Once the decision to terminate an employee has been made and the employment relationship will inevitably end, employers should no doubt properly plan the details of the employee’s separation package in order to minimize risk and liability. Remember, any employer, whether a small business or large corporation, is obliged to provide an employee being terminated with notice of his or her termination. Depending upon the terms of the particular employment contract of the employee being terminated, employers may be liable for reasonable notice of termination, contractual notice, statutory notice, and severance pay.
If the employer does not provide sufficient notice of termination to the employee, then the employee may no doubt commence a wrongful dismissal action and perhaps bring a complaint to the Ministry of Labour for violation of the payment of minimum standards. The termination package will be a critical part of the evidence at any subsequent trial or hearing.
Our Hamilton employment lawyers can help your company structure proper termination packages in order to minimize company risk and liability. An employment lawyer will be able to determine liability in terms of the employment contract, reasonable notice, minimum standard entitlements, requirements under the Employment Standards Act, and manage high-risk terminations. In addition, our Hamilton employment lawyers will be able to represent you throughout the course of litigation, discovery, mediation, pre-trial, and eventual trial.
Absolutely. Being able to conduct bench trials and jury trials is important if litigation progresses. Matt Lalande has conducted bench trials and jury trial since 2003 involving serious personal injury, wrongful death, and employment related matters. Conducting bench and jury trials allows a lawyer the opportunity to view trial risk based on experience. We are experienced trial lawyers that know how to prepare and argue complex litigation trials.
The first step in assessing the details of a termination package is knowing and understanding the proper reasons for termination. The reason for the employee’s termination will influence the contents of the termination package in order to help structure the notice which is required to the employee. For example:
Is the employee resigning? – An employee who voluntarily resigns from his or her employment will terminate the employment contract, absent a contractual term to the contrary and will not be entitled to reasonable notice. It’s important to fully understand how and when resignation is valid, involuntary, and unequivocal. It’s important to ensure that the resignation is not as a result of an employer’s constructive dismissal. Be very careful.
Is the employee being terminated due to job abandonment? – Job abandonment occurs when an employee is absent from work without authorization or justification. If the employee’s actions can be objectively viewed as unequivocally indicating an intention not to return to work, the employer may treat employment as at an and. However, abandonment is similar to resignation. There is a test to establish proper abandonment and efforts should be made, which are consistent, on behalf of the employer in order to ascertain the reason for his or her absence.
Is there a frustration of contract? – Frustration is not a breach of the employment contract, but rather the consequence of unanticipated events which relieves both parties, both employer and employee, of their obligations under the employment contract. The employee is not quitting, nor is the employer terminating the employee. Frustration is quite rare and a defence for employers. If it’s found that IF a contract is frustrated due to illness, chronic disease, injury, or other reason, the employee will not be entitled to reasonable notice. Frustration of contract should be discussed with an experienced employment lawyer prior to any discussion of termination with an employee.
Is a fixed-term contract expiring? When the employee is hired under a fixed-term contract, the employment relationship automatically ends on the expiry of the contract. An issue can arise when an employee works beyond the term of the contract. A court can then consider the employment relationship as one of indefinite duration, entitling the employee to statutory notice under the Employment Standards Act in reasonable notice of termination.
Is the employee being terminated for just cause? – This is something that an employer should absolutely discuss with an employment lawyer prior to any discussion of termination. Many employers erroneously believe that just cause exists when it actually doesn’t. An employer should definitely consider the potential ramifications of possible litigation if just cause is alleged, and a court finds otherwise. Relying on unfounded allegations of cause may incite the employee into litigation, and open the employer to wrongful, moral, or punitive damages.
Is the employee being terminated without cause? – If the employee is terminated without cause, the employer, depending on the terms of the employment contract, may be liable for reasonable notice, contractual notice, statutory notice, and severance pay. Discussion with a Hamilton employment lawyer is definitely recommended prior to termination.
Typically, there are three main methods of structuring the employee’s notice period:
Working notice – Working notice provides the employer with the benefit of having the employee perform work during the notice period. Working notice is not appropriate where the employee is unable to work (for example: the employee is on a pregnancy or medical leave of absence). Working notice may be a preferred option where there is a down-sizing or business closure, where the employee’s services are needed through the notice period, or where succession planning is necessary to find the employee’s replacement.
