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Oct 24, 2019

What U.K. Employers Should Know About Canadian Termination, Dismissal Law

By Fiona Brown and Michael F. Horvat

Canadian employment law shares many similarities with U.K. employment law by virtue of Canada having inherited its common law system from the U.K. Nevertheless, it is important for U.K. employers seeking to expand operations into Canada to understand how Canadian employment legislation operates within a federalist state. Part three of this four-part series looks at a key aspect of Canadian employment law that is distinct from U.K. employment law.

Termination

Employers’ legal obligations with respect to termination in Canada depend in part on whether the employee is being dismissed with or without cause.

Dismissal without cause

Employees who are dismissed without cause are entitled to notice of termination or pay-in-lieu of notice. In Canada, employees who have been continuously employed for three or more months are generally entitled to a minimum of one to eight weeks of notice depending on length of service. However, it is extremely important to note that, if the employment contract does not limit the amount of notice to the statutory minimum, employers will be liable to pay for “reasonable notice” at common law which is significantly lengthier than the notice requirement under statute.

The concept of common law reasonable notice is unique to Canadian employment law, and is a stark departure from U.K. employment law. Whereas the lack of any termination provision in U.K. contracts of employment defaults to the statutory minimum notice (which ranges from one to 12 weeks), the lack of termination provision in Canadian employment contracts defaults to reasonable notice at common law, which typically averages to one month per year of service to a general maximum of 24 months. For example, an employee terminated after 10 years of service could be entitled to 10 months or about 40 weeks of notice under the common law.

What constitutes reasonable notice at common law depends not only on an employee’s length of service, but also on their age, the nature of their employment and the likelihood that they will face difficulty securing a comparable job in a timely manner. To avoid unexpected, lengthy notice obligations or liability for an unintended wrongful dismissal, employers should seek legal advice to ensure that their employment agreements validly limit the amount of notice to which employees are entitled.

Dismissal with cause

Employers are not required to provide notice or pay in lieu thereof before dismissing an employee “with cause.” Though particularly serious misconduct may justify an employee’s immediate dismissal, employers often have an obligation to engage in progressive discipline before resorting to termination. Because it can be difficult to know whether an employee’s moderate misconduct or underperformance constitutes cause for dismissal without seeking legal advice, many employers will elect to provide notice even when they suspect an employee’s dismissal is justified.

Conclusion

While there are many similarities between U.K. and Canadian employment law, it is important for U.K. employers looking to expand into Canada to recognize the relevant employment-related legislation that applies to their case. When drafting employment agreements, employers should be careful not to derogate the minimum rights set out in the employment standards statutes to avoid a court finding a provision of the agreement or the entire agreement unenforceable. The consequence of an unenforceable employment agreement could, for instance, expose employers to paying common law reasonable notice upon an employee’s termination.

*This article was originally published in The Lawyer's Daily on October 21, 2019. 

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