Printable version

Terminating employees: a tough job, but someone's got to do it

A glance through this and other issues of FOCUS should reveal that mishandling the termination of an employee can have expensive, painful consequences. In some circumstances, litigation may be unavoidable, but employers who take the proper precautions before initiating the termination process can minimize the financial and emotional costs of this most difficult aspect of human resource management. In the first of a two-part series, FOCUS will provide a brief overview of what provincially-regulated employers need to know about severing the employment relationship with their non-unionized employees.

WHERE THERE IS CAUSE...

Determining whether there is cause for dismissal is a crucial question because, if there is, an employer is within its rights to terminate immediately and without notice. However, an erroneous conclusion about whether cause exists can be costly; if the dispute ends up in court, the consequences can be severe for the employer found to have wrongly alleged cause.

It is important, therefore, to keep in mind that dissatisfaction with an employee's performance, personality or "style", or the need to reduce staff, do not constitute cause. The common categories of offences where courts have found just cause for dismissal include serious misconduct, incompetence, dishonesty, theft or fraud, insubordination, serious neglect of duty, conflicts of interest, and, in some cases, serious incompatibility for reasons of, for example, hygiene. It is also important to remember that Canadian law does not recognize the doctrine of "near cause", so nothing less than just cause will enable an employer to avoid its notice obligations.

Employers bear the onus of proving just cause. Because it is relatively rare for employees to be discharged on the basis of one incident alone, this means that keeping a record of the employee's performance or behaviour problems is essential to heading off or winning a legal dispute. In addition, the employer must demonstrate that it adhered to the practice of progressive discipline in dealing with the employee. The court will expect the employer to have reacted to the employee's history of problems appropriately, by issuing warnings, communicating expectations or applicable standards and, where warranted, imposing penalties or offering assistance. All disciplinary or remedial responses should be documented.

... AND WHERE THERE IS NOT

If there is no cause for dismissal, an employer will have to give reasonable notice, or payment in lieu of notice. For provincially-regulated employees, the minimum notice period is set out in the Employment Standards Act, which provides that persons employed for three months or more are eligible for termination pay up to a maximum of eight weeks. Employees with five or more years of service are also entitled to severance pay to a maximum of 26 weeks, if their employers have payrolls of $2.5 million or more, or have implemented mass terminations. Parties cannot contract out of these provisions.

The notice period under the Employment Standards Act, however, is only a statutory minimum and should not be seen as a guide for reasonable notice under the common law. Generally speaking, the notice period increases along with an employee's level of responsibility in the organization, his or her age, length of service, and the difficulty of securing similar new employment.

Other issues, however, may have to be addressed in determining the notice period. In Leonetti and Halsey v. Hussman Canada Inc., for example (see "Notice period for employees promoted out of the bargaining unit: a promise is a promise" on our Publications page), the Ontario Court of Appeal held that two employees, downsized after having been promoted out of the bargaining unit, were entitled to notice lasting until retirement age, based on the fact they had been promised they would be returned to the bargaining unit if their supervisory positions were eliminated. An inducement of job security was also the reason for awarding a lengthy notice period in Kilpatrick v. Peterborough Civic Hospital, although this result has been set aside on other grounds (see Kilpatrick award reversed on procedural grounds on our Publications page) .

The Leonetti and Kilpatrick cases are also reminders that, even where no cause is alleged, a termination dispute may end up in court. Bearing this in mind, it is important that employers contemplating dismissal, whether or not for cause, heed the lessons of Wallace v. United Grain Growers Ltd., the Supreme Court of Canada decision reported in the January 1998 issue of FOCUS. (See "Fairly, reasonably and decently": Employers obliged to deal in good faith with dismissed employees, Supreme Court rules" on our Publications page.) Where the manner of dismissal is characterized by unfair or bad faith conduct on the part of the employer, a longer notice period will be awarded.

Aside from the issue of determining reasonable notice, employers must also ensure that the termination does not contravene one or more of the province's employment-related statutes. For example, are terminations disproportionately affecting employees from groups protected under the Human Rights Code, such as visible minorities or older employees? If so, a pattern could be established that exposes the employer to liability under the Code. Termination of an employee during an organizing drive raises the risk of the employer being found to have committed an unfair labour practice under the Labour Relations Act. And under the Workplace Safety and Insurance Act, where a worker is terminated within six months after returning from a workplace injury, the employer is presumed to be in breach of its obligations under the Act.

BREAKING THE NEWS

There may be no good time to advise employees of their termination, but some times are worse than others. It is important to try to determine whether the employee is under other immediate pressures that would make the timing of the termination appear callous and insensitive. If the matter goes to court, the choice of a difficult moment in the employee's life to convey the decision to terminate could result in a lengthened notice period.

Typically, the employee should be told of the termination in person and given a letter outlining the decision. Despite the potential for problems arising from a poorly worded termination letter, there are several reasons for informing the employee in writing. A forthright, specific and detailed letter setting forth the reasons for termination will convey the message that the employer has given due consideration to this serious decision. This is of particular importance where cause is alleged, as the provision in writing of well-formulated grounds for dismissal may serve to dissuade the employee from challenging the decision and may head off court action undertaken for the purpose of ascertaining the grounds being alleged.

The letter should also set out the date of termination, settlement offer, information about benefits continuance, list of statutory payments to be made, and any release document the employer wishes to have signed. This list will vary depending on the matters outstanding for resolution.

Employers should avoid striking a callous tone in the letter, particularly where cause is not being alleged. In one case, an employee with 35 years of service received his letter by taxi on a Friday evening. The letter contained no expression of gratitude for his years of service and offered no assistance in finding new employment. The court referred to it as being "cold and perfunctory" in tone.

Sensitivity should also be shown in the conduct of the interview, which should be held in a private setting and, where possible, after most other employees have left the premises. The interview should be brief and to the point and, while it is acceptable to encourage the employee by commenting on his or her strengths or skills, the employer should be firm in stressing that the decision is irrevocable. Anger or distress on the employee's part should be anticipated, and the employer should resist being drawn into a debate about the merits of the decision. If possible, two company representatives should be present at the interview, and a detailed record of the interview should be kept.

If the termination is immediate, the employer should avoid embarrassing the employee by being nearby while he or she removes personal effects. It should also consider offering the employee the opportunity to return later in the week to complete this task.

In the same vein, a positive note should be struck when the announcement of the employee's departure is made to the rest of the staff, by focussing on how the employee's responsibilities will now be handled. Above all, an employer should avoid circulating negative views of the employee's conduct or performance, as this could contribute to lengthening the notice period or damages for mental distress.

In Our View

With courts showing an increasing willingness to award substantial damages to employees, it is particularly important that employers be well informed about their rights and obligations when terminating employees. (In this regard, it should be recalled that the information contained in this article applies to provincially-regulated employers who are not a party to a collective agreement with the employee being terminated. The Canada Labour Code imposes a separate regime on federally-regulated employers.)

In the next issue, we will discuss issues arising out of the decision to terminate. Topics covered will include the release agreement, the employee's duty to mitigate damages, employment references, the benefits entitlement of terminated employees, and deductions from termination notice. (See "Finishing touches -- wrapping up the termination process" on our Publications page.)

For further information, please contact Andrew Tremayne at (613) 563-7660, Extension 236.