Employee Terminations

Breakfast for Business
A Practical Guide for Employee Terminations
March 6, 2013
Dan Condon
Christine Ashton
Carole McAfee Wallace
Introduction: Employee Terminations
• Employee terminations can be very costly for an employer
• It is important that employers are fully aware of the potential
liabilities prior to terminating an employee
• In addition, it is important that employers take steps to
minimize the cost of employee terminations
Just Cause and Without Cause
 Generally, employer can terminate an employee without
cause provided that:
 reason for termination is not based on a prohibited ground under
applicable human rights legislation (such as age, gender, disability)
 the termination does not breach a statute (i.e. job protected leave);
 the employee is given reasonable notice of termination
 Employer can terminate employee immediately, and without
notice, for cause
 cause exists when the employee has engaged in serious misconduct
that is incompatible with the fundamental terms of the employment
Just Cause and Without Cause
What Constitutes Just Cause
 Contextual Approach To Assessing the Misconduct
Was there misconduct? Nature and extent
 Evaluate the surrounding circumstances
 Is dismissal without notice the proportional response?
Just Cause and Without Cause
Recent Ontario Cases – No Cause
 Plester v. PolyOne Canada Inc., January 11, 2013
Ontario Court of Appeal
 Barton v. Rona Ontario Inc., August 3, 2012
Ontario Superior Court of Justice
Just Cause and Without Cause
Recent Ontario Cases – Cause
 Dziecielski v. Lighting Dimensions Inc., March 19, 2012
Ontario Court of Justice
 Bennett v. Cunningham, August 17, 2012
Ontario Court of Appeal
Just Cause and Without Cause
Just Cause v. Wilful Misconduct
 Just cause – common law concept which relieves employer
from providing reasonable notice or pay in lieu thereof
 Employment Standards Act, 2000, Reg. 288/01, S.5. 2(1)
provides that an employee is not entitled to statutory notice
(or severance) where the employee is guilty of “wilful
misconduct, disobedience or wilful neglect of duty that is not
trivial and has not been condoned by the employer”
Just Cause and Without Cause
Just Cause v. Wilful Misconduct
 Two concepts are not identical
 Generally more difficult to prove wilful misconduct
 See Oosterbosch v. FAG Aerospace Inc., March 14, 2011,
Ontario Superior Court of Justice found dismissal for cause,
but the employee’s conduct did not amount to wilful
misconduct under the ESA
The Termination Package
 When preparing a termination package an employer must
first consider whether the employee’s entitlements are
limited to the minimum provisions contained in the
Employment Standards Act or whether the employee is also
entitled to notice of termination at common law
The Termination Package
Notice Of Termination At Common Law
 The general purpose of notice at common law is to put the
employee in the position they would have been but for the
termination of employment
 While this, of course, includes base salary, it most times will
also include other items
The Termination Package
Variable Compensation
 Depending on the type of variable compensation provided
and how it has been structured by the employer, this may
need to be recognized through the notice period
The Termination Package
Variable Compensation
 Common types of variable compensation include:
 Commissions
 Bonuses
 Profit Sharing Plans
The Termination Package
 Commissions generally need to be recognized
 Commissions are considered wages
 Often, an employer will have to consider commissions which
may have been earned but not payable up to the time of
termination, as well as the amount to be included in the
notice payment
 Commissions through notice periods are generally based on
historical averages
The Termination Package
Bonuses/Profit Sharing Plans
 Whether these kinds of variable compensation must be
recognized through the notice period will very much depend
on how the employer has structured the plans
 Also, the larger the percentage of the overall compensation
which is comprised by a bonus or profit sharing plan, the
more likely a Court will be to hold these must be included
through the notice period
The Termination Package
Payment of Notice at Common Law
 If a notice period exceeds approximately two months, the
general practice is to provide pay in lieu of notice by way of
salary continuance
 This is due to the possible impact of mitigation
 If providing pay in lieu of notice in a lump sum, an employer
should consider the discounting of the notice period
The Termination Package
Clawback Payments
 When providing pay in lieu of notice by way of salary
continuance, an employer should also consider whether to
offer a clawback payment
 A clawback provision can encourage an employee to obtain
alternate employment more quickly
 It can lead to a situation where the terminated employee
receives more pay in lieu of notice than would be the case if
