Answer ... In Canada, an employment contract can be terminated in two circumstances: for just cause or without cause. A termination for cause occurs when the employee’s misconduct has irreparably damaged the employment relationship. In these circumstances, the employer is not required to provide notice of termination or payment in lieu of notice. In Quebec, the Section 2094 Civil Code right to “resiliate” a contract “for a serious reason” and the Act Respecting Labour Standards right to terminate employment for “good and sufficient cause” parallel the common law right to terminate for cause in other jurisdictions.
Conversely, without cause termination occurs where an employee is terminated without a reason. Generally, an employer may terminate an employment contract without cause at any time by providing notice to the employee or payment in lieu of notice to the employee. In addition, an employee may resign at any time by providing the employer with notice. Moreover, where an employer has fundamentally failed to fulfil its obligations to the employee or made a substantial unilateral change to the employee’s terms and conditions of employment, the employee may resign in protest and claim his or her lawful termination entitlements, as if he or she were wrongfully dismissed. This is known as ‘constructive dismissal’.
An employer’s right to terminate an employee without cause does not permit the employer to terminate for reasons which discriminate on the basis of a protected ground in human rights law or as a reprisal for the employee exercising certain statutory rights.
In the federal jurisdiction, the Supreme Court of Canada has held that the unjust dismissal provisions of the Canada Labour Code preclude an employer from terminating employment without cause and merely offering severance. Instead, subject to prescribed exceptions, federally regulated employees with over 12 months’ service are entitled to complain of unjust dismissal and to have recourse to any of the code’s remedies which may be appropriate in the circumstances, including reinstatement.
Answer ... Notice of termination is required when an employee is terminated without cause. Employers can provide employees with working notice of termination, payment in lieu or notice or some combination of the two.
The length of an employee’s notice entitlement depends on the terms of the employee’s employment contract and the applicable employment standards legislation.
Common law ‘reasonable notice’ of termination is implied in employment contracts and applies by default where a contract is silent with respect to the applicable notice period. Common law reasonable notice invariably constitutes a longer entitlement and therefore a greater benefit than the minimum termination notice required by employment standards legislation.
Common law reasonable notice of termination is determined with reference to the employee’s age and length of service with the employer, the nature of the position and the availability of other employment in light of the employee’s experience and qualifications. Each of these factors may be weighted differently depending on the facts of a given case and the list is not considered exhaustive. Employees often receive approximately one month’s salary per year of service to a ceiling of roughly 24 months.
Employers and employees can generally agree in advance, by way of contract, to provide a certain period of termination notice or payment in lieu. However, they cannot contract out of employment standards legislation by providing for less than the minimum termination notice required by statute. Contractual termination clauses which contravene employment standards legislation or lack sufficient clarity to limit employees’ entitlements will be found void or unenforceable, in which case common law reasonable notice will apply.
In Quebec, Article 2092 of the Civil Code provides that “[t]he employee may not renounce his right to obtain an indemnity for any injury he suffers where insufficient notice of termination is given or where the manner of resiliation is abusive”. As such, in Quebec, employees and employers may not contract out of either the minimum notice required by the Act Respecting Labour Standards or the reasonable notice required by Section 2091 of the code. Further, an employee who has been provided with sufficient notice under the code may still claim back pay, an indemnity for loss of the right to reinstatement and other relief pursuant to Sections 124 and 128 of the Act Respecting Labour Standards.
For individual terminations, minimum notice periods mandated by employment standards legislation generally increase with the employee’s years of service before maxing out at around eight weeks. Employment standards statutes also contain group termination provisions, which apply when a defined number of employees are terminated within a prescribed period. In the case of group terminations, all terminated employees are generally entitled to the same enhanced period of notice notwithstanding their individual years of service.
Answer ... The rights that employees have when challenging their dismissal vary depending on whether the employee concerned is employed pursuant to an individual employment contract or a collective agreement.
Employees in the non-unionised sector can initiate a court action against their former employer for wrongful dismissal in breach of the employment contract. Wrongful dismissal claims generally occur where:
- the employee alleges that the employer did not give reasonable notice of termination or dismissed him or her without notice where there was no just cause for doing so; or
- the employee has resigned because he or she claims that the employer has made a unilateral change to a fundamental term of the employment contract.
Employees have a legal obligation to make reasonable efforts to obtain alternate employment in order to mitigate their damages.
In the unionised sector, employees typically have recourse to the grievance and arbitration machinery of the collective agreement. Collective agreements generally require employers to have just cause for termination, which is viewed as the ‘capital punishment’ of industrial discipline. The just cause threshold will usually be met only where progressive discipline has been applied and has failed to correct the employee’s behaviour or performance. Collective agreements allow employees to file grievances challenging their dismissal. Grievances are heard by arbitrators, whose decisions are considered final and binding. Arbitrators can order reinstatement, damages and/or compensation to successful claimants.
In both the unionised and non-unionised sectors, employees who believe that they have been dismissed on the basis of a prohibited ground under human rights legislation may file a discrimination complaint with a human rights tribunal or commission. The human rights tribunal has the power to award compensation and/or reinstatement if it determines that the employer discriminated against the employee.
Special rights with respect to termination of employment also exist in Quebec and in the federal jurisdiction. In Quebec, Section 124 of the Act Respecting Labour Standards provides that employees with two or more years of uninterrupted service for the same employer cannot be terminated without “good and sufficient cause”. An employee alleging termination without good and sufficient cause is entitled to complain to the Commission des relations de travail, an administrative tribunal. Among other things, the commission requires employers to apply progressive discipline in order to justify termination and has the power to reinstate employees or substitute a lesser penalty, much like a labour arbitrator hearing a grievance in the unionised employment sector.
In the federal jurisdiction, the unjust dismissal provisions of Part III of the Canada Labour Code also provide expansive protections akin to those available to employees covered by a collective agreement. Subject to limited exclusions, non-unionised federally regulated employees have recourse to the code’s unjust dismissal scheme if they have completed 12 consecutive months of employment. A dismissed employee or an inspector can ask the employer for a written statement setting out the reasons for the dismissal. The employer must then provide the statement within 15 days. If an adjudicator determines that the dismissal was unjust, he or she has broad authority to grant an appropriate remedy, including requiring the employer to pay the person compensation or reinstate the person. No complaint can be considered by an adjudicator if the employee was laid off because of lack of work or the discontinuance of a function.
Answer ... Statutory severance pay is required only under the federal jurisdiction and in the province of Ontario. Statutory severance pay is separate and distinct from payment in lieu of notice.
Federally, an employee is eligible for severance pay if he or she:
- has at least 12 months’ continuous service with his or her employer;
- has a ‘qualified appointment’, which excludes employees who are on fixed-term contracts;
- has been removed from his or her job involuntarily;
- has not been dismissed for just cause; and
- has not turned down a reasonable offer of employment in another federally regulated job.
For federally regulated employees, once eligibility has been established, the employee is then entitled to two days’ pay for each completed year of service, with a minimum entitlement of five days’ pay.
In Ontario, statutory severance pay applies only to employees who have at least five years’ service and whose employer either has an annual payroll of at least C$2.5 million or has severed the employment of 50 or more employees in a six-month period due to a business closure. Severance pay is calculated by multiplying the employee’s regular wages for a normal work week by the number of years of completed service with the employer, pro-rated for partial years of service. The maximum amount of statutory severance pay is capped at 26 weeks’ pay in Ontario.