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Termination of Employment

When You Have to Discipline or Terminate an Employee

Despite best intentions, any number of things can happen that cause the employment relationship to end. 

Employment can end under a variety of circumstances:

  • resignation, when an employee initiates an end to the employment relationship
  • retirement, when an employee initiates an end to employment; or in some cases, where retirement is required as a term of contract
  • termination for just cause, when an employer declares that the employee has breached the employment contract and the relationship cannot continue
  • termination without cause, when an employer determines the employment relationship must end without fault of the employee
  • constructive dismissal, when an employee declares that the employer has breached the employment contract
  • frustration of contract, when the employment relationship is prevented from continuing due to unforeseen external factors

Termination Process

Ensuring clear communication is key to avoiding disputes surrounding the termination of an employee’s employment.  Beyond clear communication, employers also need to ensure they are meeting their legal obligations to pay amounts owing and issue Records of Employment and Tax records in a timely manner.

Before resigning, retiring, or declaring frustration of contract, employees should consult with a lawyer to ensure they understand their rights and to avoid any errors that could disentitle them from benefits or payments.

Our team of employment lawyers can guide employers and employees through the termination process to ensure both employees and employers are aware of and can meet their legal obligations.

 I’m planning on letting an employee go. What do I need to know to protect my company from getting sued?

In short, what you need to do depends on the reason you are terminating the employment relationship: are you ending employment with cause (sometimes called “just cause”) or without cause

  • An employer may terminate with cause where the employee demonstrates continued performance issues (after clear discussion of expectations, warnings, and still no improvement), OR the employee has done something so egregious to justify ending the employment relationship immediately (e.g. large-scale theft, assault, or other significant workplace misconduct). There is a high bar for establishing cause, and the onus is on the employer to prove it. 
    • If you are terminating the employment relationship with cause, you do not have to provide the employee with advance notice of the termination or pay in lieu. 
  • If there is no cause, or any issues do not rise to the level of cause, an employer will terminate without cause. Most terminations fall into this category. We sometimes hear people refer to this as being “laid off”, however what’s actually happened is the employee has been terminated without cause. Terminating without cause means the employer is ending employment for reasons other than significant workplace misconduct (e.g. company restructuring, cost-saving measures, or other business reasons why the relationship may no longer be working).
    • If you are terminating the employment relationship without cause, you owe the employee reasonable advance notice of the termination, or pay in lieu of notice (sometimes called “severance”).

If you are terminating without cause, you can put an employee on notice that their employment is ending by giving them working notice (where they continue to work during the notice period), or you can provide termination pay in lieu of working notice, or you can provide a combination of the two.

The next question is how much notice (or pay in lieu) is required. That depends on the employee. How much reasonable notice you must give the employee depends on the rules contained in three places:

  1. Legislation (in Alberta, this is the Employment Standards Code or the “Code”);
  2. The common law (in other words, judge-made law); and
  3. Any offer, contract, agreement, or policy that outlines the terms of the employment relationship.

At minimum, you must provide the employee with the amount of working notice (or pay in lieu) required by the Code. The Code sets out the minimums standards that an employer must provide to its employees. The amount of working notice (or pay in lieu) required by the Code depends on how long the employee has worked with the organization. 

If there is an employment contract in place, with a termination clause that sets out what the employee will receive as notice (or pay in lieu), then that *may* govern what the employee should receive. However, there are lots of reasons why a termination clause in contract may not be enforceable. Reach out to a member of our [Employment Practice Group – link] if you would like to check that your contract is enforceable.

If there is no employment contract in place, you have an obligation to give the employee working notice (or pay in lieu) based on the common law. In most cases, common law obligations will exceed the minimum standards in the Code. The amount of notice (or pay in lieu) will depend on the employee’s age, years of service, position, and availability of replacement employment. 

We can help you discuss what your obligations might be in the circumstances, and ways to structure the termination to minimize potential liability to the organization. 

Additionally, there are certain circumstances where termination carries more risk or is prohibited under law. These include circumstances where:

  • The employee is on a leave of absence, about to start a leave of absence, or has just returned from a leave of absence (e.g. maternity, parental, or medical leave);
  • The employee has made a complaint about the workplace (e.g. a complaint about safety in the workplace to Occupational Health and Safety);
  • The employee has sought human rights accommodation within the workplace (e.g. due to being unable to work on religious holidays and days of worship); and
  • The employee has physical or psychological disabilities.

Bottom line: To avoid getting sued, know your obligations under the Code, but be aware your obligations may extend beyond the minimum standards under the Code. If you provide severance (working notice or pay in lieu) that exceeds the minimum standards under the Code, get the employee to sign a properly-drafted release. And consider whether the termination may carry additional risk, or potentially be prohibited entirely.

At Carbert Waite LLP, we regularly assist our clients with managing termination issues. We can assist you by simplifying the process and reducing cost and liability exposure to your company by providing you with the tools you need to handle specific and future terminations. Please reach out – we’re happy to help. 

Carbert Waite LLP