Our Hamilton employment lawyers always suggest that if the employee’s presence is desired throughout the working notice period, the employer should consider the use of a retention bonus, payable at or just after the time of termination, if the employee does not resign his or her employment during his or her working notice. The retention bonus can be made conditional upon the employee signing a release.
Lump-sum payment – Lump-sum packages are attractive for the employee and employers who can afford it. Very soon after termination, the employee is provided with a defined amount, with no deduction for mitigation.
Salary continuance – with or without a “clawback” in the event of mitigation – During the salary continuance period, the employment relationship is ended, but notice is provided by continuing the employee’s compensation and benefits to the end of a specific notice period. If the employer decides to proceed with a salary continuance termination package, it may wish to utilize a clawback provision, reducing its liability in the event that the employee secures alternative employment. The employee is more likely to accept a salary continuance offer with a partial clawback than a full clawback. This is the most common form of notice.
An employer is not obliged to provide all of the employees notice in all the same form. For example, working notice and lump-sum payment could be mixed, working notice and salary continuance could be next or a lump sum payment covering part of the notice period followed by salary continuance could be offered.
Before structuring a method of termination pay in lieu of reasonable notice, it’s important that you contact a Hamilton employment lawyer to help review or structure termination provisions in a written contract. It’s important to determine if there are any restrictions on how notice can be provided and to determine if the termination obligations are subject to mitigation.
In every non-unionized employment relationship, an employer has an implied common-law obligation to give the employee reasonable notice of its intention to terminate the employment relationship unless there is just cause for termination. If you, as the employer, fail to give the potentially terminated employee reasonable notice of his or her termination, that employee can bring a wrongful dismissal action for breach of that implied term.
The purpose of providing the employee reasonable notice is to allow that person a period of time in which to secure alternative employment. The assessment of how much reasonable notice should be given to your employees is considered an art rather than a science. The starting point for determining reasonable notice was set out in a case decided in 1960 called Bardal v. Globe and Mail. This case set out the key factors in determining reasonable notice such as
It’s important to understand that although this case is always used as a base discussion among employers, HR personnel, and employment counsel alike, it certainly does not list all of the factors for determining how much notice should be provided. For example, other factors (among hundreds) that can be considered in determining how much notice should be provided to an employee are:
It is not uncommon for employees to deny the acceptance of the termination package initially offered by the employer. In today’s day and age, this is almost to be expected. Often times, the employee will seek legal counsel, which will cause the employee and employer to engage in subsequent negotiations for different termination package.
It is certainly not uncommon for an employee to request a longer notice period, inclusion of compensation that is not accounted for the initial offer, a different method of calculating notice, additional payment such as mitigation expenses, general damages for human rights infringements, aggravated or punitive damages, and the payment of legal fees. An employee could also request tax sheltering as part of the termination package.
Employers frequently ask us about terminating an employee on disability. The answer is that it depends, among other factors, on the permanency of the disability. Employers must ensure that if the employee is unable to work because of a disabling illness – the termination of employment is properly frustrated and does not interfere with an ill or disabled employee’s entitlement or eligibility for long-term disability benefits. Consultation with an employment lawyer concerning the risks of terminating an employee on disability is highly advised. Wrongful termination of a disabled employee could expose an employer to wrongful dismissal damages – and perhaps, if disability is interfered with, damages for payment of long-term disability benefits.
If you are an employer that is required to terminate an employee, or you have terminated an employee and are having difficulty, please do not hesitate to contact us. We would be happy to review your plans for employee termination, reasons for employee termination, determine liability, review the terms of the employment contract, review the best methods for structuring the notice and draft the appropriate termination documentation. In addition, if the employee decides to litigate, we can assist you with litigating or defending a wrongful dismissal claim.
Terminating an employee is never an easy task. We have seen time and time again that a small investment into proper and specialized employment law advice, will save a large payout later.
Contact us at 905-333-8888 or feel free to chat with our live chat operator who will be able to assist you with setting up an appointment.
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