Canada: 12 Key Do's & Don'ts of Hiring & Firing

Last Updated: February 8 2017
Article by Lucie LaBoissonnière and Dominique Fontaine

The hiring process and the termination process are equally important stages of the employment relationship – and both are full of minefields for employers. It’s critical that employers put the time in both up-front to ensure they are hiring the right people in the first place, and at the back-end to ensure they are ending employment relationships in a way that complies with the law and minimizes their liability exposure.

Here are 12 key do’s – and don’ts – for employers when hiring and firing employees.

6 KEY HIRING DO’S & DON’TS

Hiring is an important part of the employment process: once the employer has hired an employee, it will be difficult for the employer to later end the relationship if, for example, the employee just isn’t working out. So it’s critical that the employer put the time in up-front to ensure it’s hiring the right people. This means the employer must gather information about candidates, but this process can also be a legal minefield, so employers must take care to get the information they need, in a way that minimizes their own liability exposure and respects candidates’ rights.

  1. Do require all applicants to submit a (well-drafted) employment application.

First contact between an applicant and the employer is typically by way of an employment application or a resume. Even if a candidate provides a resume, it’s still good practice to require them to complete the employer’s form of application.

Information. The application form will allow the employer to gather the specific information it wants for its evaluation. There’s some information to which the employer is entitled – and some to which it is not – so it’s important that an employer draft an application form that collects only the information to which they are entitled, and all they need to evaluate the applicant. An employer can ask for:

  • Some personal information such as the employee’s name and address.
  • Confirmation of the candidate’s legal entitlement to work in Canada.
  • About schools the candidate attended, degrees obtained and training programs, but avoid asking for dates because it could be construed as an indirect means of inquiring about age, a protected ground of discrimination.
  • The candidate’s past employer(s), their names, addresses, the applicant’s reason for leaving the job, and whether it can contact the applicant’s previous employer(s).

Binding Acknowledgements. The application form can also be a way to obtain the applicant’s (and prospective employee) binding acknowledgement that the information they provide on the application form is accurate; this is valuable if the employer later discovers an employee wasn’t truthful on it. However, such acknowledgements should be carefully drafted to allow the employer to later rely on them if necessary.

  1. Do check applicant references.

Asking applicants for references is another useful way to obtain important information – but many employers never follow-up by contacting the references. An employer should only ask for references if it’s going to check with them; an employer that asks but doesn’t follow-up, and misses discovering something that might have prevented an incident or accident, could be liable. The employer should keep a record of the references it contacted and what the reference said; it may need this information down the road to justify why it did or did not decide to hire a candidate. And remember: an employer might need to “read between the lines” to understand what the previous employer(s) is trying to say.

  1. Don’t ask interview questions that violate human rights legislation.

When conducting an interview of a candidate, the employer must take care not to seek information that’s related to any of the prohibited grounds under human rights legislation, even if inadvertently. Here are examples of grounds protected under human rights legislation and common interview questions about each:

Race. There are no permissible questions about a candidate’s race, colour or physical characteristics, although questions about language fluency are okay if that is a genuine requirement of the job.

Creed / Religion. Similarly, there are no permissible questions about a candidate’s creed or religious affiliations.

Age. And no permissible questions about a candidate’s age or birth date, though the employer can inquire whether a younger applicant is legally old enough to work.

  1. Do use Social Media to screen candidates.

Social media, like Facebook and Instagram, is a rich source of information about prospective employees. But do be careful: you never know what you might learn, and once an employer knows, it can’t “un-know” that information. In particular, an employer could learn the candidate has characteristics placing them in one of the protected groups under human rights legislation – information that could taint the employer’s hiring decision with discrimination or give rise to a human rights complaint by the candidate alleging this.

  1. Do be careful what you say – and don’t make promises.

  An employer must be careful of what it says to a candidate to persuade them to join its ranks, particularly if the candidate already has a secure job. If an employer makes promises of improved employment terms, like a higher salary or a promotion, that sway (or “induce”) the candidate its way, the employee will be entitled to a lengthier notice period – even if the employee’s length of service was relatively brief, and even if the employer kept the promises (though including a termination and an entire agreement clause in the employment contract might help).

