Staff Terminations: What does the Law Require?

There are two ways in which an employer can unilaterally end its relationship with an employee: dismissal for cause, or dismissal without cause. The difference between the two is substantial.

In the vast majority of dismissals there will be no just cause. In such cases, the law requires the employer to provide the employee with either notice of dismissal or pay in lieu thereof. Employment standards legislation will typically set out a minimum amount of notice that is to be provided. Every jurisdiction in Canada has its own legislation in this regard.¹ The applicable jurisdiction is based upon where the individual works, not where the employer is based.

The statutory notice period generally varies based solely upon the length of service. In addition, some statutory regimes require severance pay in specified circumstances.

Our courts have established a common law obligation to provide “reasonable notice,” which is over and above the statutory minimums. There is a common myth that employers have to provide one month of notice for each year of service. Our courts, however, have explicitly stated that no such rule is to be applied, and the statistics do not bear such an assumption out.

There are no black and white rules with respect to what will constitute reasonable notice in a particular situation. Rather, the courts have made it clear that each case is to be assessed based upon its own particular set of circumstances. The primary factors that are typically considered include: (a) length of service; (b) age; (c) position and character of employment; and (d) availability of similar employment.

There are dozens of other factors that the courts have considered. One of the more common ones is the issue of inducement; if an individual was lured away from secure employment and then subsequently dismissed, that will be a factor.

The reality is that assessing common law notice periods is not an exact science. While one judge may assess a situation and consider three months’ notice to be appropriate, another judge might consider five months to be reasonable in the circumstances. It is extremely difficult, therefore, to predict accurately what a court will consider to be reasonable notice in a particular case. That is why I recommend that employers use employment agreements that cover, among other things, obligations in the event of dismissal.

So long as an employment contract is properly entered into, and the amount of notice it establishes does not go below the statutory minimums, the parties can contract out of the common law obligation of reasonable notice for dismissal without cause. Contracts can be written to establish shorter notice obligations than the common law and in that way the employers provide themselves with a level of certainty as to their obligations. Uncertain obligations, on the other hand, can lead to protracted negotiations and litigation.

All of the above is irrelevant if just cause for dismissal exists. Simply put, just cause relieves the employer of all of the obligations discussed above; there is no requirement to provide notice of dismissal, pay in lieu thereof, or severance pay.

In any situation where an employee engages in misconduct, such as sleeping on the job (Torontonians will recall the recent case of the snoozing TTC fare collector), the employer must take a contextual approach in assessing whether just cause for dismissal exists. The contextual approach involves considering not only the misconduct in question, but also the entirety of the employment relationship. This would include the length of the employment relationship, the nature of the employee’s position and duties, any prior discipline, and any other contextual factors relating either to the relationship or the misconduct in question. The misconduct cannot be considered in isolation.

When faced with apparent misconduct on the part of an employee, it is incumbent upon an employer to conduct an appropriate investigation. In assessing whether the employment relationship has been irreparably harmed, courts and arbitrators will often consider the employee’s behaviour during the course of the investigation. An unapologetic, dishonest employee is less likely to be given a second chance than those employees who admit their wrongdoing and offer suitable apologies and assurances that it will not happen again.

Because a contextual approach is required, it is entirely possible that two employees will be guilty of the exact same misconduct, but the penalties will differ in each case. For example, a long-term employee with a clean disciplinary record will typically be given more leeway than a recent hire that has already been in trouble repeatedly.

Clients often comment that despite the contextual approach, “surely stealing from the company must be enough to fire someone.” In response, I often refer to the case of Bravo v. Etobicoke Ironworks Ltd., in which the plaintiff stole a few bolts and acted rudely towards his supervisor. The court held that the theft “was not of sufficient gravity that it warranted dismissal without notice,” and that the plaintiff was therefore entitled to notice of dismissal. The court considered that the plaintiff was a good welder, had worked for the employer for over six years without incident, and that the misconduct did not give rise to a breakdown of the employment relationship. Similarly, I often ask the employers if they would fire their assistant for bringing a pen home so their child could do their homework that night.

Finally, I note that there is no middle ground of “near cause.” Sometimes employers will argue that while there may not be just cause for dismissal as defined above, the employee was not a particularly good one and they should not have to pay the full notice period. Canadian courts have definitely rejected this approach, with the end result being that dismissal is “all or nothing”; either the employee is entitled to notice or they are not.

I regularly monitor just cause cases throughout the country and can comfortably say that courts and arbitrators will uphold summary dismissal in appropriate circumstances. However, the onus will be on the employer to justify the decision. Employers should obtain advice from a lawyer who specializes in employment law before taking action.

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