What Employers Should Know About Termination of Employment
Reasonable notice or just cause?
Where an employer has "just cause" to terminate an employment relationship, there is no requirement to give notice to the employee and the termination may take effect immediately.
However, “just cause” is reserved for those cases where an employee is guilty of serious misconduct, or has been through a program of progressive discipline that has not been successful. In most cases, an employer will be required to give an employee reasonable notice.
What is "just cause"?
"Just cause" can be one of two things:
- Serious misconduct on the part of the employee. There is no exhaustive list of the type of conduct serious enough to justify an immediate dismissal. Courts describe this type of conduct as the breach of a “fundamental term” of the employment contract. Each situation has to be assessed on its own facts to determine if an employer has just cause to terminate the employment relationship for misconduct. Types of behaviour that fall into this category include theft, dishonesty, serious insubordination, reckless disregard for safety, long-term unavailability for work etc. The seriousness of the misconduct required to justify immediate dismissal is usually greater for a long-term employee, or where the employee has an excellent past work record. Uncharacteristically bad behaviour is usually deserving of a second chance, unless trust in the person is irrevocably broken. We recommend that legal advice be obtained prior to any decision to terminate on the basis of just cause.
- Failure to improve performance after an appropriate program of progressive discipline. Generally, an employee who is not performing the requirements of the job satisfactorily cannot be terminated for just cause unless you have afforded an opportunity to improve and warned the employee that termination will be a consequence of failing to improve performance. Incompetence does not amount to just cause unless you can show that you implemented a program of progressive discipline.
This requires that you provide the employee with a performance evaluation in writing and that you document your expectations for improvement clearly with specific goals and objectives. You should specify the period of time afforded to the employee to turn things around. You must also warn the employee that the job is at risk if performance is not improved. One evaluation and warning is probably insufficient. You will likely need to have warned the employee at least twice before you can then terminate for just cause.
In our experience, many employers do not use good performance management programs to progressively discipline sub-performing employees. This can result in frustration for supervisors and low morale for the fellow employees of the person who is not meeting expectations. Importantly, employers may, by their own conduct, lose an opportunity to dismiss an employee for just cause. Whenever an employer condones the misconduct of an employee, he or she cannot later rely upon that misconduct as grounds for dismissal. The progressive discipline starts with the first written warning to the employee that expectations are not being met.
- Long service employees who have ten years or more of service with the same or related employers cannot be dismissed without just cause by virtue of the Nova Scotia Labour Standards Code. If you are an employer subject to the Canada Labour Code this section does not apply to you. We refer to such employees as -“tenured employees”. Tenured employees can apply to the Labour Standards Division for reinstatement and full back pay and benefits if they are terminated without just cause. Legal advice should be obtained if you wish to terminate the employment of a tenured employee, as these can be quite complex situations to resolve.
- If you have entered into a written contract of employment, that contract may provide for the manner in which the employment is to be terminated. Employers are required to terminate the employee in accordance with the terms of the agreement. If you fail to do so, you may be in breach of the employment contract.
If you do not have just cause to terminate employment, and you need to end an employment relationship you must provide the employee with reasonable notice. What is reasonable will depend on a number of factors. The most obvious considerations are the years of service of the employee, the position of the employee, the age of the employee, the employee’s re-employment prospects, and the educational background of the employee.
The starting point to calculate the terms and conditions of termination is the Labour Standards Code, if your workplace is subject to this provincial legislation, or the Canada Labour Code if your workplace is within federal jurisdiction. The Labour Standards Code sets out minimum notice requirements based on various ranges of years of service. The Canada Labour Code adds to minimum notice requirements by requiring additional severance pay, also linked to length of service. These statutory requirements are minimum requirements, and the common law (case law) has developed additional rules for calculating reasonable notice that significantly increase the length of notice periods in many circumstances. If you do not attempt to calculate an offer of reasonable notice in accordance with both statutory and common law, an employee may have a basis to bring a wrongful dismissal action against you.
Under both statute and common law, employers have the option of offering working notice, requiring the employee to work during the notice period, or payment of an amount of money in lieu of notice. In most cases, it is not practical to ask the employee to work during the notice period, and therefore most offers will be for pay in lieu of notice.
Reasonable notice will include more than payment of a salary equivalent. Any benefits the employee is normally entitled to should be taken into account in determining an appropriate severance package. Severance packages may also address such matters as re-employment counselling and appropriate references.
Keeping in mind that special considerations must be addressed if you are contemplating the termination of tenured employees, if care is taken in constructing an appropriate severance arrangement based on reasonable notice to the employee, the likelihood of liability arising from the dismissal will be reduced.
Copyright: March 2013
This Lawletter has been provided for general reference only. For advice on an actual matter, you should consult a Employment & Labour Lawyer. To contact a member of our team call us at 902-469-9500 or 1-866-339-3400 or contact us online to make an appointment.