Dismissal and Severance

There are two ways an employer can dismiss a non-unionized employee:

1. Without Cause: the employer must provide the employee advance notice of termination or payment in lieu of notice (also known in BC as severance).

2. For Just Cause: the employer can dismiss the employee immediately without providing advance notice or severance.

If an employer does not have just cause to dismiss an employee, they must treat the dismissal as without cause. 

A wrongful dismissal happens when an employer dismisses an employee without providing that employee the correct amount of advance notice or severance in lieu of notice. For example:

• Dismissing an employee without cause but providing them less notice or severance than the employee is owed; and

• Dismissing an employee for just cause when the employer does not actually have just cause.

An employment relationship can also come to end after an employee resigns, or if the employer and employee both agree – usually on negotiated terms.

Note: different considerations apply to unionized workplaces, federally regulated employees and in certain provinces where additional benefits must be provided to dismissed employees under employment standards.

without cause dismissals

An employer can dismiss an employee without cause at any time and for any reason so long as:

1. The employee is provided their lawful advance notice of dismissal or severance in lieu; and

2. The reason is not otherwise illegal. Examples of illegal dismissals include dismissing an employee for discriminatory reasons in violation of the BC Human Rights Code (see here for more information), in response to an employee asserting their rights under the BC Employment Standards Act (see here for more information), or for reporting a workplace safety issue under the BC Workers Compensation Act (see here for more information).

When an employer dismisses an employee without cause, employers do not have to explain the reasons for dismissal to the employee apart from confirming the dismissal was on a without cause basis.

Advance Notice/Severance

The amount of advance notice or severance in lieu an employee is entitled to upon dismissal without cause is determined by two sources of law:

1. Legislation; and

2. Common law.

Legislation: ESA Termination Notice and Pay in Lieu of Notice

Each provincial government, or for federally regulated workers the federal government, has established laws setting out the minimum standards for workplaces (such as minimum wage, vacation pay, statutory holiday pay and overtime pay etc.). These are also known as employment standards.

In British Columbia, the Employment Standards Act (the “ESA”) sets out the employment standards that apply to most non-unionized employees in the province. Other provinces have similar legislation.

Under the ESA, when an employer dismisses an employee, that employer must provide the dismissed employee with a minimum amount of advance notice of dismissal or severance pay in lieu equal to the amount of advance notice the employee would have received.

For without cause dismissals, the ESA sets out the minimum amount of notice employees must receive based on how long an employee has worked for that employer. This amount of notice is capped at a maximum of 8 weeks after 8+ years of service (although this amount increases when an employer engages in group layoffs of over 50 employees within a two month period).

There are also situations, e.g., when an employee is terminated for cause, that no advance notice or severance in lieu is owed to an employee when they are dismissed.

Up to date information on ESA termination notice or pay can be found here.

Important Reminders:

• It is illegal for employers and employees to agree to terms of employment that provide less than what employment standards require. When that happens, those contractual terms are unenforceable. 

  For example, an employer and employee cannot agree that the employee will be paid less than minimum wage. The minimum requirements regarding notice of dismissal or severance in lieu operate in the same way; an employer and employee cannot agree that an employee will receive less than their minimal entitlements on dismissal under employment standards.

• Employment standards only ensure employees receive at least the prescribed minimum requirements, e.g., under the ESA in BC. 

  For example, if an employee is being paid at least minimum wage they do not also receive additional wages equal to the minimum wage on top of their salary. The minimum requirements regarding notice of dismissal or severance in lieu operate in the same way; the amount of notice or severance will be included in any notice or severance provided by an employer and not in addition to that amount (which could be more as discussed below).

Common Law: Contractual Termination Notice/Severance

The second, and often forgotten, source of law that determines how much advance notice or severance in lieu an employee is entitled to upon dismissal is our ‘common law’ legal system.

Our common law legal system, which Canada inherited from England, is based on laws and legal principles developed in our court system; important cases decided by judges become legal precedents for similar issues in the future. This is also known as “case law”.

Under common law, judges have developed law around contract law and employment law, including a framework to determine how much advance notice, or severance in lieu, an employee is entitled to when dismissed without cause.  This amount of notice under common law is called a reasonable notice period and represents the approximate time it will take an employee to re-employ in a similar position.

