All questions

Discontinuing employment

i Dismissal

In the absence of an express agreement regarding the consequences of termination, the law holds that employees who are dismissed without cause (without 'serious reason' in Quebec) are entitled to reasonable notice of termination of employment, and may recover damages if such notice is not given. In providing reasonable notice, an employer may require the employee to continue to work through the notice period (working notice) or may provide pay in lieu of working notice. All employment standards statutes contain minimum periods for notices of termination and, if applicable, severance pay. Employers will generally be required to provide employees with both statutory notice of termination and notice of termination under the common law or the CCQ. The duration of common law or CCQ notice that is reasonable is determined by the circumstances of each case (reasonable notice). The courts will usually take into account the employee's age, position, length of service, overall compensation and the availability of similar employment, among other factors.

Written employment contracts may also contain an express provision that specifies the amount of notice that will apply to a termination without cause. However, these provisions may not always be enforceable before the courts, depending on the jurisdiction, drafting and content of the clause. In particular, such a provision will not be enforceable where the notice period is less than that which the employee would have been entitled to under the applicable employment standards legislation, where the clause otherwise fails to provide an employee with minimum statutory entitlements, or where it is too vague or ambiguous. If a termination provision in an employment contract is unenforceable, the reasonable notice entitlement under the common law or the CCQ will apply and the employee will be entitled to reasonable notice based on the factors described above.

Only where just cause for termination exists can an employee be summarily dismissed without notice. The Supreme Court has recently confirmed that federally regulated employers are not permitted to terminate employment of non-managerial employees under the CLC, unless there is just cause, with certain exceptions.

What constitutes just cause varies greatly, although theft, gross misconduct and insubordination would generally qualify. It is advisable for the employment contract to provide a non-exhaustive list of examples of what would constitute just cause. In addition, Canadian law recognises the notion of constructive dismissal, in such cases where an employer has made one or more substantial changes to the essential terms of an employee's employment. Examples of constructive dismissal may include, in particular, significant changes to an employee's compensation, a significant reduction in the employee's duties or responsibilities, a demotion to a more junior position or a significant change to the employee's hours of work. In such a case, an employee may assert a claim of constructive dismissal and allege that such changes are tantamount to an outright dismissal by the employer.

A dismissed employee who is not unionised may bring an action before the civil courts alleging an unjust dismissal. In the federal jurisdiction, Quebec and Nova Scotia, employment standards legislation allows certain employees with a specified length of service to have their dismissals adjudicated by an arbitrator. In those cases, reinstatement is generally an available remedy.

A unionised employee can generally request that the union bring a grievance contesting the dismissal under the collective agreement. This grievance will be heard by an arbitrator or a board of arbitration. If the dismissal is found not to be made for just cause, then the employee will be reinstated, normally with full back pay. Should the arbitrator find that a period of suspension was warranted, the amount of back pay will be adjusted accordingly.

Upon termination of employment, whether for cause or without cause, employers are required to report the employee's interruption in earnings to the federal government. If eligible, employees may receive employment insurance benefits following a termination of employment. Generally, dismissals for just cause will disentitle an employee for such benefits.

It is common across Canadian jurisdictions for employers to enter into settlement agreements with employees following a termination of employment, particularly in the case of a without-cause termination. In such a case, the terms of the settlement agreements are usually kept confidential between the parties, except where disclosure is permitted by law or for some other specific reason agreed to by the parties.

ii Redundancies

Terminations made for economic reasons (i.e., redundancies) are permissible across Canadian jurisdictions. In such a case, the termination of employment is considered to have been made on a without-cause basis and the employee will be entitled to the notice requirements specified in subsection i, above. Where a mass termination has been triggered, greater periods of statutory notice may be required to be provided by the employer, and there may be an obligation to report the mass termination to a governmental entity. The criterion that is applicable to a mass termination will vary depending on the jurisdiction.

Temporary lay-offs (done without severing the employment relationship) are used by many Canadian employers, particularly where the employer's activities are seasonal in nature or there is a lack of work. Statutory notice requirements that apply to temporary lay-offs will vary from jurisdiction to jurisdiction.