Best practices for employee terminations

'The employee may bring a wrongful dismissal claim and demand additional damages for the hardship of being terminated for cause'

Best practices for employee terminations

When it’s just not working out for an employer or an employee has done something egregious on the job, inevitably difficult conversations result and a decision must be made: terminate or not?

Doing it too quickly — or handling the process in a poorly planned manner — can often mean the employee launches a wrongful dismissal lawsuit, which can produce even more headaches for the employer.

So, what are the best practices for employers and HR to keep in mind when dealing with employees who might need to be let go?

Canadian HR Reporter asked Lindsay Craig, an associate at Sultan Lawyers in Toronto, about some of the best ways organizations can ensure the process is handled smoothly.

If any employer is looking for best practices on how to handle a termination, they may want to look at a recent decision out of Ontario involving HBC.

With or without cause?

It often begins with employers deciding whether the termination should be for cause, or without cause, says Craig.

If there was no real misconduct or breach of the employment contract, or it’s just not working out, or the company is going in a different direction “or it’s just a slightly bad performance,” then the dismissal should ideally be without cause, she says.

“When you’re terminating an employee for cause, the reason that you’re doing that is because there’s been such a fundamental breach in the employment relationship that it can’t continue, essentially [there’s] willful misconduct.”

For the employee who is dismissed with cause, often that means there is no requirement for termination pay or time of notice and even employment insurance might not be an option for the terminated worker, says Craig.

“It’s really looking at what is the behaviour that has occurred and does it meet that standard? But some factors would be looking at: Does this make the employment relationship irreparable? Are we able to continue based on this or has there been a complete lack of trust? Does this behaviour or pattern of behaviour show that the employee is not willing to cooperate with the employer?”

Termination-for-cause provision seems to be particularly problematic these days, according to a Toronto lawyer.

Document behaviour

In this case, it’s prudent to consult with legal counsel says Craig in order to ensure the process is above board and won’t lead to more headaches further down the road.

“The risk of that is that it’s a wrongful termination for cause and the employee may come back and bring a wrongful dismissal claim and also demand additional damages for that hardship of being terminated for cause and they shouldn’t have been,” she says.

Doing it correctly means not only gathering document around the worker’s performance or behaviour but showing that it was noted at the time.

“If there’s previous discipline that is on the record, that’s always really helpful to have because you can show warnings have been given,” says Craig.

And make sure those disciplinary conversations were not informal or it might result in the employee saying they didn’t know the performance or behaviour was a problem, she says.

Good faith in terminations

Once the without-cause route has been chosen, employers will have to satisfy various legal entitlements for the worker, which can include notice time or pay in lieu of that notice, says Craig.

“There’s the employment standards legislation minimum that are required that an employer would have to pay regardless and then there’s common-law notice entitlements — an employer should look into whether their employment contract is enforceable at the time of their terminating and if not, then they do have to provide more than the minimum.”

When it comes to offering some amount of severance pay, often when employers sweeten the pot, it pays dividends, she says.

“It’s pretty common for employers, if there’s no bad blood and things just aren’t working out and they want to avoid future litigation, to offer an additional amount and it can vary,” she says.

“But if you can, you might as an employer save yourself a lot of grief in actually just giving them that amount of money in the end as a settlement anyways; you can avoid going through the back and forth of negotiation by just giving them a little bit of extra at the beginning.”

During the dismissal meeting, always treat employees in a “good-faith manner” to avoid fodder for a wrongful termination case.

“[That means] not walking them out in front of a group of people; being kind; not lying to them; being honest and upfront because if a claim comes forward later that can carry with it additional damages, or bad-faith termination, if you embarrass the employee at the time, you’re cruel or if you’re stringing them along for a little while saying your job is safe, all the while planning to terminate them, that could be something that could be cause for additional damages,” says Craig.

And because case law is always malleable, review your termination documents regularly, she says.

“Often, a lot of termination clauses are unenforceable because they’ve been drafted a few years ago, and case law has changed and certain aspects of the clause may now be unenforceable without them really noticing. It’s good practice to review that at least once a year, just to see if it’s still enforceable, if it needs to be updated and that can also make the termination process a little bit more seamless as well.”

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