Employment termination overview

This article is about the termination of employment of an individual employee who is not covered by a collective agreement. The content in this article is for general information only. It’s not legal advice. Review your jurisdiction’s employment and labour standards and human rights legislation to ensure that your organization complies with the legislation related to employment termination, but remember that there is also judge-made law that applies to the termination of employment. In many cases, your obligations are greater than those provided in the legislation.

If you must terminate an employee's employment, consult a lawyer for advice on the best way to proceed with the termination, given the specific circumstances. There are many legal issues to consider when terminating an employee.

Most employers/managers find the dismissal of an employee to be difficult regardless of the reason. When a dismissal is necessary, it’s important to:

  • Be informed about and comply with both legislation and judge-made law.
  • Treat the employee fairly and act in good faith.
  • Handle the termination process in a professional way that preserves the employee's dignity.
  • Be careful about how much information you communicate to others about the facts and reasons for the termination.

As discussed in this article, termination is an action taken by the employer to end the employer/employee relationship. Employers have a basic right to terminate an employee's employment, but along with that right comes responsibilities. Employers must comply with the employment/labour standards and human rights legislation for their jurisdiction as well as with applicable judge-made law. They must also treat employees fairly and in good faith as defined by common law or civil law (Québec).

For more information, view the Government of Canada’s definitions of common law and civil law.

Terminology

The following key concepts about termination are incorporated into all employment/labour standards in Canada:

Termination with cause

By law, termination with cause, also known as termination with just cause, means that an action or omission by the employee is serious enough to irreparably damage the employment relationship between the employer and the employee. This is sometimes called breach of contract. Usually, termination with cause occurs when an employee is dismissed for a serious reason related to the employee's conduct.

Not all employment/labour standards define “termination with cause.” However, those that do define justifiable reasons for “termination with cause” as willful misconduct, disobedience, and deliberate neglect of duties. In addition to employment/labour standards, there is judge-made law that also deals with termination with cause. That law sets parameters around what an employer must do before it can terminate an employee for cause. For example, depending on the type of cause, an employer often has an obligation to provide an employee with a warning and professive discipline before terminating their employment for cause.

Termination without cause

Termination without cause means that the employee is being terminated for reasons unrelated to misconduct, such as restructuring a work unit or position due to changing business needs.

Important: In a termination without cause, the employer has no legal obligation to give a reason. However, when being terminated without cause, most employees want to know why. If you provide a reason, it's important to be fair and honest. Under no circumstances should you allege that you have cause for termination when you do not.

Notice

Notice is the amount of time between informing an employee in writing that they will be terminated and the date the termination will take effect (the last day the employee will be paid). Notice can be given as working notice, meaning that the employee continues to work and receives all of their usual pay and benefits from the date of notice until the date of termination, or an employee can be given payment in lieu of notice (see below). The law sets out the minimum amount of notice that an employee must be given. Employment/labour standards legislation sets out minimum notice periods, but judge-made law also applies and often imposes a higher minimum notice period. An agreement, including an employment agreement, cannot be made with an employee for less than the minimum notice requirement as provided for in the relevant jurisdiction’s employment/labour standards. Any agreement regarding termination of employment will be closely scrutinized by the courts.

Payment in lieu of notice

Payment in lieu of notice means that an employer may choose to have the termination take effect immediately and pay the employee for the weeks of notice required by the legislation/judge-made law or, if greater than that required by legislation, as agreed to in the employment contract. The employee will not return to work following payment in lieu of notice following the termination meeting. You must ensure that you meet all other requirements under the employment/labour standards legislation during the notice period.

Recommendation

Once you have determined that an employee will be dismissed without cause, you will have to carefully consider whether you want to give the employee working notice or pay in lieu of notice. This decision will depend on several factors, including the impact of having the employee continue to work during the notice period — on both employee and the organization.

Severance Pay

Some jurisdictions require that an employee who is terminated without cause be provided with severance pay. This will depend on the size of the employer and the length of service of the employee.

Legislation

An employer can terminate an employee's employment at any time for any reason, as long as it’s not in violation of human rights or employment/labour standards. Check the employment/labour standards for your jurisdiction for a complete list of the factors that are covered by this legislation.

Federal employment/labour standards

Provincial employment/labour standards

Territorial employment/labour standards

Human rights

Human rights legislation protects individuals from being terminated for reasons relating to discrimination. Check the Human Rights Code/Act for your jurisdiction for a complete list of the factors that are covered by this legislation.

Federal human rights

Provincial human rights commissions/tribunals

Territorial human rights commissions/tribunals

Job protected leaves as defined by employment/labour standards

The employment/labour standards in all provinces and territories give employees some protection from termination of employment while on approved leaves, such as maternity leave, and before or after taking the leave to which they are entitled.

An employer cannot terminate the employment of an individual who is eligible for or on a job protected leave for reasons related to that leave. For example, the employment of a pregnant employee cannot be terminated because they are pregnant; a parent cannot be terminated from employment because they are taking leave to care for their child.

An employer can terminate an employee who is on leave if the employer has a legitimate business reason for the termination like restructuring. However, the employer will have to prove that the termination was not related to the leave.

