In Manitoba a non-unionized employee can be terminated or fired at any time for any reason. There are a few exceptions to this, but that is, for the most part, the system that we have. One important caveat is that the employer is required to give notice of termination.
This can be done in one of two different ways.
One option is for the employer to give ‘working notice’, which means that the employee is told that their employment will terminate on a date that is far enough into the future that the employee’s legal right to notice is respected.
The other option is for the employee to be given a severance package. This means the employee is effectively not given any prior notice of their termination, but they are provided with enough money to adequately compensate for this.
How much notice?
Whether the employee is given working notice or a severance package, the quantum of the notice period is determined by several factors. At a bare minimum, all employees—subject to very few exceptions—must receive the notice period required by the Employment Standards Code. An employee may also be entitled to a further amount of severance pay by the terms of their employment contract. Most employees do not have a written employment contract, but that does not mean there is no contract. As a matter of law certain terms can be implied. The most important of these is the implied term that an employment contract will not be terminated by the employer without providing the employee with ‘reasonable’ notice.
Reasonable notice can be a fuzzy concept that ultimately amounts to whatever a judge would think is fair. The age of the employee, the length of service, the availability of suitable replacement employment, and the custom in the industry can all be factors to consider.
What is a severance package?
Sometimes the compensation that is provided to an employee on their termination is called a severance package. A severance package should be designed to adequately compensate the employee for the loss of their employment. Although the loss of base salary in the notice period is usually the most important element, a severance package can also compensate for the loss of pension credit accrual, the loss of benefits, and can sometimes also provide access to retraining services or career counselling.
It is increasingly common for Employers to seek employment contracts from their employees that will limit severance entitlements at termination. This can help provide certainty for employers but there are pitfalls. Employees, and their lawyers, frequently have found ways to void termination clauses that limited severance entitlements. When a termination clause turns out to be void, the cost for the employer is significant. An employer should consult legal advice before seeking a termination clause in its employment contracts. Conversely, employees who have been terminated and told that they are limited in their severance claims because of a termination clause may wish to consult legal advise as the clause may turn out to be void.
What about Cause?
In cases where an employee is guilty of serious misconduct, the law permits an employer to terminate an employee summarily and without any advance notice. Unsurprisingly, employers and employees often disagree on whether certain facts justify summary dismissal. Canadian courts have considered many scenarios and then ruled on whether summary dismissal was justified. Many employers have jumped the gun and moved too quickly to dismiss when a less punishment was appropriate.
An employer considering whether to summarily terminate an employee for cause should consider obtaining legal advice prior to proceeding.
The Termination Process
Terminating an employee is a difficult and stressful moment. Although both sides will have an interest in determining the cost of the employee’s entitlements, there is often some negotiation and back and forth. Employees are often upset, shocked, and filled with anxiety about their future. There are strategies in this process that can be used by both employees and employers to protect their interests in this process. It is usually a good idea for either side to engage the services of experienced legal counsel.
How much does it cost?
Employees are often anxious about legal fees because the last time someone wants to hire a lawyer is when they have just lost their income. Although there can sometimes be risks to negotiations, those are discussed at the outset. In some cases, it can be possible for the lawyer to work on a contingency arrangement where the fee is taken out of the final settlement and is contingent upon the lawyer generating additional value for the client. Legal fees can be tax deductible.
Every situation is a little bit different and it’s usually very important to not delay reaching out to legal counsel.
Daniel Hildebrand is a lawyer at Wolseley Law LLP focusing on civil litigation and employment law in particular