Managing risk in not-for-cause employee terminations

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.

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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

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