dismissal in the United Kingdom is the part of UK labour law that requires fair, just and reasonable treatment by employers in cases where a person's job could be terminated. The Employment Rights Act 1996 regulates this by saying that employees are entitled to a fair reason before being dismissed, based on their capability to do the job, their conduct, whether their position is economically redundant, on grounds of a statute, or some other substantial reason. It is automatically unfair for an employer to dismiss an employee, regardless of length of service, for becoming pregnant, or for having previously asserted certain specified employment rights. Otherwise, an employee must have worked for two years. This means an employer only terminates an employee's job lawfully if the employer follows a fair procedure, acts reasonably and has a fair reason.
A severance package is pay and benefits that employees may be entitled to receive when they leave employment at a company unwilfully. In addition to their remaining regular pay, it may include some of the following:
The Employment Rights Act 1996 is a United Kingdom Act of Parliament passed by the Conservative government to codify existing law on individual rights in UK labour law.
The New Zealand Employment Relations Act 2000 is a statute of the Parliament of New Zealand. It was substantially amended by the Employment Relations Amendment Act 2001 and by the ERAA 2004.
Wallace v United Grain Growers Ltd, 1997 CanLII 332, [1997] 3 SCR 701 is a leading decision of the Supreme Court of Canada in the area of Canadian employment law, particularly in determining damages arising from claims concerning wrongful dismissal.
Johnson v Unisys Limited [2001] UKHL 13 is a leading UK labour law case on the measure of damages for unfair dismissal and the nature of the contract of employment.
In labour law, unfair dismissal is an act of employment termination made without good reason or contrary to the country's specific legislation.
South African labour law regulates the relationship between employers, employees and trade unions in the Republic of South Africa.
Honda Canada Inc v Keays, 2008 SCC 39, [2008] 2 SCR 362 is a leading case of the Supreme Court of Canada that has had significant impact in Canadian employment law, in that it reformed the manner in which damages are to be awarded in cases of wrongful dismissal and it declared that such awards were not affected by the type of position an employee may have had.
Reda v Flag Ltd [2002] UKPC 38 is a case from Bermuda law, advised upon by the Privy Council, that is relevant for UK labour law and UK company law concerning the dismissal of a director.
Commonwealth Bank of Australia v Barker is a leading Australian judgment of the High Court which unanimously and firmly rejected the proposition that contracts of employment in Australia should contain an implied term of mutual trust and confidence.
Downtown Eatery (1993) v Ontario was a case brought to the Court of Appeal for Ontario pertaining to the structure of business hierarchies and relationships as a form of creditor proofing business assets, and specifically the common employer doctrine. It considered the oppression remedy of the Business Corporations Act.
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