How to plan and execute a termination with care

Terminations can be tricky. For employees, it can be an emotional and stressful time. For employers, handling a termination poorly can result in increased exposure to liability. For both parties, it is important that terminations are handled with care.

In this blog post, we explore some of the key considerations employers should keep in mind when preparing to terminate an employee. By planning ahead and following best practice recommendations, employers may be able to reduce their legal risks while also increasing the chance of a cordial end to the employment relationship.

Consider the kind of termination

The first thing to determine is whether the termination will be without cause or for cause. As we've discussed in our previous blog post, Termination for Cause – A High Threshold, the threshold for a termination for cause is high. If you believe you may have grounds to terminate an employee for cause, we strongly encourage you to speak with an employment lawyer regarding the situation.

Otherwise, in most cases, the termination will be on a without cause basis. This can include terminations due to restructure, redundancy, poor fit, or other performance issues not reaching the threshold for cause. Regardless of the reason, employers will then need to turn their minds to the employee's termination entitlements.

Consider termination entitlements

With some very limited exceptions, employees who are terminated without cause have termination entitlements.

What are the entitlements?

The first to consider is what are the employee's entitlements? To determine this, consideration must be had to:

• Employment standards legislation. Are the employees governed by federal or provincial law? What does the applicable employment standards legislation entitle the employee to receive?
  • Remember: Employers must comply with employment standards legislation when terminating an employee. This cannot be avoided, regardless of any terms in a contract.
• The employment contract. What is the employee entitled to under the terms of their contract? Are the terms of the contract enforceable?
• Common law entitlements. If there is no contract, or no enforceable contract, what are the employee's entitlements under the common law? Consideration should be given to the employee's role, age, length of service, as well as the availability of similar employment.

Each of these factors requires an appreciation of how the law might apply to the employee's unique situation. For that reason, we urge employers to seek legal advice when determining an employee's termination entitlements.

Working notice or pay in lieu?

Once it is determined how much an employee might be entitled to, the employer can then turn its mind to whether its obligations to the employee can be satisfied by providing the employee with working notice, pay in lieu or combination of both.

Working notice, as the name implies, is where the employee is provided with advance notice of termination and continues to work and receive wages up and until the date of termination. In contrast, pay in lieu is where an employee is terminated without or with limited advance notice, and instead just receives a pay out for the remainder of the notice period.

Whether to provide working notice or pay in lieu of notice or a combination of both will depend on a number of factors including;

• The working relationship. Sometimes it is infeasible or impractical to have an employee continue to work after providing notice of termination. Other times, it may be helpful to have the employee continue to work for at least some of their notice period, for example, where the role is being phased out or transitioned to a new employee.
• Employment standards legislation. Severance pay under Ontario's employment standards legislation has to be provided as pay; it will not be satisfied by working notice.
• The employment contract. Does the employment contract stipulate how any severance package may be provided? For example, a lump sum payment or salary continuance.

If pay in lieu, what should be included?

If providing an employee with pay in lieu of working notice, questions often arise about how to calculate the pay in lieu. The starting point is that employees should receive everything they would have received throughout the working notice period, including wages and benefits. However, this can be complicated when employees have variable pay entitlements, such as bonus or shares, and there can also be exceptions.

For some further information on this topic, we recommend you check our previous blog posts, Share Entitlements on Termination – the Decision in Mikelsteins v. Morrison Hershfield Limited, and Bonus Entitlement on Termination – the Decision in Matthews v. Ocean Nutrition Canada Ltd., as well as speak with an employment lawyer.

Consider the history of the employment relationship

Once an employer has an idea as to an employee's termination entitlements and how they intend to provide them, it is important to carefully consider whether there are any factors which might make the termination riskier.

Some of the relevant considerations include:

• Did the employee recently take a job-protected leave of absence?
• Has the employee recently raised any human right related issues, such as health concerns or family status issues?
• Has the employee recently raised any health and safety concerns about the workplace?
• Has the employee recently filed or otherwise been involved with a workplace complaint or investigation?

If any of these issues ring a bell, further consideration should be had about the risks involved with the termination. Again, discussing with an employment lawyer is encouraged, as they can explain the degree of risk involved and potential mitigation strategies.

Consider the termination meeting

Once all of the possible issues with the termination have been canvassed and a termination package has been decided upon, it is then time to action on the termination. This should be carefully executed to minimize risk of possible bad faith allegations.

Best practice recommendations include:

• Meet with the employee, either in person or virtually, to inform them of the decision.
• Keep the meeting short, neutral, and professional.
• At or immediately following the termination meeting, issue a written termination letter. This should include an overview of the relevant details pertaining to the termination, such as their last day, pay information, and details on returning company property, among other things.
• If the termination is effective immediately, keep the employee's exit courteous. Absent extenuating circumstances, there is generally no need to enlist security to walk the employee out. Doing so without good reason could in fact increase exposure to liability.
• Be prepared to action on what was offered. The employee's final pay should be issued promptly and/or in accordance with normal payroll practices. If the employee is receiving any additional amounts, those amounts should be paid in accordance with the terms of the offer.
• Keep documentation. Properly document the termination meeting, as well as matters such as how much was paid, when payments were made etc.

Takeaways:

Taking the time to carefully plan and carry out a termination can pay dividends. While it may not be possible to avoid all upset, a considered and strategic approach may help mitigate legal risk, as well as preserve an employer's reputational interests. No one wants to be known as the employer who acts callously or fails to comply with their legal obligations, especially when this can be avoided by simply planning ahead.

Employers are always encouraged to seek counsel when contemplating a termination. On the flipside, terminated employees should speak with an employment lawyer to ensure they're receiving their proper entitlements.

Lee Workplace Law would be happy to answer any questions you might have regarding your rights and obligations in the workplace.