How to end the employment relationship
As human resources consultants, it’s our job to keep up with HR law so that you don’t have to. However, there are many legal areas employers need to be aware of and while we don’t claim that reading this will provide the answers to all, we do hope that it might open up some discussion.
We’ll start with the often tricky topic of ending an employment relationship.
The law says that you may terminate for any reason unless limited by Employment Law, Human Rights Code or the Employment Contract.
Terminating with just cause
If terminating for just cause, consider the following:
- What is the nature and extent of misconduct?
- Consider the surrounding circumstances
- Is dismissal a proportional response?
If terminating due to poor performance, have you:
- Had the employee explain?
- Set realistic targets?
- Advised the employee of the problem?
- Given appropriate enough time to improve?
What is constructive dismissal?
When you unilaterally change fundamental terms of employment AND you do not give a reasonable amount of notice. Not every change is Constructive Dismissal, but examples include demotion, changing wages/benefits to less than before, having the employee change geographical location, providing biased performance reviews or creating a poisoned atmosphere.
Termination without cause
You must provide working notice or pay/benefits in lieu of notice. If paying in lieu, the severance needs to be at least what that person would have earned during their notice period. (Note: if giving lieu of notice, CPP and EI do not need to be deducted.)
The amount of notice varies from case to case. Take in to consideration Employment Law, Contractual Notice Provisions and Common Law.
We mentioned before that terminating someone can be tricky so one of the best things you can do to avoid common pitfalls is to specify notice entitlements in the written contract. This way, both parties can assess fairness before employment is agreed upon, minimizing the cost of disputes later.
When hiring, avoid exaggerating what you can do for the individual to make the job tempting; keep only to the written material/documents.
If a probation period isn’t outlined in the Employment Agreement the employer could be obligated to pay reasonable notice under Common Law.
Should I give working notice, or have salary continuance or just pay a lump sum?
- Easier to find a job if you currently have a job
- Get the value you are paying for
- TRUST is essential
- Not the best option if terminating for cause (undermines the case)
- Define the criteria
- Pay 50% of whatever is left on their notice period once they find re-employment (gives incentive to find work)
- Maintains loyalty
- Should be discounted from what the salary continuance would have been (similar to how the courts would consider reasonable)
- Severs the relationship
For all the above, the employee may accept a lower payment if it’s paid in a form that isn’t taxable (RRSP contributions, Legal fees, Human Rights damages etc.)
If cancelling benefits
- Consider offering long-term disability coverage for a short period
- Pay all outstanding wages and vacation within 48 hours
- Provide ROE within 5 working days
- No need to provide a letter of reference; however bear in mind that this may be the only thing the employee was looking for recognition and something to help get another job
As part of obtaining the release (payment in exchange of the employee’s agreement to not take legal action), go through the restrictions (non-competition, non-solicitation and confidentiality provisions). Note: for a release to be valid, it needs to exceed the Employment Law requirements
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