Making the decision to terminate an employee is difficult in itself. This is often further complicated for small businesses and entrepreneurs who may not have dedicated and experienced HR personnel. However, it is essential for employers to understand the key steps (and key pitfalls) when terminating an employee. Poorly done terminations can drive wrongful dismissal claims, and can impose significant additional liability on employers for the manner in which a termination is performed (see our previous posts where employees have been awarded $50,000 and $150,000 for the manner in which a termination was carried out).
- Tread carefully when alleging cause – cause has been referred to as the capital punishment of employment law, and is reserved exclusively for instances where an employee has clearly and intentionally engaged in serious misconduct. Employers have been increasingly penalized by courts by way of additional damages for alleging cause without sufficient evidence, or as a negotiating strategy. If you believe you may have just cause to terminate an employee, we would strongly recommend seeking legal advice.
- Follow the applicable employment standards legislation– familiarizing yourself with the applicable labour and employment standards legislation will ensure that you remain compliant with your contractual and statutory obligations to an employee upon termination. These are fairly straightforward to understand and follow, but failure to do so could lead to significant liability for the Company (see Pohl v. Hudson’s Bay Company, 2022 ONSC 5230 (CanLII), where the employer faced an additional $55,000 in moral and punitive damages, in part due to failure to adhere to employment standards legislation). Employers should note that employment standards legislation sets out an employee’s minimum entitlements, and quite often employees will be entitled to significantly more severance. There are also clearly stipulated timelines for payment of these minimums as well as processing Records of Employment, which must be followed.
- Act fairly and with sensitivity – Employers have a duty to act in good faith in the course of terminating an employee. In layman’s terms, employers are expected to be respectful and considerate when terminating staff. Making defamatory statements about the departing employee, misrepresenting the basis for termination, making false representations to the employee regarding their job security, and withholding wages and earned commissions/bonuses are all forms of bad faith conduct which will attract additional liability, on top of any severance package found owing to the employee.
- Document – Effective communication is key when ending an employment relationship. A clear and well drafted termination letter will help ensure that the employee clearly understands how their termination will be processed and will provide direction in what can be a confusing and fast moving time for both parties.
- Timing is Important – While it is never a good time to terminate an employee, there are circumstances which are particularly tricky, such as when there are human rights or safety related concerns at issue. The decision to terminate employment should not be influenced by any such considerations. We strongly encourage employers dealing with these highly complex terminations to seek expert HR or employment law guidance, given the potential consequences of mishandling such a termination.
Planning appropriately for terminations will help avoid several of the pitfalls outlined above and minimize not only the costs of any termination but additional liability as well, which can double or triple termination costs. The team at MaxPeople and Rodney Employment Law can provide a wide range of effective support for employers, depending on your individual needs. We are pleased to provide you with our Employee Termination Checklist that will assist you in better understanding termination best practices.
For more information about our Employment law services please contact a member of our team at [email protected] or complete our contact form here.