Employees can be dismissed for any reason as long as reasonable notice is given and statutory rights are recognized
Employers are often concerned when they receive a letter claiming a former employee was “wrongfully dismissed” or entitled to damages for “wrongful dismissal” since the term suggests the act of termination was blameworthy or wrong. However, provided an employee is treated fairly in the course of dismissal and the employer does not breach a statutory duty or violate an employee’s statutory right, there is nothing “wrong” about dismissing an employee and providing her with reasonable notice or pay in lieu thereof.
As highlighted recently by the Alberta Court of Appeal in Merrill Lynch Canada Inc. v. Soost, the term “wrongful dismissal” is misleading. Apart from employers who are governed by the Canada Labour Code, the term “wrongful dismissal” does not have any legal significance.
In a non-unionized workplace, the employment relationship is a contract and either party may end that relationship at any time. Ending the relationship by way of termination or resignation is not a breach of the employment contract provided the terminating party provides reasonable notice — or pay in lieu of notice —or has cause to terminate the relationship. As stated by the court in Merrill Lynch, “…all that needs to be reasonable is the length of the notice. The dismissal (or resignation) need not be reasonable; it may be whimsical, or inexplicable.” Accordingly, in most cases, the only potential wrong to be compensated for will be the lack of reasonable notice. Other economic losses arising out of a dismissal, including loss of reputation, will not be recoverable.
Unless there is a written agreement between the parties, what constitutes reasonable notice depends upon a variety of factors including age, position, salary, length of service, availability of suitable employment and inducement. In most cases, damages associated with a termination without cause should not exceed what reasonable notice is. In fact, these damages could very well be less than what reasonable notice ought to be where a recently terminated employee has fulfilled her duty to mitigate by obtaining new employment or has failed to mitigate by not taking reasonable steps to obtain new employment.
Damages can come from poorly handled dismissals
While the term “wrongful dismissal” is misleading, a termination can be carried out incorrectly, which can potentially lead to additional damages and other legal consequences. For example, an employer who breaches a statutory duty or violates a statutory right in the course of a dismissal, such as discrimination under human rights legislation or reprisal under occupational health and safety or employment standards legislation, can face additional legal consequences, including increased damages and potentially a reinstatement obligation. Another exception to the general rule that damages for a without cause dismissal are limited to reasonable notice (less mitigation income, if applicable) are Honda damages (see Keays v. Honda Canada Inc.). Honda damages may be available to an employee if the employer has breached its duty to treat the employee with good faith in the manner of dismissal but such damages are not available merely because there has been a dismissal.
One situation where an employer may trigger Honda damages is when cause is alleged to deny an employee reasonable notice where there is no basis upon which to assert cause. However, if an employer has an honest belief that it has cause to terminate the employee, even if cause is not proven at trial, Honda damages will not be available.
Dismissal dos and don’ts
While not an exhaustive list, these dos and don’ts should help employers avoid carrying out a termination incorrectly:
•Be forthright about the reasons for termination.
•Hold the termination meeting in private, where possible, with at least two employer representatives, and keep detailed notes.
•Keep the termination meeting short and avoid engaging in an argument with the employee.
•Pay statutory termination pay and severance pay that is owed to an employee without undue delay.
•Don’t breach a statutory obligation or violate an employee’s statutory right.
•Keep the circle small. Only provide details about an employee’s termination to those individuals who require such information.
•If a reference letter is promised, provide an honest reference letter and answer any telephone reference requests in accordance with the letter.
•Don’t speak negatively about a recently terminated employee.
•Don’t dismiss an employee and later re-characterize it as a resignation to avoid an obligation to provide reasonable notice.
•Don’t allege cause in the absence of a reasonable belief that there is cause to terminate the employment relationship and never use the threat of cause to leverage a shorter period of reasonable notice.
•Don’t dismiss an employee as a means to deprive a pension benefit, bonus or permanent status.
For more information see:
•Merrill Lynch Canada Inc. v. Soost, 2010 CarswellAlta 1695 (Alta. C.A.).
•Keays v. Honda Canada Inc., 2008 CarswellOnt 3744 (S.C.C.).
