Layoffs and Terminations 101: Best Practices as an Employer

When an employer terminates an employee, it results in a significant relationship breakdown. In discussing terminations and layoffs with Ellen Swan, an employment lawyer practicing in association with Caravel, this point became central. Ellen was quick to reference research revealing, in most instances, we spend more time with our coworkers than with our loved ones. Regardless of what has prompted the exit or how expected it may have been, the ending of these relationships should be handled with care.  

In our conversation, Ellen raised a few key best practices to keep in mind:  

  1. Treat Your Employees as You Would Like to be Treated: This sounds simple because it is simple. Consider the standards you would have if you were an employee being let go and uphold these standards in your approach. It will save you time, money and energy to be fair and reasonable from the get-go.  

  2. Be Reasonable with Your Offer: Finding new work in under 8 weeks is unlikely. Remember, even if the individual finds a suitable job opening within the first few days of their termination, they still must go through the cycles of the hiring process. This means waiting for job postings to close, going through interview rounds and negotiating offers. If you remember this timeline and are aware of it in crafting your offers, you’re more likely to make the terminated employee feel secure.  Secure employees are less likely to litigate.  

  3. Consider the Big Picture: Remember, it is in everyone’s best interest that the former employee finds new work quickly. It reduces the risk of conflict, so be helpful. If you can, offer to be a reference. Have HR personnel offer advice for CV’s and resumes. If you are familiar with other suitable job openings, point the individual in the right direction. Even if the individual does not accept this help, a show of good faith will carry weight if legal action is taken later on. 

  4. Prioritize Predictability Over Minimal Entitlements: When you draft employment agreements to limit termination entitlements, remember that statutory minimum clauses are litigated far more often than clauses that provide something upon termination an employee can live with and feel secure with.   

While the above efforts are a show of good faith, there are legal requirements you must consider throughout the layoff process as well, including:  

  • Minimum Standards for Notice and Severance: The Ontario Employment Standards Act sets requirements for minimum notice and severance that must be provided based on the length of employment. Each province will have its own variation of this requirement. It is your legal obligation to provide the employee with the minimum. It may be in your best interest to be more generous, and it may be your legal obligation if you have not effectively limited termination entitlements with an enforceable employment agreement.  

  • Termination Letters: Even though termination meetings occur face to face, all employees must receive notice of termination in writing. Remaining wages/salary and severance payment(s) should be clearly outlined in the letter along with the last day of employment, and any outstanding details (I.e., outstanding vacation amounts, termination of benefits and other company packages, return of company equipment, etc…) 

In many instances, the relationship breakdown between an employer and employee may not be satisfactory to the employee, much less amicable. You will encounter disputes and challenges, in those instances there are scenarios and legal nuances you should be aware of.  

Just Cause 

This refers to instances in which an employee is terminated based on their misconduct and breach of employment contract. In discussing just cause with Ellen, she emphasized that you should terminate for just cause if you have it. However, you must be familiar with what constitutes just cause and the evidence required to uphold that claim.  

In scenarios where just cause is challenged and a wrongful termination claim is made, the burden of proof is on the employer – and it is a high standard. This should not deter you in situations where just cause exists, but employers should understand the burden of proof, what evidence must look like, and what ultimately constitutes just cause.  

The Burden of Mitigation 

Employees who have been terminated have a duty to take reasonable steps to find comparable employment. In a wrongful termination dispute, this requirement works in the employer’s favor. Good faith acts (ex: assisting with the job search and resumes, as suggested above) are examples of efforts to help mitigate losses. However, the burden of evidence for an employee is low.  

If an employee has found comparable work, damages may still be awarded. However, those damages will be for the reasonable notice period, less the amount they’ve mitigated. Again, it is in everyone’s best interest that the individual finds new work sooner rather than later.  

The Duty of Good Faith 

Employers have a duty of good faith both during and after employment. Many employers know they have a duty to provide common law reasonable notice of termination or pay in lieu thereof. However, they often insist on a release to pay any amounts over and above minimum statutory entitlements. Consider paying at least part of a common law entitlement without making the employee sign a release. You and the employee may disagree on what common law pay in lieu of notice looks like, but if you pay what you think you could owe, including via salary continuance, you will appear much more reasonable before a judge should the matter end up in litigation.  

Moreover, paying at least the low end of an employee’s common law entitlement means the file may be less attractive to contingency lawyers, or even make the matter one more appropriate for the Small Claims Court than the Superior Court, which vastly reduces the cost of litigation for the employer. 

Caravel has a team of over 90 qualified and experienced lawyers, including those specializing in employment law, who can advise on terminations and layoffs. Get in touch with our team today to find out more. 

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