10 Best Practices for Canadian Employers on Terminations and Layoffs

Every business has to make difficult decisions when it comes to staffing, particularly in times of economic uncertainty. Employers, including their management and human resources teams, have the unenviable task of balancing the interests of the business with compassion and responsibility towards the affected employees, while also ensuring that employment laws are carefully followed.

Below are 10 best practices for successfully managing employee dismissals and reductions in force, both large and small, as discussed in a recent webinar presented by Blakes.

1. Know the minimum standards for notice and severance requirements. Employment standards for each province set out the minimum rights afforded to employees when terminated without cause. These include minimum standards for notice or payment in lieu of notice and, in some cases, severance pay. Employers cannot provide less than what is required by legislation. Employees may also have common law (or in Quebec, civil law) entitlements that arise through legal precedent and judicial interpretation. This may include a right to reasonable notice of termination that may be greater than what is required by the provincial standard. Employment contracts can, in certain cases, modify or clarify the common law obligations owed to employees, but they may not provide for less than the provincial standard. Contractual rights owed will depend on the specific terms of the employment agreement.

2. Consider the factors influencing employees’ entitlements to reasonable notice. When determining an employee’s common law rights, courts will consider the employee’s length of service, age, character of employment and availability of similar employment. For example, longer service and a higher age will typically require additional notice.

3. Understand the terms of the collective bargaining agreement (CBA). Where employees are unionized, common law standards do not apply in assessing entitlements on termination or layoff. A CBA may provide guidance on any entitlements in addition to applicable provincial minimum standards. For example, a CBA may contain notice requirements, severance requirements or specific procedures for laying off employees. Employers are expected to recognize all entitlements under a CBA.

4. In the unionized context, keep in mind employees’ right to return to work within a specific period. Recall rights in a CBA will generally entitle unionized employees to return to work if a layoff ends within a specified period. If recalled, the CBA will typically contemplate a return to work in the reverse order of layoff, meaning that the most senior employees will return to work first. If employees are recalled within the defined period, their seniority will often continue to accrue per the CBA. If not, they will be considered terminated. Where there is no likely chance of recall, such as in a plant shutdown, a unionized employee may, in certain circumstances, be able to waive their recall rights and collect their severance right away.

5. Determine the mass termination thresholds in each province. What constitutes mass termination will differ by province. In most provinces, a mass termination will trigger additional statutory entitlements. Employers are encouraged to obtain legal advice to best understand the relevant thresholds and requirements for their jurisdiction. For example, the dismissal of 50-plus employees over two months on a rolling basis will constitute a mass termination in British Columbia. In Ontario, the test requires the dismissal of 50-plus employees at the employer’s establishment within a four-week period, while in Quebec the threshold is 10 employees over the course of two consecutive months.

6. Determine the mass termination requirements for providing notice to provincial authorities. In cases of mass termination, employers may also be required to provide notice to provincial government authorities. Employers should obtain legal advice on requirements for the giving and timing of notice to authorities in their jurisdiction.

7. Track terminations. Mass termination notice requirements can extend beyond what is owed in a regular dismissal without cause. For that reason, particularly in provinces with low mass termination or collective dismissal thresholds, it is prudent to carefully track terminations to avoid triggering these additional notice thresholds or requirements when possible.

8. Learn about termination clauses that can help manage severance costs. Termination clauses in employment agreements can, when carefully drafted, be used to negotiate out of common law notice requirements. Legal counsel should be consulted when seeking to include termination provisions in offer letters or employment agreements.

9. Consider strategy relating to employees’ duty to mitigate. Employees have a duty to mitigate their damages by seeking new employment. As a general rule, money earned during the applicable notice period will be deducted from common law entitlements. In certain cases, employers may strategically look to waive the employee’s duty to mitigate in exchange for a reduced severance period.

10. Ensure termination letters are professional, clear and accurate. A termination letter should include (at minimum) the following information:

• The last date of employment
• Details regarding any remaining or additional payments to be made to the employee and, if applicable, which payments are conditional on a release
• Any outstanding vacation amounts
• The date any benefits will be terminated
• The date company materials must be returned
• A reminder of post-employment obligations (where applicable) 
• Contact information for the terminated employee in the event that communication after the termination is necessary

For further information, please contact:

Daryl Cukierman          +1-416-863-2585
Natalie Bussière           +1-514-982-4080

or any member of our Employment & Labour group. You may also view our webinar on Terminations and Layoffs of Employees: Best Practices for Canadian Employers.