  1. Do use a written employment contract – before you agree on the employment terms.

There are several reasons why a written employment contract is good practice, and there are a number of key terms that every employment contract should include. First, it’s important that the employment terms be set at the time of hiring/start of employment: once that employment offer is made and accepted, it’s binding – and the employer can’t unilaterally withdraw it or change it or impose new employment conditions that fundamentally change the employment relationship unless it gives the employee prior notice or something of sufficient value in exchange. So it’s important to ensure offer letters are carefully written because there are no second chances or “drafts”. Second, clear employment terms help avoid disputes, and the associated costs and time to resolve them, later. Finally, an employment contract will go a long way towards facilitating the end of the employment relationship, and protect certain employer’s rights – but courts are extremely protective of employees and scrutinize contract terms closely so legal counsel in drafting the agreement is highly valuable.

  6 KEY FIRING DO’S & DON’TS

Terminating the employment relationship is an equally important part of the employment process. It’s just as critical that the employer put the time in at the back-end to ensure it’s carrying out the termination process the right way – and there are as many minefields as there are in the hiring process. Once the employer has terminated the relationship, it’s often too late to go back in time and retroactively fix mistakes or mend emotional damage. Courts take the view that employees are at their most vulnerable at the time of termination, and will protect them from the more powerful employer – so mistakes during the termination process can be expensive. This means taking the time to think it through and plan, and avoiding acting in the heat of the moment.

  1. Do pick the right (legal) reason for the termination.

There are two primary ways in which an employment relationship can be terminated: the employer can terminate the employment relationship or the employee can voluntarily terminate it through resignation or retirement. If the employer chooses to terminate the employment relationship, it must decide whether it’s doing so for cause, or without cause. The decision has legal ramifications, so carefully considering and choosing the right one can significantly affect an employer’s liability exposure.

For cause. If the employer terminates an employee’s employment for just cause, the employee isn’t entitled to notice of termination or pay in lieu of that notice. But just cause requires the employer to meet a very high threshold: it’s a two-part test, and the employer must prove both the facts that establish the impugned conduct upon which it relies, and that the nature and degree of that conduct was “fundamentally or directly inconsistent with the employee’s obligations to his or her employer”. In every case, whether particular misconduct amounts to just cause for termination depends on all of the circumstances, and it’s rare that a single incident of misconduct will meet the test. Too often, the employer’s reflection on whether it can meet the threshold is retrospective: it discharges the employee, then seeks to justify it. This, however, is often too late and can be an expensive mistake. It’s impossible for the employer to be 100% certain, but don’t terminate for just cause unless reasonably confident the employee’s misconduct is sufficiently severe to meet the threshold. If an employee simply isn’t working out but the employer can’t meet the just cause threshold, it can choose to terminate the employment relationship without cause. 

Without cause. An employer can terminate an employee’s employment without just cause, but must give the employee the appropriate period of notice of the employment termination, or pay in lieu of that notice.

  1. Do ascertain notice and prepare the separation package in advance when termination is without cause.

The decision to terminate an employee’s employment is a serious one, with consequences for both employee and employer. Taking the time to properly prepare to implement that decision will help the employer minimize its liability risk.

Notice. For a without-cause termination, the employer should determine in advance the notice or pay in lieu of notice to which the employee is entitled – or that the employer wants to offer – and may pay it by salary continuance, lump sum, or a combination. The employer can look to one of these three sources to ascertain the amount of notice to which an employee is entitled:

  • Statutory Notice. Every employee is entitled to the minimum notice under the relevant employment standards legislation upon termination without cause. Employment standards legislation in each province and federally set out minimum employment standards, including minimum notice requirements to which an employee is entitled in the event of employment termination without cause.
  • Contractual Notice. It’s open to an employer to limit the amount of notice to which the employee is entitled on termination without cause by including a “termination clause” in the employment contract. A court will typically enforce such a clause if the contract itself is enforceable and the termination clause is clear, unambiguous and doesn’t violate the minimum requirements of the employment standards legislation, but courts look at these clauses especially closely so they must be well-drafted to stand up.
     
  • Common Law “Reasonable Notice”. If there’s no (or no enforceable) employment contract with a termination clause, the employee will also be entitled to common law (law based on judges’ decisions) “reasonable notice”. This is often higher – sometimes significantly – than the minimum statutory notice (so often effectively inclusive of that notice entitlement), and sometimes higher than that to which the employee is entitled under an enforceable contractual termination clause. Reasonable notice actually varies depending on the all the circumstances, including the employee’s age, the length of employment, the nature of the employment and the availability of alternate employment. Relying on any “rule of thumb” or “cap” can be dangerous.

