Employment Law

Reducing the Cost of Employee Terminations: Part 1

By April 23, 2019 No Comments

There was a time when people worked their entire career at one organization. With a few exceptions, those days are long gone. Now the vast majority of employees change jobs many times during their working career. And most of these terminations are “without just cause” so that some termination pay is often owing.

If you have ever been involved in a wrongful dismissal action you know how much time, money, legal uncertainty and emotional energy is expended deciding how much termination pay is owing. This unproductive time and money can be avoided.

The best way to decide how much termination pay is owing is to address this issue up front in the termination clause of the employee’s employment contract.  

This is the first of four blogs that discusses how to better manage the costs and legal risks associated with employee terminations by including a well crafted legally enforceable termination clause in your employment contracts.

In recent years, the legal enforceability of these clauses has been much litigated. There have been a myriad of court cases in the last two or three years including several from Ontario’s Court of Appeal. Here is a link to a recent case where the courts refused to enforce a termination clause: https://macleodlawfirm.ca/esa-termination-clauses-another-one-bites-the-dust/ All organizations should have their termination clause reviewed regularly to make sure it will withstand judicial scrutiny.

There is no one size fits all termination clause but it can address the following issues:

  • How much notice of resignation is the employee required to provide
  • How much notice of termination is required in a just cause termination and  whether to define the term “just cause”
  • How much notice of termination is required in a without cause termination and does this notice comply with the minimum standards set out in the Employment Standards Act
  • Does the clause specifically state that the notice of termination includes all common law notice of termination owing
  • Does the clause address temporary layoffs

My second blog discusses the difference between just cause terminations and without cause terminations and how an employment contract can take away a judge’s power to determine whether just cause exists  in certain situations.

The third blog discusses the different kinds of without just cause terminations and how you can significantly decrease the amount of termination pay that is owing in connection with this kind of termination. Did you know that you can decrease your organization’s obligation from 104 (or more) weeks termination pay to 8 weeks if your payroll is under 2.5M?

The final blog discusses different ways to structure termination payments in a termination clause and the benefits of offering reference letters and outplacement counselling to some employees.

 

For 30 years, Doug MacLeod of the MacLeod Law Firm (www.macleodlawfirm.ca)  has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at doug@macleodlawfirm.ca

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