First Reference company logo

First Reference Talks

News and Discussions on Payroll, HR & Employment Law

decorative image

Managing risk in not-for-cause employee terminations

risk-dice

The employer’s discretionary right to terminate any employee at any time without cause

My Human Resources college professors used to ask students on a regular basis when it was OK for employers to terminate employees without cause. The answer, in theory, is that the employer can terminate an employee at any time! However the response of many students reflected a feeling that is common to many employees which is a belief that employees have a right to continuous employment with the same employer unless there is a cause such as a very serious mistake, deliberate misbehaviour or ongoing poor performance. It is this feeling that makes so many terminations a landmine for employers.

Statutory and common law obligations in a not-for-cause termination

The professors repeated again and again that employers can terminate employees without cause as long as they terminate in a fair and reasonable manner that meets the Ontario Employment Standards Act (ESA) requirements of provision of proper written notice, or termination pay instead of notice to a maximum entitlement of up to eight weeks for eight years of service. Additionally for companies with payroll of over $2.5 million they must also provide severance if the employee has tenure of five years or more of up to 26 weeks regular wages (one week per year). Common law entitlements (precedents set by previous judicial decisions) tend to be higher. In non-unionized workplaces, employers generally do have the right to fire employees as they see fit. The only exceptions are adherence to the Human Rights Code and other specific ESA and Health and Safety legislation.

The risk inherent to not-for-cause termination

The academic theory that termination without cause can be done at will by employers as long as they meet the ESA standards and payout severance entitlements or some “rule of thumb” common law settlement is not so clean in real employer and employee relationships. Chances are that terminations without just cause can still cause an employer a lot of damage, both realized and reputational.

For most employees, termination without cause is seen as a violation of trust between the employer and the employee and feelings of hurt and entitlement can cause the employee to consider a wrongful dismissal suit. The emotional hurt that an employee, especially a long-serving employee will feel at being told they are terminated can cause lasting damage to the employer through legal battles or even just through public perception of the termination depending on how the employee and the employer communicate the termination.

Managing the risk of terminations

Terminating without cause does not mean that the employer does not give a reason for the termination. It could be a lay-off, reorganization, an internal fit issue, a change in management style or any other reason that does not infringe on prohibited grounds in the Human Rights, Employment Standards or Health and Safety Legislation. In fact it is often better to give a short reason over no reason so that you don’t leave the door open for employees to consider that the termination might have been for reasons that impinge on prohibited grounds.

Here are some quick tips for managing terminations:

  1. Handle the process with as much kindness, appreciation and respect as is possible.
  2. Ensure the termination is not based on prohibited or discriminatory grounds such as gender, age, culture or a disability.
  3. Ensure the termination doesn’t occur during an employment protected leave such as maternity leave.
  4. Ensure the termination doesn’t happen on a special or sensitive day for the employee such as a birthday or work anniversary.
  5. Ensure your termination meeting is private and confidential but that both a manager and Human Resources are present.
  6. Document your meeting (date and time), what happened at the meeting and the reaction of the employee on the day of the meeting.
  7. Give the employee options regarding the exit strategy after the meeting such as going home immediately or finishing up the workday.
  8. Offer the employee options on how the departure is communicated to the broader community. Is he or she taking early retirement? Do they want to spend more time with family?
  9. Consider offering extended working notice if at all possible. Not all employees need to be escorted off the premises with security (although security risks do need to be considered in advance especially for employees with access to confidential information)
  10. Come prepared to make an offer of severance that exceeds the minimum ESA standards if there is no severance agreement in the employment offer.
  11. Ensure that you are aware of and communicate the employee rights regarding benefits, bonuses, pension plans and other during the notice period.
  12. Do not allow for discussion or defence for continued employment. Be clear that the decision is final and is not up for debate.
  13. Keep the meeting to under an hour and have an exit strategy.
  14. Consider offering employment or financial counselling (at a later date) as part of the termination agreement.
  15. Allow the employee adequate time to respond and acknowledge the severance offer before requiring them to sign a release.
  16. Consult your own lawyer before termination and severance offers for complicated or high profile employee situations.

Were my professors correct that employers can terminate any employee without cause at any time?

Technically they were correct, but the reality of the messy business of terminations means that just because you have the legal right to do something it doesn’t mean that it won’t have other legal, business or public perception costs.

Follow me

Marcia Scheffler

Human Resources Generalist at Wawel Villa
Marcia Scheffler, M.A., CHRP Candidate is a Human Resources Generalist with M.A. working full-time as a Senior HR Officer. She is interested in the intersection of human resources theory and current best practices in HR. Read more
Follow me
Kindle

, , , , , , , , , , , , , , , , , , , , ,

Comments are currently closed.

3 thoughts on “Managing risk in not-for-cause employee terminations
  • TMM says:

    I’m not sure I agree with #7 of allowing the person to choose whether or not to finish out the day. I have terminated many people over the past 20 years and not one of them was in a frame of mind after the termination meeting to continue working that day. Not to mention the risk of sabotage or stealing company confidential information by someone allowed to sit back at their desk. Then there is the possibility of info leaking out that they are leaving which makes for an extremely awkward situation for the terminated person and the other employees, suppliers, etc.

    After 30 minutes, I find a person cannot take in any more information and will often end up losing their composure. This can be humiliating for them and in fact, rather cruel, to make them sit there while you discuss the reason for termination and all the package details. I have found a shorter meeting works just as well to convey the critical information. I let them take the package with them, giving them a week or so to respond and ask them to communicate with me about any questions they have. I allow them a choice at that time about taking their personal stuff right away, setting up another time to pick up all their personal stuff or I package it up and mail it to them.
    Respectful termination meetings must be carefully planned out in advance with a back-up plan to allow for unexpected occurrences. All those involved must be coached beforehand so it goes smoothly.

  • Marcia Scheffler says:

    Hi Paula,

    Thanks for the extra details regarding documentation of a termination. What are your thoughts of handwritten notes vs computer documentation? Any preference? If you rewrite your notes into a computer file immediately and save as a PDF do you still keep your rough notes? I’ll read your article. Marcia

  • Great article covering all the important points of without cause terminations. One addition, when you do a dismissal interview, do not do it alone. Best practice is to have two people in the room, in addition to the employee. One does the talking, the other does the documentation. Not only does this allow for a witness to what is said by all parties (helping to protect both the manager doing the dismissal and the employer against allegations of inappropriate behavior) it also ensures complete documentation takes place. It is VERY difficult (sometimes impossible) to take notes while doing a dismissal. This is a stressful time for any manager and taking notes often takes a backseat to getting through the dismissal interview. Notes are often cobbled together (recall being less than perfect because of the stress) after the fact. Given the number of without cause dismissals that are followed by legal action, this is a less than desirable practice. For some additional reading on this topic I would recommend: “From Hiring to Firing” available at: http://www.silvercreekpress.ca/hiring-to-firing.html.