Terminating an Employee

Firing an employee is one of the most difficult and unpleasant things for an Employer to do. As mentioned in the previous section, Ontario laws largely favour the employee. Thus if you are going to terminate an employee, doing so in a proper and professional manner is critical to avoiding aggravation and/or a wrongful dismissal lawsuit. The section that follows is comprised of considerations and important steps to follow when terminating someone:

Termination Process

Compensation

Terminating an employee comes with a financial cost. The Employment Standards Act, 2000 (ESA) requires employers to provide termination notice or pay in lieu of notice, which is calculated based on an employee’s length of service. If an employee has worked less than 3 months, no notice is required. Any duration longer than 3 months requires 1 week per year of service. For example, someone employed for more than 3 months but less than 1 year receives 1 week of notice.  Someone employed more than 1 year but less than 3 years receives 2 weeks’ notice. Someone employed more than 3 years but less than 4 years receives 3 weeks’ notice, and so on. There may also be legal entitlements owing such as paid vacation, overtime and statutory holiday pay.

It is important to note that compensation includes entitlements to things like bonuses, commissions and health benefits for the duration of the notice period.

Severance pay is a separate obligation under the Employment Standards Act. It applies only if the employee has been employed for 5 or more years and if the employer has a payroll in Ontario of at least $2.5 million per year. Refer to the Employment Standards Act for more information.

Working notice

An employer can provide working notice instead of pay in-lieu. Working notice is when an employee continues to work throughout the notice period instead of ending employment on the date of termination. The advantage to the employer is that they are still getting the benefit of the employee working. That being said, the effort on the part of the employee will likely not be 100%.

Employee Agreement

The first step in conducting a proper termination is to ensure the Employment Agreement was properly put together (for more information on Employment Agreements, see the HIRING module). All employment agreements whether in the form of employee or independent contractor, should include a termination clause to minimize the clinic’s potential for liability. When terminating an employee, re-visit their employment agreement and the termination clause. Ensure that the clause meets the minimum legal requirements set forth by the ESA.

“Just cause” or “without cause”

The majority of terminations that take place in any business are “without cause”.  Provided the employee is not unionized, you do not have to give a specific reason for the termination other than it is “without cause”. “Just cause” or “with cause” is when an employer terminates an employee with no notice or compensation. “Just cause” terminations are usually reserved for significant incidents of misbehavior such as embezzlement, assault, fraud and things of that nature. Terminating with cause is extremely difficult to prove and will almost guarantee subsequent legal action. Poor performance is not considered grounds for “just cause”. Employers are encouraged to deal with underperforming staff before resorting to termination (see Managing Staff).

Termination meeting

There is not a legally prescribed way to carry out a termination meeting; however there is certainly ‘termination meeting etiquette’.

  • Hold the meeting in a private place
  • Deliver the message in a professional way but be direct and to the point
  • Do not engage in personal conversation. You are there to deliver a message. If the employee wants to discuss, simply state “the decision has been made”
  • Deliver the termination agreement and explain next steps
  • Give the person an option to collect their personal belongings or arrange another time to come back after hours
  • Ask the person to return all keys and access cards for security purposes. Terminating access to building facilities and computers can be done after the person has left (or before, depending on the situation)
  • Consider letting the person say good-bye to co-workers
  • Offer yourself as a reference for future employment (decide on a case by case basis)

Signed release

A terminated employee (without cause) does not need to sign a release in order to receive the minimum entitlements set out under the ESA. Should the employer offer more than what is required under the ESA, they can request a release be signed for the amount over and above what the ESA entitlements are. If there is a release to be signed, do not make the person sign it at the termination meeting. Allow them 1-2 weeks to read the information, sign and return the release.

Walking the person out and saying good-bye

There is no rule that dictates a terminated employee must be walked out of the building or cannot say good-bye to their co-workers. These are decisions that can be made on an individual basis.

Other considerations when terminating an employee

  • Consider giving more entitlement than what is required by the ESA. Fair and generous termination terms will expedite acceptance and significantly decrease any chance of legal action
  • Ensure all information regarding employee entitlements is accurate. Check the Employment Standards Act and look at the original employment agreement. You can also consult an Employment lawyer if you have any doubts
  • Do not discuss the termination of an employee with others at work. If the terminated employee finds out you are speaking negatively about them, it could be grounds for legal action
  • Offer to provide the terminated employee with a positive reference. There may be exceptional circumstances, but for most there was a time when the employee performed the job well. Furthermore, a positive reference may help the person secure a job faster which could potentially decrease your settlement obligations
  • Keep news of an upcoming termination confidential and inform only those who need to know
  • Have 2 people participate in the termination meeting to avoid potential accusations after the fact. One should be the employee’s direct supervisor and the other either a clinic owner, partner or trusted staff member
  • Make a list of what office items are in the employees’ possession and need to be returned
  • Shortly following the termination, communicate to the rest of the staff that the employee is no longer working there. You do not need to provide an explanation or give further details as to why, but you do want to maintain morale and have employees feel confident about their job.
  • Be diligent with post-termination activities such as sending out the final pay and issuing a record of employment

The termination process is one of crossing T’s and dotting I’s. With preparatory planning and professional execution, it is possible to remain discreet. Following the steps and suggested practices in this section will drastically decrease the chances of a terminated employee taking legal action against you.