Minimizing Employee Termination Costs

Aug 4, 2011

Employers often call us because they are thinking of terminating an employee. They want to know the potential legal repercussions associated with the proposed termination and the termination costs. The first question we ask is:

Is there a termination clause in your standard employment contract?

If so, it is usually a matter of reviewing this clause. This clause can limit an employee’s right to notice of termination to the minimum notice outlined under the Ontario Employment Standards Act.

Without a termination clause in an employment contract, an employee may be entitled to up to 104 weeks notice of termination. A termination clause can limit that period to as few as 8 weeks.

Lesson: Require all new employees to enter into an employment contract with a termination clause.

If no termination clause exists and there is no just cause for termination, the employee is usually entitled to reasonable notice of termination. In this scenario, the first question we are often asked is:

What is “reasonable notice of termination”

To determine the amount of reasonable notice in each particular case, courts usually consider the following factors.

  • The employee’s position.
  • The employee’s length of service.
  • The employee’s age.
  • The availability of similar employment based on the employee’s experience,
    training and qualifications.
  • Wrongful dismissal decisions involving employees with similar
    positions,  lengths of service, and age.

Other factors are also considered. Advising on the appropriate notice period in each case is more of an art than a science. Judges have considerable discretion when determining the appropriate notice period. It is possible to find cases where judges have found  significantly different notice periods based on similar facts.

Note: Ontario courts have specifically rejected “one month per year of service” as a rule of thumb.

Lesson: It is difficult to predict a reasonable notice period with any certainly. Accordingly, reasonable people can and often do disagree on what is fair.

If you want to discuss the benefits of using an employment contract or are thinking about terminating an employee, and wish to speak with one of our lawyers, click here

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