Terminations
Terminating an employee is one of the most difficult decisions that an employer must make. It is also an aspect of workplace relations that is fraught with landmines and possible risks, and requires careful navigation. There is a right and a wrong way to terminate an employee and taking the wrong way can significantly increase the legal and financial consequences for an employer.
The experienced, strategic, and knowledgeable employment lawyers at Rousseau Mazzuca LLP routinely guide employers through the best practices of terminating an employee. Our goal is to help our clients understand their options, minimize risk, and avoid prolonged legal disputes where possible, while nonetheless firmly opposing unreasonable demands from departing employees. We have many years of focused experience assisting clients in numerous industries and sectors with their most challenging termination situations.
BAD FAITH DAMAGES
If an employer acts in bad faith at the time of termination, the terminated employee may be entitled to additional money on top of their termination and/or severance pay. Examples of bad faith actions by an employer include wrongly accusing an employee of serious misconduct warranting just cause dismissal, or dismissing someone in a callous or unprofessional manner.
DISMISSAL FOR JUST CAUSE
Certain serious incidents such as illegal activity, abuse, fraud, or theft can be grounds for immediate dismissal for just cause without the need for notice or a compensation package. This often results in a wrongful dismissal lawsuit. Any employer contemplating a just cause dismissal should contact an employment lawyer before taking any action.
IMPORTANT FACTORS TO CONSIDER IN A TERMINATION
Most workplaces in Ontario are governed by the Ontario Employment Standards Act. The Act sets out a number of obligations and rights that are triggered during a termination.
Termination Pay and Severance Pay
One of the most important termination obligations offered by the Act is termination and severance pay. The protections under the Act provide departing employees with a “floor” of rights that cannot be contracted out of and must be provided by employers.
Employers are obligated to provide departing employees with notice of termination, or pay in lieu of that notice. This notice and/or pay is calculated based on the length of time the employee worked for that employer:
Length of Employment Notice Required
Less than 3 months……………………………………………………….None
3 months but less than 1 year…………………………………1 week
1 year but less than 3 years…………………………………….2 weeks
3 years but less than 4 years………………………………….3 weeks
4 years but less than 5 years………………………………….4 weeks
5 years but less than 6 years………………………………….5 weeks
6 years but less than 7 years………………………………….6 weeks
7 years but less than 8 years………………………………….7 weeks
8 years or more………………………………………………………………8 weeks
It is important to note that the above represents only the bare minimum requirements under the Act. Ontario courts have regularly recognized that departing employees are often entitled to more notice than this guaranteed minimum, and have awarded more notice in many cases.
In addition to termination pay, employers are also obligated to provide certain departing employees with severance pay. This applies only to employees who have been working for an employer for at least five years, and where the employer has an annual payroll of at least $2.5 million. Severance pay can far exceed termination pay as it is based on the number of years and months of service, up to a maximum of 26 weeks’ pay.
Termination Provisions in Employment Contracts
Well-drafted employment contracts should contain carefully worded termination provisions setting out what happens after a termination. A termination provision in an employment agreement must provide the minimum notice standards set out in the Ontario Employment Standards Act and cannot violate any other workplace law, such as the Ontario Human Rights Code. As long as these minimum obligations are met, the employer can use employment contracts to limit their potential liability following a termination.
If there is no written employment contract, the contract does not have a termination provision, or the employment contract is not valid or enforceable, then the employee is entitled to “reasonable notice” under what is known as the “common law” which may significantly increase an employer’s liability following a termination.
“Reasonable Notice” Considerations
Ontario courts have repeatedly stated that in many circumstances, employees are entitled to more notice of termination than the minimum provided for under the Employment Standards Act. In determining what this amount of notice should be, courts will look at a number of factors, including:
Length of service – long term employees will often receive far more notice than the minimums guaranteed by the Employment Standards Act;
Age of employee – employees who are older, or close to what was historically retirement age, will often receive far more notice;
Level of responsibility/position – employees in higher level or more senior positions, such as management positions, will get more notice;
CONSEQUENCES FOR FAILURE TO PAY
Employers should be careful before they assume that an employee is not entitled to overtime pay. Employers must understand that there can be serious financial implications for failure to pay overtime, including the obligation to pay money owed retroactively. There have been successful class action lawsuits filed by large groups of employees claiming back pay due to unpaid overtime.
In addition, if a complaint is filed under the Employment Standards Act, the Ministry of Labour can come into the workplace and perform an investigation of everything in that workplace, not just the employment of the individual who filed the complaint. This can lead to additional, unforeseen penalties.
