Stephane Thiffeault is a lawyer at the Toronto law firm of McMillan Binch and a member of the firm’s Labour and Employment Law Group. This article was prepared with the assistance of CASSANDRA WATSON.

The news is filled with reports of an economic slowdown in both Canada and the United States. Add to that the uncertainty caused by the looming strikes amongst U.S. writers and actors, and many companies are pondering whether they’ll be able to maintain their staff at the current levels.

In order to avoid potentially costly lawsuits, before you terminate any employees, you should ensure that you conduct the termination in accordance with all legal requirements and take into consideration the realities and sensitivities of the employees being terminated.

The legal requirements surrounding termination will vary depending on the province in which your company operates, whether your business is governed by federal legislation or provincial legislation, whether you operate under a collective agreement and whether you have employment contracts in place. So what follows is a general guide only. You’ll need to talk to your own legal counsel to ensure that you get the full picture.

Termination without cause

The more common kind of termination during economic slowdowns is a termination ‘without cause.’ Here are the basics.

1. You need to give notice: If you are terminating your employees without cause you must give them written notice of the termination. In an effort to save costs, companies will often provide ‘working notice’ where the employee is required to continue working up to the end of the notice period.

You should note that most employment legislation explicitly prevents you from altering the conditions of employment after this notice is given. Furthermore, employees are entitled to any benefits they received before the notice of termination during the notice period.

2. How much notice are you required to give?: The right to notice and the amount of notice required will depend on a wide number of factors, perhaps most importantly, the type of employee being terminated and their length of service. You need to be aware of both the employment legislation that applies to your company and the common law established by the courts in this area.

Each employment statute provides for a specified period of notice that you must give your employees based on their length of service. Generally, the notice periods range from one to eight weeks. For instance, in Ontario, one weeks notice must be given to an employee that has worked for three months to a year, two weeks notice is required for an employee who has worked for one year or more but less than three years, and so on to a maximum of eight weeks.

Alberta, British Columbia, Nova Scotia, Quebec, Saskatchewan, the Northwest Territories and Nunavut have similar notice periods. Prince Edward Island, New Brunswick, Newfoundland, Manitoba and the Yukon have slightly differing starting points and maximum weeks of notice.

Most provinces provide a long list of exceptions to the requirement to give notice. As a result, you may not have to give notice to employees who were fired for wilful misconduct not condoned by you; employees who were free to decide when they worked; employees who were temporarily laid off; and employees hired for a specific task or period of 12 months or less.

You should consult the relevant employment standards legislation that applies to your business for a complete list of these exceptions.

The common law does not provide a set number of weeks for notice like the various employment statutes do. Instead, the proper amount of notice is determined by the courts examining a number of factors. These factors include the position held by the employee, the employee’s length of service, the employee’s age and the availability of similar employment for that particular employee. In fact, under the common law what is considered sufficient notice is usually longer than under employment legislation.

3. Payment in lieu of notice: If you fail to provide the appropriate notice as required by the governing law you will be required to make a payment of the regular amount of compensation (usually excluding overtime pay) equal to the period of notice the employee is entitled to. This is referred to as payment ‘in lieu of notice.’

A compromise is found in Alberta, B.C., and soon Ontario, where employment legislation explicitly allows you to provide a combination of written notice and payment in lieu of notice.

4. Wages and vacation pay: Keep in mind that you are liable to pay any outstanding wages and or vacation pay that your employees are owed. There is great variance between the different employment statutes regarding when you must make these payments. For instance, in Ontario all payments owed to the employee must be paid within seven days after termination, the federal government requires payment within 30 days of entitlement, whereas B.C. requires payment within 48 hours of termination.

5. Severance pay: Severance pay is payment that is received over and above payments that are provided in lieu of termination notice. This pay is provided in recognition of the amount of service contributed to the employer by the employee. Ontario and the federal employment statues require that employers provide severance pay on termination.

However, not all employees are entitled to severance pay. Under federal legislation only employees who have worked for 12 consecutive months with the same employer before their termination are entitled to severance pay. Furthermore, an employee is not entitled to severance pay if dismissed for just cause.

In Ontario, employees are entitled to severance pay where the employee has worked five or more years for the employer and the employer is in one of the following two groups: (1) the employer has a payroll in Ontario of at least $2.5 million a year, or (2) the employer is no longer going to be carrying on all or part of the business, and 50 or more employees will lose their jobs for this reason in any six-month period.

Finally, employees in Ontario are not entitled to severance pay if they fall within a list of exceptions similar to those listed under the exceptions to termination notice.

6. Mass terminations: Each employment statute, except the Prince Edward Island statute, has rules that employers must follow for terminating large numbers of employees. These rules generally require special notice and/or payment to the employees being terminated. For instance, you may be required to provide notice to each individual to be terminated or post the notice of termination in a conspicuous place in the workplace. Notice will also have to be given to the minister of labor for your province and to the union, if your company has one.

7. Temporary layoff: Under most employment statutes, if you temporarily lay off your employees they will not be entitled to termination notice or pay in lieu thereof. However, you may become liable to provide termination notice or pay in lieu of notice if the temporary layoff lasts beyond a time specified in your province’s employment statute.

Because the rules regarding the maximum time an employee is allowed to be on temporary layoff before termination notice and, if applicable, severance pay entitlements arise, you should talk to your legal counsel before any decision to temporarily lay off is made. In the long run, this may save you a lot of money and grief.

Termination with cause

Not surprisingly, the least expensive form of termination is when you terminate the employee ‘with cause.’

‘Just cause’ for termination is found where the employee engages in conduct which is a breach of their fundamental obligations to you (for instance, by demonstrating habitual neglect of duty, incompetence or wilful disobedience), or is incompatible with the discharge of his or her duties.

A big point, though – economic hardship on the part of you as the employer does not qualify as ‘just cause.’

In this type of termination, you are not required to provide the employee with written notice of termination or to make payment in lieu of such notice. The employee is generally only entitled to their record of employment and any money owed for past services, vacation pay, and the like.

However, you may be required to provide the terminated employee with written reasons for the dismissal (e.g. as is the case under New Brunswick’s employment legislation).

Taking a decent approach

One of the most important elements of the termination process is taking the right approach. This approach should be in line with the governing law, but it should also preserve the dignity of the employees and demonstrate your respect for the special role that employment plays in their lives. For instance, a heavy-handed and insensitive approach to terminations could mean that, if the terminated employee were to sue your company, the quantum of damages awarded to the ex-employee could be greater than if the termination had been better handled.

Hopefully, your company has a policy regarding disciplinary action and terminations. This, along with good judgement and sensitivity, will guide you in effecting a dignified and legal termination that both parties have a better chance of walking away from without harboring feelings of resentment.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice in any particular situation.) *