Under common law, an employee may be entitled to up to a reasonable notice period of up to 24 months (see this summary for a more detail description on how this is calculated).

Important Reminders:

• An employer and employee can expressly agree in an employment contract that employee is entitled to something different (usually less) than common law notice/severance when terminated without cause. 

  When this happens, the termination clause in that employee’s employment contract determines how much advance notice or severance that employee is entitled to when dismissed.

  Since termination clauses often limit employees’ rights on dismissal to an amount less than their common law entitlement, courts heavily scrutinize them.  For example, termination clauses that are ambiguous or are illegal e.g., do not comply with the ESA, are unenforceable.  If there is no termination clause or a court determines a termination clause is unenforceable, that employee is entitled to common law notice/severance.

• The amount of severance an employee is owed may be reduced if they earn money after being dismissed e.g., by re-employing.  

  Because the purpose of a reasonable notice period is to determine the time it would take an employee to re-employ, the law assess the position the employee would have been if they had received advance notice they were being dismissed and continued to work during that notice period while searching for a new job.

  Based on this, dismissed employees have a positive obligation to search for new work (the “duty to mitigate”). Any earnings they earn over their notice period (“mitigation earnings”) are deducted from the severance to them owed by their previous employer to ensure that employee is only “kept whole” and not earning more than that would have had they remained employed over their notice period.

Just cause Dismissals

The relationship between an employer and employee is predicated on trust. An employer can terminate an employee for just cause when that employee causes a significant breakdown of this trust.

The threshold for dismissing an employee for just cause is extremely high and the most severe form of discipline in employment law. The law only allows employers to dismiss employees for just cause in the most serious circumstances.

This occurs in two main ways:

1. The employee engages in a single and very serious form of misconduct. 

   Examples include fraud, violence, and theft. Less severe discipline such as a warning or suspension must not appropriate. If lesser discipline was appropriate, then the employer may not have just cause.   

2. The employee engages in a culmination or pattern of less serious misconduct or poor performance issues.

   Before terminating an employee for just cause due to multiple incidents of lesser misconduct or ongoing poor performance, employers must provide:

• Clear feedback and warnings (e.g., progressive discipline), including advising the employee they may be dismissed for just cause if they do not improve their performance and/or correct the situation, and

• Fair opportunities after the feedback/warnings for that employee to correct the situation and/or improve their performance.

Ultimately, in both situations, the law considers the full context of what happened to determine whether an employer had just cause to terminate an employee. 

Off-duty misconduct

After reading the information above on dismissing an employee by providing them with notice or severance (i.e. without cause), and dismissing an employee because they did something seriously wrong at work (i.e. with cause), you may be curious if an employer has a right to fire someone for something they did outside of work, in their own free time (i.e. off-duty misconduct). 

In some extreme circumstances, an employer may be able to prove just cause for off-duty misconduct if:

1. The employee’s conduct harms the company’s reputation or product;

2. The employee’s behaviour renders the employee unable to perform their duties satisfactorily;

3. The employee’s behaviour leads to refusal, reluctance or inability of other employees to work with them;

4. The employee is guilty of a serious breach of the Criminal Code, making their conduct injurious to the general reputation of the company and its employees; or

5. The employee’s conduct interferes with the employer’s ability to properly carry out its functions or efficiently manage its operations and/or workforce.

As with just cause generally, we caution you that the courts will only allow employers to dismiss employees for just cause for off-duty misconduct in the most egregious circumstances.

Constructive Dismissal

Sometimes an employer may not expressly dismiss an employee, however they may change a fundamental part of the employment relationship, such as significantly reducing an employee’s compensation, demoting the employee, or creating a very hostile work environment. In these circumstances, an employee may be able to claim that the employer’s behavior amounted to a dismissal. Normally, an employer will owe severance pay to a constructively dismissed employee (see Potter v. New Brunswick Legal Aid Services Commission, a statutory body corporate pursuant to a special act of the Province of New Brunswick, 2015 SCC 10 or our summary of this case).

Constructive dismissal cases are complex – some changes to an employment relationship will end it, while others will not. Sometimes conduct by an employer can constitute bullying, while similar conduct may be viewed as a sharp management style. Each case must be reviewed with the entire context considered.

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