What are the Best Practices for Terminating Employees?
The termination of employment is never an easy process, and it is therefore important for employers to be aware of what are the best practices for terminating employees.
The guiding principle upon termination is that employers have an obligation of honesty and good faith in the course of dismissing an employee, who the courts acknowledge is in a particularly vulnerable position at the time of their termination.
Can an employer terminate you at any time?
Employers have the right to terminate an employee without reason if they provide the proper advanced warning, known as notice. If an employer terminates an employee without this notice, then it must provide payment in compensation for the same – this is what is often referred to as termination pay or a severance package.
An employee is presumptively entitled to common law notice – the amount of time a court believes it will take them to find a comparable alternative position. However, this presumption can be changed if the employee signs an employment agreement with a termination clause that governs the amount of notice they are entitled to. This clause can specify a notice period, or it can limit the notice entitlements to the minimum amounts under the applicable employment standards statute, but under no circumstances can it provide for less than this statutory entitlement. If it purports to, then a court will void the clause, and the employee will be entitled to common law notice.
While the employer need not provide a reason for dismissal at the time of termination, the termination cannot be motivated by an illegal reason, such as discrimination (for example, age, religion, gender, family status, race or disability) or reprisal in retaliation for a complaint of harassment or bullying.
Employers can also terminate without warning or severance if the employee engages in very serious misconduct that renders the employment relationship unsound. This is known as a dismissal for “just cause”. Due to the serious consequences of being terminated for cause, the courts have a high threshold for what constitutes “just cause.” If an employee dismissed for cause sues for wrongful dismissal, the employer has a legal duty to prove the truth of any alleged misconduct, and to prove that the misconduct was so bad that no other alternative existed but to immediately dismiss them. If the employer does not meet this requirement, the court will order them to pay the employee pay in lieu of notice, and in some cases will award additional extraordinary damages if it finds that the employer operated in bad faith in alleging cause for termination.
When should an employer terminate with or without cause?
Most terminations occur without cause, even if the employee has committed some misconduct, since the threshold for cause is quite high. Employers should always be wary of terminating on a cause basis, ensuring that they have consulted with legal counsel, and that the cause is asserted clearly and unambiguously. Given the high bar courts hold for employers to prove just cause, it is often a good idea for employers to provide employees with an offer of termination pay in exchange for a full and final release, and, if the situation warrants it, unconditionally providing them with their statutory entitlements. Such payments offered early can save legal bills and even extraordinary damages down the line.
How much should an employer offer in the severance package?
The amount of notice owed to a terminated employee is presumed to be the common law, but employers should review the employment contract to see if there is a different amount specified. The termination letter should clearly state any and all statutory and contractual amounts and advise that they will be provided unconditionally.
Employers often offer an amount to satisfy the employees common law amounts, even when they have a termination provision in their contract. Such offers can save valuable time and money by avoiding litigation, as employers offer them in exchange for the employee signing a full and final release.
However, the termination letter should clearly separate any such conditional amounts in satisfaction of the common law from those already guaranteed by statute or contract, and the termination letter must make clear that the employee will still receive those guaranteed amounts if they do not sign a release.
When employers fail to delineate, the consequences can be dire. Courts have awarded extraordinary damages against employers who issued termination letters that stated the employee would need to sign a release in order to receive their statutory entitlements. The letter does not even need to explicitly state this in order to be grounds for such damages – in Russell v. The Brick Warehouse LP, 2021 ONSC 4822, the court awarded $25,000.00 in extraordinary damages against the employer because the termination letter, which included a conditional offer of termination pay, merely failed to explicitly state that the employee would still receive his statutory entitlements if he did not sign the release.
Finally, whether the payments referenced in the termination letter are guaranteed or conditional, the amount to be paid or method of calculation should always be clearly stated so that there is no ambiguity, as should the terms of the release of future claims.
What other best practices for terminating employees should an employer consider?
The termination letter should advise the employee to go seek legal advice on the offer, and in some cases, employers can offer limited reimbursement for such advice.
Employers are not obliged to give the reason for termination without cause. However, in some cases it is warranted. In some cases, the employee may want to know that there was a business reason unconnected to their performance. In others, the employer may want to make clear that the termination was due to performance, so that the employee does not believe there was a bad faith reason for termination (i.e. Discrimination or reprisal).
Finally, employers should always remember that the law expects them to dismiss employees in a reasonable, honest, respectful and upfront manner. If the employee experiences additional harm because the employer is unfair, dishonest, misleading, thoughtless or harsh, the employee can make an additional claim of compensation for bad faith discharge.
How can Whitten and Lublin Help?
Terminating employees can be difficult and complex, and the strategies involved may vary significantly from employee to employee. If you are an employer looking to know the best practices for terminating an employee, Whitten & Lublin is here to assist you. Contact us online or by phone at (416) 640-2667.