Gratuitous Payment. If the termination is without cause and the employer is paying the employee a significant amount, or the contract doesn’t conclusively determine the severance amount payable, the employer can consider asking the employee to sign a release in exchange for the payment, especially if its paying the employee more than the employment standards legislation requires and/or not paying the exact amount set out in the employment contract. But the employer can’t ask an employee to sign a release if all it’s offering is the statutory notice; the employee is entitled to this no matter what, so a release isn’t binding – and a court wouldn’t like it either.

Other Terms. The employer can also consider other separation terms that may be required, appropriate or welcome in the circumstances, at sometimes minimal expense to the employer, such as outplacement counselling, relocation expenses and/or a letter of reference.

Termination Letter. The termination letter is extremely important: it’s the document the employee will take away, reflect upon, take to legal counsel and in the event of litigation, enter into evidence. So take the time to prepare it carefully, to seek appropriate legal counsel on it and to get it as right as possible. It’s good practice to clearly set out the amount and nature of the payments the employer is making and how and when it will make them, whether benefits will cease or continue and until when, and a contact person. Some employment standards legislation requires the employer to state the reasons for termination in writing. The letter can also address the return of employer property and, if applicable, the terms of any release the employer asks the employee to sign in exchange for the payment (though this can be tricky and legal counsel is warranted).

  1. Do plan ahead to implement the employment termination.

Generally, it’s a good idea for the employer to hold a termination meeting, whether it’s with cause or without, to advise the employee of the termination of their employment. To do it right, this meeting requires forethought and advance planning on the employer’s part:

Location. Meet privately and away from co-workers, and in a “neutral” location, like a boardroom, if possible.

People. Consider whether to have a management-side witness present.

Transportation & Security. Consider setting up and offering transportation home for the employee. Depending on the individual employee and the circumstances, consider whether on-site security, including to escort the employee from the premises after the meeting, is appropriate.

Documents. Give the employee a written termination letter and any other key documents, like benefits transition forms, the Record of Employment (ensure it’s consistent with the reason set out in the termination letter and in the meeting) at the end of the meeting, all of which the employer should have prepared in advance.

  1. Don’t violate the applicable employment standards legislation.

An employer should always comply with all of its obligations under the applicable employment (or labour) standards legislation, including when terminating an employee’s employment. Employers that don’t comply risk an employment standards complaint and/or a legal action for wrongful dismissal – and courts are harsh with employers that fail to comply with this legislation. Compliance in the context of an employment termination typically includes:

Pay the statutory amount. If the employment termination is without cause, pay the employee the minimum amount to which they are entitled under the employment standards legislation (even if the employee refuses to accept any additional severance offer and/or to sign a release).

Pay accrued wages & accumulated vacation pay. Employees are entitled to all accrued wages and accumulated vacation within a specified time after termination; clearly state how and when the employer will pay these.

Disclose the reasons. Some employment standards legislation specifically requires this (for example, section 30(2) of the NB Employment Standards Act) for a termination with just cause and failure to comply could lead a court to decide there was no cause regardless of the facts. So clearly state the reason for dismissal consistent with what was said in the meeting.

  1. Do always terminate with dignity, or be ready to pay the price.

Courts have been clear that employees are particularly vulnerable at the time of termination, and that employers have a legal duty not to treat unfairly, dishonestly or insensitively in the manner in which they terminate an employee’s employment. So no matter the reason for or the circumstances of the termination, the employer must always be respectful and professional throughout the termination process – and never engage in conduct that is unfair, dishonest or insensitive. An employer that breaches this duty of good faith and fair dealing in the manner of dismissal is exposed to liability to financially compensate the employee (so-called “Wallace” damages) if there is subsequent litigation around the termination.  

  1. Don’t jump the gun if an employee resigns.

Employees do often voluntarily end the employment relationship themselves by resigning – but sometimes it’s in the heat of the moment. An employer shouldn’t be too quick to accept such a resignation. Courts know that an employee’s emotions can run high, and so they often give the employee a bit of time to revoke a resignation tendered in such circumstances. However, do fully document the circumstances leading up to and in which a resignation is tendered and accept it – in writing – when it’s tendered; just be prepared to handle a revocation if it comes up. And don’t cut the employee off immediately, before the resignation notice ends; a court could decide that by doing so, the employer actually terminated the employee’s employment and is on the hook for pay in lieu of notice. However, if it’s not appropriate that the employee remain in the workplace during the resignation notice period, the employer can continue to pay the employee but require that they not attend work.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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