they litigated while, at the same time, the employer’s notice
payment is less than it would otherwise have been
The Termination Package
Benefits/Vacation Pay
 If an employer provides its employees with benefits, these
also are required to be recognized through the common law
notice period
 Medical/Dental vs. Life Insurance and Disability benefits
 It is important to advise terminated employees of any
conversion rights they have with respect to benefits
 It is also important to address any accrued and unused
vacation pay which may be owing to the employee at the time
of termination
The Termination Package
Post Employment Restrictions
 If a terminated employee is subject to non-solicitation or
non-competition covenants, it is important to make
reference to these in the termination materials
 If an employee is not subject to any restrictive covenants in
some instances it may be appropriate to attempt to obtain
these as part of the negotiated settlement
The Termination Package
Miscellaneous Matters
 In the termination materials, the employer should also
address matters including return of Company property,
payment of outstanding expenses, provision of a letter of
 Employers can also consider whether it is appropriate to
offer outplacement counselling as a term of the package
The Release
 If a terminated employee is being offered notice of
termination in excess of what they are entitled to under the
Employment Standards Act the provision of any additional
amounts should be made contingent upon the employee
executing a Full and Final Release in favour of the employer
 It should be a comprehensive Release which addresses not
only notice of termination under the Employment Standards Act
and common law but also benefits and any potential claims
under other legislation including the Human Rights Code
The Release
 Employers must be mindful, however, that if a negotiated
settlement is not obtained, the terminated employee must
still be provided with their entitlements pursuant to the
Employment Standards Act
No Settlement
 On occasion, and for a variety of reasons, the termination
package presented by the employer is not accepted and a
settlement cannot be reached
 In such instances, the employee will be at liberty to pursue
the matter further by way of an action, MOL claim, and/or a
Human Rights application
No Settlement
 Where no settlement has been reached, the employer still has
certain obligations which it must satisfy
 If it fails to satisfy these obligations, the employer can be
exposed to more significantly liability
No Settlement: ESA Entitlements
 Employees whose employment is terminated on a without
just cause basis must be given their ESA entitlements on
 These are:
 Termination pay
 Severance pay (only applicable in certain situations)
 Benefits continuation during the termination pay period; and
 Vacation pay on the termination pay
No Settlement: ESA Entitlements
 If an employee’s employment is terminated on a just cause
basis at common law, but is not terminated on a just cause
basis under the ESA, then the employee must be given their
ESA entitlements on termination
 In order to have just cause under the ESA, the employee
must be guilty of “wilful misconduct, disobedience or wilful
neglect of duty that is not trivial”
No Settlement: Benefits
 The ESA provides that during the termination pay period the
employer must continue to make whatever benefit plan
contributions are required to maintain the employee's
benefits until the end of the notice period
 This applies even if employment is terminated effective
immediately and the employer pays termination pay instead
of continuing the employment
No Settlement: Benefits
 If the employer fails to continue the benefits during the
termination pay period, the employer can be held liable for
any damages which flow from this
No Settlement: ESA Entitlements
 If an employer fails to provide an employee with their
entitlements under the ESA upon termination, the employee
is entitled to additional damages
No Settlement: Reference Letter
 If no settlement is reached, the employer should still offer to
provide, and should provide where requested, a letter of
reference (where no cause is alleged) or a letter confirming
employment (where cause is alleged)
 If an employer improperly refuses to provide such a letter,
the employee may be entitled to additional damages as a
result of the employer hampering mitigation efforts
Wilson Vukelich LLP can help ensure that your employment law matters are handled
effectively and efficiently, and in manner that is reflective of new legal developments
and obligations. If you have any questions or require further information, please
Dan Condon
Wilson Vukelich LLP
[email protected]
Christine Ashton
Wilson Vukelich LLP
[email protected]
Carole McAfee Wallace
Wilson Vukelich LLP
[email protected]

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