2019, Volume 4, Issue 2 - Fall 2019

Employer Considerations on Termination of Employment

By Jeff Palamar of Taylor McCaffrey LLP

Be Aware

The best time for an employer to get legal advice on termination of employment issues is before hiring the employee. The second best time is before the termination actually takes place.

Whether considering a termination with or without just cause there are always options, risks and potential costs. With complete control over the timing of things, an employer has no excuse for not becoming well informed before taking action.

Termination of Employment Generally

An employer can quite properly decide to terminate a non-unionized employee “just because” it wants to do so. It cannot terminate for “illegal” reasons however, such as by discriminating against the employee contrary to human rights legislation or because the employee has exercised rights under some other statute. Typically there is a reverse onus and the employer must prove its reasoning was not illegally tainted. Failing to do this can lead to the employee being reinstated, with back pay and other remedies as appropriate.

Termination With Just Cause

To terminate with just cause, and so with no obligations to the employee, the employer has to prove the employee did something wrong which warranted some form of discipline and that termination (instead of some lesser response, like a warning or suspension) was appropriate.

In almost all cases progressive discipline is required. This is a series of warnings culminating in an express statement that ongoing employment is at risk, followed by a breach.

Context for what occurred is key, including past practice with that employee or others, as well as overall any aggravating factors (e.g. poor record, lying about the events) or mitigating factors (good record, sincere apology).

If an employee has an addiction or mental health condition that contributed to the misconduct, this becomes a human rights and accommodation matter, not simply a disciplinary one.

Termination Without Just Cause

An employer generally can terminate a non-unionized employee without just cause, but must pay the price for that.

In Manitoba, most employers are covered by The Employment Standards Code, which requires notice or pay in lieu up to 8 weeks depending on length of service.

Federally regulated employers may have some employees subject to the Canada Labour Code’s provisions dealing with “unjust” dismissals. Such employees cannot be terminated unless there is a layoff due to lack of work or discontinuance of a function, or in circumstances where there is just cause. These employees may seek reinstatement, with back pay and other remedies as appropriate.

Just cause arises from the misconduct of an employee as opposed to any idea of fairness or legitimacy. Therefore, while a restructuring may “justify” or provide a proper business reason for the termination, it is not “just cause” at law, and so does not disentitle the employee to compensation for the lost job.

Reasonable Notice

By common law “reasonable” notice or pay in lieu is required for an employee dismissed without just cause unless the parties have expressly agreed to something else. Reasonable notice is normally far greater than the minimum standards in The Employment Standards Code.

For example, the most anyone is entitled to by statute in Manitoba is 8 weeks (unless there is a “group termination” of 50 or more employees within a 4 week period) but someone might be awarded up to 24 months as reasonable notice. It would be a serious error to call Employment Standards for advice as that will only lead to details on what the statute requires as a minimum, not what an employer’s actual obligations are.

There is no absolute definition or exact formula to apply when assessing reasonable notice, and it is always up to the court to determine based on the particular circumstances. The court considers various factors such as length of service, age of the employee, the nature of the employment and market place, and overall how long it would take for the employee to find a reasonable replacement position.

The period of reasonable notice is intended to put the employee in the position he/she would have been in had employment continued through that time and so includes all aspects of compensation such as salary, non-discretionary bonus, pension, coverage under group insurance plans, etc.

Mitigation

Any possible award is subject to the employee’s obligations to act reasonably so as to try and mitigate or minimize any losses. To the extent the employee actually does minimize losses (or reasonably could) that reduces the award.

In some cases mitigation might mean going back to school, moving to a new city, or perhaps even taking a lesser job for a period of time as that is all that is available at the time.

The onus is on the employer to prove a failure to act reasonably, and a mere suspicion that the employee could have found something if he/she “tried harder” is not enough. There must be proof of real employment opportunities that were actually available to that specific employee.

Employment Contracts

A formal employment contract is useful to clarify the obligations of the parties and can specify what notice is required to terminate, provided that is not less than required by The Employment Standards Code.

To have a binding contract, a party has to receive some valuable “consideration” in exchange (for example, a new employee signs, and gets the job). If the contract only appears after the job has started, there is no consideration, and the contract likely is not binding.

Punitive Damages and Costs

Needlessly publicizing unproven allegations of wrongdoing or dishonesty, or maintaining an implausible argument for just cause are typical mistakes leading to punitive damages or awards of solicitor and client costs where the employee is indemnified for all legal costs incurred.

Be Smart

As Michelle Rowen said “…it’s important not to jump into a swamp until you’ve properly assessed how many alligators there are.”  Hopefully then, after reading this you will be on the lookout for alligators.  Please also seek advice from counsel specific to your location and circumstances, as the law can vary between provinces and can change from time to time.

About the Author

Jeff Palamar is a partner at Taylor McCaffrey LLP who has been listed among the peer-selected The Best Lawyers in Canada in labour and employment law since 2008. He practices primarily in the areas of labour relations, employment law, human rights and dispute resolution, usually representing employers. He works in all matters related to the workplace.