Navigating employment law issues can be daunting for employers. Human rights, health and safety, privacy, employment standards, accessibility, and so much more. In particular, the beginning and end of an employment relationship can present unforeseen challenges. This article briefly highlights these challenges and discusses the importance of an employment contract and some termination best practices.
A written employment contract…during employment?
A written contract (well drafted, of course) crystallizes the parties’ expectations by setting out fundamental terms including duration, salary, benefits, hours of work, bonus, incentive plans, compliance with employer policies, and entitlement upon termination. For an employment contract to be enforceable, the employee must receive consideration and the terms and conditions must comply with minimum statutory employment standards. For a new employee, consideration is typically the job itself. For an existing employee, consideration can take the form of a promotion, raise, bonus, or other benefit. But beware: inserting a written employment contract into an existing employment relationship has its risks. When in doubt, consult with experienced employment counsel.
…at the end of employment?
In the absence of an enforceable employment agreement (or collective agreement), an employee terminated without cause is entitled to ‘common law’ damages, which represent the amount of notice (or pay instead of notice) the courts say the employer ought to have provided the terminated employee. This can range from a few months to roughly two years depending on the circumstances. However, with a well drafted employment agreement, an employer is able to limit an employee’s entitlement to notice of termination to the minimum amount required under relevant employment standards legislation (in Ontario, a maximum of eight weeks).
Bottom line: To minimize risk and increase an employer’s flexibility to make workforce decisions without having to factor in hefty termination costs, implement a written employment contract for every employee, limiting the amount of notice to which the employee will be entitled upon termination.
Ending the relationship with or without cause
Generally speaking, in a non-unionized workplace, a provincially regulated employer can dismiss an employee provided appropriate notice of termination is given. This is termination without cause and it can help an employer respond to changing business circumstances such as shortage of work, restructuring, closure, etc. or address employee issues that fall short of cause.
Termination with cause occurs when an employer alleges the employee breached an essential term and condition of employment (e.g., theft, fraud, workplace violence). In that case the employee is not entitled to receive notice of termination, or pay in lieu of notice.
However, even if employee misconduct is egregious and would ordinarily justify dismissal for cause, human rights considerations can alter the analysis and create unexpected results for the employer.
Best practice: Before proceeding to terminate employment, consider all relevant factors including: the seriousness of the offence, the employer’s past practice, whether the incident was isolated, premeditated or condoned, the employee’s length of service, and whether issues of disability contributed to or caused the conduct.
Full and final release
A comprehensive release and indemnity provides an employer the comfort of knowing issues are resolved relating to the departure of an employee. However, a release will not provide the security an employer seeks if it can later be attacked. To ensure your organization receives the full and intended value of a release, consider these best practices:
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Exceed minimum statutory requirements: When terminating without cause, ensure the payment provided exceeds the minimum requirements under employment standards legislation.
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Time to review: Provide the employee time to review the documentation and seek legal advice. If the employee wants to sign the release during the termination meeting, require them to take it away to review.
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Do not provide legal advice: Be careful not to make any representation about the employee’s legal rights under the release. If the employee has questions, encourage them to seek their own legal advice.
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Do not withhold minimum entitlements: Do not threaten to withhold minimum statutory entitlements (such as accrued vacation pay, termination and/or severance pay) unless the employee signs a release. Not only is it unlawful to do so, this may create an opening for a court or tribunal to conclude the release was signed under economic duress or that the employer acted in bad faith.
About the author
Samia Hussein is a lawyer with Sherrard Kuzz LLP, one of Canada’s leading employment and labour law firms, representing management. Samia can be reached at 416.603.0700 (Main), 416.420.0738 (24 Hour) or by visiting www.sherrardkuzz.com.
The information contained in this presentation/article is provided for general information purposes only and does not constitute legal or other professional advice, nor does accessing this information create a lawyer-client relationship. This presentation/article is current as of September 2017 and applies only to Ontario, Canada, or such other laws of Canada as expressly indicated. Information about the law is checked for legal accuracy as at the date the presentation/article is prepared, but may become outdated as laws or policies change. For clarification or for legal or other professional assistance please contact Sherrard Kuzz LLP.