Can a Government Employee Sue for Wrongful Dismissal in Ontario?

Can a government employee sue for wrongful dismissal in Ontario?

Yes — Ontario government employees can bring civil claims related to their employment, including wrongful dismissal actions, though the procedural rules and remedies available may differ from those in the private sector. A recent Court of Appeal decision, Derenzis v. Ontario, 2026 ONCA 385 (CanLII) (full decision), provides a reminder that even after the substantive issues in a case are resolved, the question of who pays legal costs can take on a life of its own.

If you are a current or former Ontario public sector worker dealing with a workplace dispute, understanding how costs work in litigation is just as important as understanding the underlying claim.

What does a costs order mean in an Ontario lawsuit?

A costs order is a court direction requiring one party to pay some or all of the other side’s legal fees. In Ontario civil litigation, costs are not automatically awarded — a judge decides who pays, how much, and why, usually at the end of a hearing or appeal. Costs can be fixed at a set dollar amount (called an all-inclusive costs order) or assessed in detail by a court officer.

In employment disputes, costs orders matter enormously. A worker who wins their case can still end up financially worse off if costs are not handled properly. Conversely, an employer who successfully defends a claim may seek costs against the employee, which can be a significant deterrent to bringing a claim in the first place.

What happened in this Court of Appeal decision?

The appeal itself had already been decided — the Court of Appeal had allowed the appeal on the merits. What remained was the question of costs that were not resolved at the original hearing. The court invited both sides to make written submissions on those outstanding costs.

The parties ultimately reached a consent agreement on costs. Based on that agreement, the court ordered the plaintiffs to pay costs to the appellant, fixed as an all-inclusive amount. In other words, both sides negotiated a number and the court formalized it as an order.

This kind of outcome — a negotiated, consent costs order — is actually quite common at the appellate level. It avoids a separate contested costs hearing, saves both sides time and money, and gives everyone certainty.

Why would plaintiffs pay costs if they brought the case?

It may seem counterintuitive that the people who started the lawsuit ended up paying costs, but in Ontario litigation, costs generally follow the outcome of each step in the proceeding. If the appellant (the party who brought the appeal) succeeded on the appeal, it is entirely consistent for the court to order the other side — the plaintiffs in the original action — to pay the costs of that appeal.

This does not necessarily mean the plaintiffs lost the entire case. A party can win at trial but lose on a specific motion or appeal, and costs can be ordered separately for each stage. The takeaway is that litigation is not a single event — it is a series of steps, and the cost consequences of each step can add up.

How are costs calculated in Ontario employment cases?

Ontario courts use several methods to set costs. Partial indemnity costs are the most common and cover roughly 40–60% of a party’s actual legal fees. Substantial indemnity costs are higher and are typically reserved for situations involving bad faith or a rejected settlement offer that turned out to be better than the result at trial.

When parties agree on costs — as happened here — the court will generally accept the agreed amount and make it an order of the court. This gives the agreement the force of a court judgment, meaning it can be enforced if not paid.

For employees navigating a dispute with a government employer, having experienced legal counsel who understands both the substantive employment law issues and the procedural cost rules is essential. Our Ontario employment lawyers regularly advise employees on how to manage litigation risk, including the risk of adverse costs awards.

Does this decision change the law for Ontario employees?

This particular ruling does not establish new legal principles — it is a procedural costs order made by consent. However, it is a useful reminder of several realities that any employee considering litigation should keep in mind.

First, appellate proceedings are expensive and unpredictable. Second, even a successful appeal by one party can result in costs flowing back against the other. Third, negotiated resolutions of costs — rather than contested hearings — are often the most practical outcome for everyone involved.

If you are employed in the Ontario public sector and have concerns about how your employer has treated you, speaking with a lawyer early gives you the best chance of understanding your exposure before you are deep into a proceeding. Workers in the Hamilton and Burlington areas can connect with our Burlington employment law team for local advice.

Practical takeaways for employees involved in government employment disputes

• Costs are not an afterthought. Before starting or defending any employment claim, ask your lawyer to walk you through the realistic costs exposure at each stage of the proceeding.
• Appeals can reverse cost positions. Winning at trial does not guarantee you will avoid a costs award if the other side successfully appeals even part of the decision.
• Consent costs orders are enforceable. If you agree to pay costs as part of a settlement or consent order, that agreement has the same force as any other court judgment.
• Government employer cases have unique procedural layers. Claims against Ontario or its agencies may involve different notice requirements, limitation periods, and procedural rules than private sector disputes.
• Get advice early. The earlier you consult a lawyer, the better positioned you are to manage both the substantive claim and the procedural cost risks that come with it.

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UL Lawyers offers a free initial consultation from our Burlington office and works with clients across Ontario on employment matters of all kinds. Whether you are facing a dismissal, a workplace dispute, or questions about your rights as a public sector employee, our team is ready to help. Reach out to speak with our Ontario employment law team today.

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This article is automated commentary on a public court decision and is for general information only — not legal advice. Decisions rely on facts unique to each case. If you are affected by a similar issue, contact a lawyer for advice specific to your situation.