1. Start With Strong Employment Contracts

Upon terminating an employee’s employment without cause, the employer is required to provide the employee with reasonable notice of their employment termination or pay in lieu of such notice (or a combination of both). These amounts are often far higher than the minimums set out in the Employment Standards Code. The best way to minimize these large severance obligations is to draft termination provisions in employee employment contracts that unambiguously limit the amount of notice owing upon termination.

Some Canadian courts have found termination clauses stating that an employee can be terminated “at any time” or “at the employer’s sole discretion” to be unenforceable because those provisions can conflict with circumstances in which termination is legally prohibited, such as during protected leaves. While we wait for an appellate court in Canada to decide whether such language in a termination clause renders the clause unenforceable, we recommend that employers draft employment contracts to ensure compliance with applicable employment standards and human rights legislation.

2. The New Maximum Notice Period

Previously, the highest length of reasonable notice Canadian courts would typically award was 24 months. In 2025, an Alberta case, Lischuk v K-Jay Electric Ltd, 2025 ABKB 460, awarded an employee 26 months’ notice for the termination of his employment.

3. Terminating With Cause

When an employer terminates an employee for Just Cause, the employee is entitled to no notice of their termination or severance. In preparing to terminate employees for cause, we recommend employers ensure they document any performance concerns, warnings given to employees, and the process leading to terminations.

Should You Terminate for Cause or Without Cause? Often, the answer depends on the strength of the evidence and the employer’s tolerance for risk. If the case for cause is weak or the employee is likely to litigate aggressively, an employer may choose to terminate without cause and provide a higher payment to the employee than is legally required in order to obtain a release.

4. Performance Improvement Plans (PIPs)

In order to terminate an employee’s employment for cause, an employer ought to provide warnings of performance concerns to an employee. We recommend employers document all warnings provided.

An employer can also implement a PIP to manage their employee’s performance. A strong PIP outlines performance concerns, clear and measurable expectations, steps required to improve, timelines, and consequences for failing to improve.

5. Last Chance Agreements

These agreements are less common than PIPs in non-unionized environments, but can be used when an employer wants to provide one final opportunity to an employee before terminating their employment. Last Chance Agreements can be (cautiously) used in situations involving disabilities, including addictions. These agreements outline expectations and consequences, and can support a future termination for cause if the employee does not meet the conditions set out.

6. Constructive Dismissal

Constructive dismissal occurs when the employer unilaterally changes a fundamental term of their employee’s employment. Examples that courts have recognized as constructive dismissal include significant reductions in pay and benefits, forcing an employee who worked remotely for decades to start to work full time in the office, and workplace behaviour that is humiliating or toxic.

An employer may argue that an employee has accepted the changes to their employment (and thus lose their ability to successfully argue constructive dismissal) if the employee provides written consent to the changes or continues working under the new terms.

7. Accommodation and Disability: The Most Challenging Area

Termination of employment becomes more complex when disabilities are involved. Employers can terminate an employee who has a disability; however, employers cannot terminate their employee’s employment because of their disability. If performance issues are connected to the disability, the employer must explore accommodation options. In these cases, the employer must accommodate to the point of undue hardship.

8. Settlements and Releases

If the employer settles a wrongful dismissal dispute, we recommend employers obtain a comprehensive and signed release from the employee. A proper release prevents future claims related to wrongful dismissal, human rights, privacy, employment standards issues, and occupational health and safety.

Key Takeaways for Employers

Employers should keep the following considerations in mind to reduce the risk of legal action:

Document everything related to employee performance concerns, warnings or other discipline provided, accommodations requested, considered or provided, and investigations conducted;
Review, update, and use legally sound language in your employment contracts;
Conduct timely, fair, and thorough investigations into employee performance concerns or complaints received;
Understand accommodation obligations and formally assess these requirements; and
Do not ignore evidence or assume circumstances, motives, or context.

If you would like to learn more about terminations or accommodations, reach out to presenters Lauren Barteluk and Braeden Davis: