An employer may terminate and employee for many different reasons, such as: selling the business; employee misconduct; bankruptcy; business restructuring; and many others. It would be impossible to cover all scenarios in this one post. However, we can offer some general guidelines for all employers, who need to embark upon the unfortunate situation of firing an employee.
Look at the Contract
The starting place is the contract of employment (if you don’t have a contract of employment then you should ask yourself why not?). Most properly drafted employment contracts set out the terms of the employment relationship, including termination of the employment relationship.
Cause and Notice Period?
The most important consideration is the notice period an employer needs to give an employee. Most employment contracts set out two scenarios for terminating the employee’s employment – “with cause” or “without “cause”.
A termination “with cause” is an allegation that the employee has misbehaved so significantly that it has resulted in a break of the employment relationship. Another way of describing this type of dismissal is with “just cause”.
The courts evaluate these types of dismissals very carefully and employers need to know that it is not just a matter of opinion. At court an employer needs to be able to prove that they had sufficient evidence to prove just cause, i.e. a fair reason to consider the employee’s misconduct (or multiple misconduct) a fundamental break in the employment relationship. Breaches of trust, theft, insubordination, incompetence are all considered in the context of the employment relationship and whether ongoing employment was reasonable in the circumstances.
Given the evidentiary requirements, most employers choose the other option of dismissing employees, i.e. dismissing “without cause”. In that case, an employer needs to give adequate notice to the employee that their employment is ending.
The only requirement for contractual clauses specifying the amount of notice is that it cannot be less than the amount set out in the Employment Standards Act of British Columbia. Even a theoretical possibility of the contractual clause resulting in less than this legislation will invalidate the clause.
An employer can choose to terminate a person with working notice (e.g. the employee will be told that their job is ending in one month’s time) or pay in lieu of notice (e.g. wages equivalent to 4 weeks’ of work). The contract should specify the exact calculation of notice. In most employment contracts, either scenario is possible and most employers will choose one option over the other depending upon the reason for dismissal.
Benefits or Insurance?
Another important consideration is whether there are any benefits or insurance policies provided to the employee as a result of their employment. The Globe and Mail published an article in 2017 that highlighted the potential issues employers can face. It is very important to ensure that benefits and insurance coverage extend throughout the notice period in case that employee ends up needing life insurance or long-term disability cover. If the employer cancels any insurance coverage too early then the employer may end up paying for these claims, which can be extensive. For example, in Feldstein v. 364 Northern Development Corporation, 2016 BCSC 108, an employer was found responsible for over $83,000 because it misrepresented long-term disability coverage to an employee.
It is important to seek legal advice on the potential exposure your business may have prior to dismissing any employee. A free consultation is available at our firm just to make sure that you are proceeding properly.
Breaking the News
Once you have calculated the amount of notice required, you will need to meet with the employee to break the news. The following are a few helpful suggestions for this meeting:
- You should usually have two or more people in this meeting to ensure that there is a witness for everything that occurred.
- That witness should write up a summary of anything that happened at the meeting for the employee file immediately afterwards (this document may be relied upon in litigation so it should be as complete and accurate as possible).
- At the meeting, the person conducting it, should calmly and simply advise the employee that their employment is being terminated as that date.
- If you are not alleging just cause, then do not give any reasons for the dismissal. Reasons for dismissal are only required for with cause terminations.
- If you have chosen to dismiss without cause the only person who benefits from any reason for dismissal is the employee (which can result in claims for bad faith or breach of the Human Rights Code); again, it does not benefit the employer at all to give any reason for dismissal.
- If you are pressed for the reason for dismissal, simply say that “the business has decided to go in a different direction” or some other vague explanation. Again, you are not required to give any reasons.
- Having advised the employee that their employment is ending, you then give the employee the notification letter, a copy of their employment contract, a copy of any benefits and insurance available during their notice period, and their complete record of employment for Service Canada.
- If you are making an offer to settle any outstanding claims then you would present the offer at this time as well. All offers should be presented in the same manner. You should advise the employee that the business is offering extra wages in exchange for the employee signing a release of claims and the offer is open until the deadline listed in the letter. Do not negotiate at this meeting.
- Do not try to pressure or persuade the employee to sign anything at the meeting or afterwards. In fact, you should encourage the employee to take some time to think about the offer and seek legal advice if they need it.
- Employers are held to fairly strict standards in the manner of dismissal. So, you must not lie, mislead, pressure, or otherwise treat the employee in a harsh manner in this meeting. A failure to follow these basic standards can result in a bad faith claim against the employer above and beyond any lost wages. These claims can be significant.
- To that end, we suggest three simple guidelines: keep the meeting focused, short, and polite.
- Focus on the task of notifying the employee that their job is ending. Do not engage in negotiation. Just say that you would need to check with your lawyers before making any decisions. Using us as a shield helps protect you from bad faith claims. Naturally, if you want to use this excuse then you should have lawyers who have given you advice. Otherwise, you are lying to the employee, which can constitute bad faith.
- A focused meeting should be short. You are there to notify them that the job is ending – that is all. You are not there to tell them of all the ways that they can improve or do better at their next job. If you have a professional human resources staff, let them handle any exit interviews. If you do not have such professionals, then we suggest that you refrain from the practice.
- Lastly, you need to be polite. If you are polite and have a witness present to confirm then it is unlikely that you will have any bad faith claims made against you. The most serious claims against employers involve situations of callousness, insensitivity, and harsh behavior that has contributed to the employee suffering psychological consequences from the employer’s conduct. It is a difficult thing to dismiss an employee so do not make it any harder by acting in an impolite manner.
If you have no employment contract delineating the employment relationship, you can still dismiss without just cause. However, you will need legal advice to calculate the amount of reasonable notice available to that employee. The courts have set out several different factors to calculate reasonable notice, including: age of employee, tenure of employment, type of employment, and availability of similar types of employment in the marketplace. Each of these factors in the employee’s situation can raise or lower the amount of reasonable notice available in comparison to other similar cases. The rough upper limit available in British Columbia is 24 months notice or pay in lieu.
Contact Us for a Free Consultation
We can help you determine the range of reasonable notice available to the employee and help with a strategy to decrease your potential exposure to litigation. Contact us to schedule a free consultation.