Employee terminations can be one of the most challenging aspects of managing a business.
Lindsay Koruna
Whether you're downsizing, restructuring, or parting ways with a performance-challenged employee, navigating terminations in Ontario requires careful attention to legal and ethical considerations.
Here’s a comprehensive guide to help employers handle terminations effectively and in compliance with Ontario's laws and regulations.
Understanding the legal framework:
In Ontario, employee terminations are governed by several legal principles, including the Employment Standards Act, 2000 (ESA), common law, and any applicable employment contracts.
The key elements to consider are:
- Minimum Notice Periods: The ESA stipulates the minimum notice period or severance pay required based on the employee’s length of service. At no time can an employer offer an employee less than their entitlements under the ESA.
- Common Law Notice: Under common law, employees may be entitled to more notice or severance than what is provided under the ESA. Common law notice is based on various factors like the employee’s position, length of service, age, and the availability of similar roles at a commensurate rate of pay.
- Employment Contracts: An employment contract is where employers specify an employee’s entitlements upon termination (whether it be ESA or common law notice). It’s very important that your employment contracts are up-to-date and contain enforceable termination provisions. Before proceeding with a termination, review the employee’s contract to understand any specific termination clauses.
Documenting performance issues:
If the termination is performance-related, it’s essential to have thorough documentation. This includes performance reviews, disciplinary actions, and any communications regarding performance expectations. Before terminating an employee, provide clear feedback and an opportunity for improvement. A well-documented performance history helps support the rationale for termination and can be crucial if the employee challenges the decision.
Following fair termination procedures:
Fairness in the termination process is crucial to avoid potential legal disputes.
We always recommend conducting a professional and respectful exit interview and ensuring confidentiality throughout the termination process to protect the employee’s privacy and maintain morale among remaining staff.
Calculating final pay and benefits
- Outstanding Wages: Any wages earned up to the termination date.
- Accrued Vacation Pay: Payment for any unused vacation days.
- Severance Pay: If applicable, based on the terms of the employment contract or legal requirements (i.e. if you are an employer with a global payroll over $2.5 million, or if you are permanently closing your business with a mass reduction in force of at least 50 employees within a span of 6 months).
Review the employee’s benefits, such as health insurance or retirement plans, and inform them of any changes or continuation options.
Addressing legal risks and compliance:
To minimize legal risks, ensure compliance with all applicable laws and regulations:
- Employment Standards Act (ESA): Ensure that the termination process meets the ESA’s requirements for notice or pay in lieu of notice, severance, and other entitlements.
- Human Rights Code: Ensure that the termination does not discriminate against the employee based on protected grounds.
- Employment Insurance (EI): Provide information to the employee about their eligibility for Employment Insurance benefits and how to apply and provide them with their Record of Employment (ROE).
Plan for the transition & learn how to improve
Consider how the termination will affect team dynamics and the workload. Plan for the transition of the employee’s responsibilities and communicate any changes to the remaining staff to maintain morale and productivity.
After the termination process, review what worked well and what could be improved. Use the experience to refine your termination procedures and employment practices, ensuring that future terminations are handled effectively.
Navigating employee terminations in Ontario involves a careful balance of legal compliance, fairness, and professionalism:
Don’t hesitate to seek advice. By doing so, you can make informed decisions and navigate the complexities involved in employee terminations. If you are an Employer looking to reduce your workforce or considering a termination, contact us.