Check the employment/labour standards for your jurisdiction for the complete list of leaves that are covered by the legislation.

When notice is not required for termination

There is no exact formula across jurisdictions for determining reasonable notice. Employment legislation only provides the bare minimum that an employee is entitled to, and unless there is an enforceable termination clause in an employment agreement, the courts often impose a much higher notice requirement. Under the legislation the amount of notice required is directly related to the length of time the employee has been with the organization. Under judge-made law, the courts will consider other factors such as the age of the employee, their level of employment, the location of their employment, whether they were recruited to the position, and whether they left another job to take the position (among other factors).

At the beginning of employment

The legislation in each province allows for termination without notice for a specific period at the beginning of employment. Judge-made law may still require you to provide notice though.

During the probationary period

A probationary period allows an organization to assess employee performance prior to granting full employee status. While an organization may have a probationary period that exceeds its jurisdiction’s legislated period, it’s still required to provide notice or payment in lieu of notice that follows the labour standard. Note that not every province uses the word “probation”. In some jurisdictions the legislation just provides that notice is not required if an employee is terminated before a certain period of time.

For example, in British Columbia, notice of termination is required after three months, so an employer who decides to terminate an employee at the end of a six-month probationary period will still have to give notice or payment in lieu in accordance with British Columbia employment standards.

Termination during or at the end of the probationary period must comply with employment legislation. It's important to sit down with the new hire to explain the details of your probationary period and to discuss performance expectations. It is also important to document the probationary period in writing so that there is a clear record that the employee is subject to a probationary period.

Fixed-term contracts

In most jurisdictions, the employment standards also allow for no notice of termination for fixed-term contracts where the employee has been hired for a specific term or task of 12 months or less.

The exemption from giving notice with a fixed-term contract depends on the employment ending at the exact end date specified in the contract.

Notice will be required even when there is a fixed-term contract if:

  • The employee works past the date specified in the fixed-term contract period (some legislation allows an employee to work for a short time past the termination date before notice is required).
  • The fixed-term contract is for longer than 12 months.
  • The employee is terminated before the end date stated in the fixed-term contract. In this case, the employer might have to pay out the balance of the contract.
  • The employee is employed on a succession of fixed-term contracts.

For most jurisdictions, exemption from providing notice is contingent upon a fixed-term contract of 12 months or less. This does not mean that an employer can enter one 12-month contract after another to avoid the obligation of providing proper notice of termination. Most jurisdictions' employment/labour standards include rules on how to determine if the fixed term is for longer than 12 months and will therefore require notice.

In most jurisdictions, back-to-back contracts and contracts with little time in between are added together to determine if the 12-month exemption has been exceeded.

Consult the employment/labour standards for your province for the specific details on how to determine if a fixed-term contract has exceeded the exemption from notice period and therefore notice is required.

Termination with cause or breach of contract

Some common grounds for termination with cause or breach of contract where no notice is required are:

  • Dishonesty, theft, or fraud by the employee
  • Harassment, including sexual or psychological harassment, bullying, discrimination or gross negligence that jeopardizes the health and safety of the employee or those the employee works with
  • Insubordination, such as an employee repeatedly breaking organizational policies and progressive discipline has not resulted in an acceptable behavioural change
  • Incompetence at their job where performance has not improved even though the employee has been given the tools, guidance, support, training, coaching, and sufficient time and opportunity to improve

Termination with cause is difficult to prove, and the onus will be on the employer to show that they have been clear about organizational and performance standards, and that the employee's actions or behaviors are severe and/or show a pattern of repetition.

  • For long term employees, the organization will also have to show that the incompetence or misconduct has not been condoned by a lack of performance management by the employer over a long period of time
  • If termination with cause is the result of the progressive discipline process, thorough documentation of the process which shows that progressive discipline was fairly and consistently applied will be needed
  • If termination with cause is the result of a serious event, it’s the employer’s responsibility to show that a fair investigation of the event took place before the termination and that the event was serious enough to justify the employee’s dismissal
  • If the employee had a substance abuse issue like alcohol or drug abuse, the employer will have to show that they tried to support the employee to seek treatment, but that the outcome was unsuccessful

When notice is required for termination

Termination without cause

In most circumstances, an employer must provide written notice of the intent to terminate employment and the termination date. If an employer wants the termination to take effect immediately, most employment/labour standards allow employers the option of payment in lieu of a working notice period. However, a written notice of termination and the date upon which employment ends is still required.

Payment in lieu of notice is based on the normal weekly salary of the employee, and all benefits must also be covered during the notice period. Some legislation also states the date by which payment in lieu must be made.

Check the employment/labour standards for your jurisdiction for the specific details on how payment in lieu is calculated and when the payment is due. It is also important to consider judge-made law to determine if a greater amount of notice is required.

In the nonprofit sector, termination without cause is often the result of restructuring the organization or changes in funding. For example:

  • An organization may decide to reorganize its operations, and in doing so, a position becomes redundant; therefore, the employee who held the position is terminated
  • Funding for a project is not renewed, and the employee who worked on the project is terminated

Severance pay

In addition to the notice period, some jurisdictions require that an employee who is terminated without cause be provided with severance pay. This will depend on the size of the employer and the length of service of the employee.

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