Terminating an employee in Ontario is pretty basic: Absent “just cause” for the termination, an employer has to provide to the employee with reasonable notice of the termination of his or her employment.
Wait. Is that basic? Let’s take a closer look at that “rule”:
Absent just cause is definitely not a simple concept. I could talk for days about “just cause.” Just cause is a legal concept which really delineates a standard of conduct on the part of the employee that allows an employer an exception to the rule of providing reasonable notice to the employee in the event of the employee’s termination. That standard is pretty extreme: I sometimes will tell my employer clients, tongue in cheek, that the employee has to have murdered someone – or something akin to murder – to establish a just cause termination before a Court. I won’t go further into the concept of just cause as it deserves a topic of its own. Today, the topic will stick to terminations of employees that are for reasons other than just cause. .
So, let’s take a look at what the rule is rather than the exception: providing reasonable notice of the termination of an employee’s employment when the employer decides it is time to part ways for the varied reasons which exist in the business world.
Reasonable notice is a concept that we have to look at in two different ways in Ontario (and in all the common law provinces in Canada). The first way is the statutory concept of reasonable notice. Statutory law is the law which is created and for the most part enforced by the government (I’m dating myself, but think of a Canadian version of the School House Rocks “I’m Just A Bill” cartoon that used to come on between Saturday morning cartoons in the early 70’s). In Ontario, we look to the Employment Standards Act, which sets out minimum standards for workplaces in Ontario which carry on provincial undertakings. Reasonable notice under the Employment Standards Act is entirely based on how long an employee has worked for the employer. It is between one and 8 weeks. It can be working notice (“Bob – your job is ending, but not until 8 weeks from today”) or it can be a payment which is the equivalent of the notice that is required under the Act (“Bob – your last day of work is today but we will pay you the equivalent of 8 weeks of your regular wages instead of having you work here and sabotaging our operations).
If the employer has a payroll of 2.5 million or more in a year (and that calculation can be done a couple of different ways), and the employee has worked more than 5 years, then the employee has an additional entitlement called severance pay, which depending on the length of employment, can be a payment (not working notice) of up to 26 weeks of regular wages.
That is the statutory law. The other area of the law that we look at is the common law. The common law is law which is based on judicial precedent throughout both Ontario and Canada’s history as well as on British and other commonwealth judicial precedent throughout history. It is (of course) British based and has been developed by judges at all levels of courts for centuries.
The key to understanding the common law reasonable notice period is that it is meant to address an interruption in a terminated employee’s earnings. It is meant to give the employee notice that his or her job is coming to an end and that the employee should be finding something to replace that job. It is not meant as a reward for long term service prior to the termination – which is the way most people conceptualize it. (And under our statutory law, the Employment Standards Act , notice actually translates as a reward for long term service since the longer an employee has worked, the greater the notice entitlement upon termination). Common law is all about pulling oneself up by the bootstraps and finding replacement income. Legally, the concept is called mitigation of damages. Practically, it is about hitting the pavement (or the computer screen in today’s world) and finding another job as soon as possible.
That being said, common law reasonable notice periods tend to be (although not always) longer than the statutory notice period. Over the centuries, and primarily over the last 40 to 50 years, the most relevant factors which a Court will use to decide what is the reasonable common law notice period (i.e. how long notionally will it take this terminated employee to replace his or her income with another job) are the employee’s age, the character of the employment the employee is leaving (meaning was it supervisory, how much did it pay, how senior was it in the organization and what was the employee’s level of responsibility) and the length of time it might take for this employee to replace the income. If the employee can find replacement income in two weeks, then the reasonable common law notice period is going to be two weeks. If it is going to be three months, then if the relevant factors support a three month notice period, it will be three months.
To further complicate the matter, a common law notice period can be determined by an employment contract – so long as it meets the requirements set out in the Employment Standards Act and is contained in an enforceable employment agreement (yet another future topic).
The common law notice period works hand in hand with the statutory notice period which is only dependent on length of employment and not on when the employee actually finds or should have found other employment. If an employee is entitled to six weeks reasonable notice under the Employment Standards Act but finds a job in three days, under the common law, that employee’s reasonable notice period is only three days. But that employee will still get six weeks of notice because the Employment Standards Act is a minimum entitlement, meaning the employee gets the statutory amount in the very least.
The ways of structuring an employee termination and providing – or not providing – reasonable notice are numerous, and depend on the employer’s goals: exiting a problem employee as painlessly as possible; restructuring a valued employee into another job or right out of the business; downsizing an operation and terminating several employees at once; terminating an employee to set an example in the workplace….The list is as varied as the different circumstances which can arise in a workplace. And just cause is not the only exception to the standard of providing reasonable notice to employees that you want or need to exit from your business. There are other exceptions which I will leave to future topics: When an employee is sick; when an employee abandons his employment; when there is a mutual agreement with the employee to change some terms of the employment relationship. But for the most part, an employer has to follow the basic rule of providing an employee with reasonable notice of the termination of his or her employment.