When Does the Limitation Period for a Wrongful Dismissal Claim Start?

by & Ava Z Moradi, JD, editor, First Reference

In a recent decision, the Ontario Court of Appeal clarified that the limitation period for a wrongful dismissal claim does not start at the end of employment, but rather as soon as working notice is provided.

Was it too late to sue?

By letter dated March 7, 2013, the President and CEO of a company advised a long-term worker that the employer could “no longer sustain the costs of his position” and proposed two options for his exit from employment. A week after rejecting this offer, the worker received another letter dated March 18, 2013, stipulating that the worker’s prior service at the predecessor company was not recognized and that therefore his employment would end two years hence on March 22, 2015.

The worker continued his employment until March 22, 2015, and filed a legal claim nine months later on December 21, 2015, against his former employer and its President and CEO for, among other issues, wrongful dismissal and severance pay pursuant to the Employment Standards Act, 2000.

Ontario Superior Court of Justice decision

Limitation periods on the commencement of civil actions are governed by statue. In the province of Ontario, the general source is the Limitations Act, 2002. With specific reference to wrongful dismissal claims, the applicable limitation period for bringing a lawsuit is two years. But at issue is when the limitation period begins to run. In the employment law context, this case sheds light to whether a limitation period commences at the time the employer gives notice of termination, or rather on an employee’s last day of work.

The worker argued that the limitation period began to run from his last day of work on March 22, 2015, not on the date he received notice. Accordingly, his claim was brought well within the two-year time period. On the other hand, the employer moved to strike the worker’s claims arguing, among other reasons, that the action was statute-barred for passing the two-year limitation period, which commenced when the worker received notice of his termination on March 18, 2013.

The motion judge relied on Jones v Freidman, 2006 CanLii 580 (ON CA) as the binding and leading case in Ontario for the commencement of limitation period in a wrongful dismissal action, where the Ontario Court of Appeal held that the “limitation period commences when the cause of actions arises. In a breach of contract, the cause of action arises when the contract was breached.” Having also considered cases decided after Jones that approached the same issue, the motion judge found that none concluded that the limitation period begins to run from the last day of work.

Ultimately, the motion judge held that the cause of action for wrongful dismissal and severance pay claims arose on March 18, 2013, when the worker received notice of his termination. Since the statement of claim was filed after the expiry of the limitation period, the claims for wrongful dismissal and severance were found to be statute-barred.

The worker appealed and sought a declaration that his claims for severance pay and wrongful dismissal were issued within the limitation period. However, the employer brought a cross-appeal, arguing again for an order to strike the balance of the worker’s claims for failure to disclose a reasonable cause of action and a declaration that they are statute-barred.

Ontario Court of Appeal decision

At appeal, the Court upheld the motion judge’s conclusion that the cause of action for wrongful dismissal arose on the date the worker was provided with notice and not on the last day he worked for the employer. Accordingly, he is statute-barred from claiming wrongful dismissal for missing the two-year limitation period, because the limitation period began from the date of the termination notice on March 18, 2013.

However, the Court held that the motion judge erred in finding that the worker’s claim for severance pay was barred by the limitation period. Discovery being the fundamental part of limitation periods, the failure to pay severance would only be discoverable after the worker ceased to work and the employer then failed to provide the severance payment. Therefore, the Court sided with the worker’s argument based on ss. 11(5), 63(1)(a), 64(1) and 65(1) of the Employment Standards Act, 2000 that until employment is completed, the claim for severance pay does not crystalize. Accordingly, the Court set aside the motion judge’s order, and instead allowed the claim for severance pay as the limitation period began from the date of the end of employment on March 22, 2015.

Takeaways

In this case, the Ontario Court of Appeal re-affirms that the limitation clock for a wrongful dismissal claim starts to run as soon as proper termination notice is given and clarifies the haze in situations where an employee is provided with a long period of working notice. However, the same does not apply for statutory severance pay claims as the Ontario Court of Appeal clarified in this case that the limitation period for such situations runs from the date of the end of employment.

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