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Terminating an Employee: the Dignified, Legal Way

By J. Christa Thomas |

Firing an employee, even if you think that person is grossly incompetent, can be a risky venture. If you do it for the wrong reasons, or in the wrong way, a court may force you to pay damages to the employee. Fortunately, there are several steps you can take to reduce the chances of being sued.

  1. The Employment Contract
    A well-written employment contract can help you avoid a lawsuit. Be sure to review it for provisions that limit your ability to fire:

    • Guaranteed employment for a fixed period of time
    • Job security promises
    • Conditions that limit firing to specified causes

    The contract should specifically spell out an employee's obligations to you. If the employee isn't performing well, chances are that they are in breach of the contract, giving you the legal right to terminate the relationship.

    If there is no written contract, the law views the employment relationship as an on-going one of indefinite duration. The relationship can be terminated for just cause, reasonable notice, or payment in lieu of notice. But, a written contract is strongly recommended.

  2. Reasonable Notice
    The Employment Standards Act (ESA) for Ontario imposes a mandatory minimum notice period of one week per year worked. But in case after case, the courts have stressed that the ESA is a minimum guideline only. In determining the appropriate notice period, courts take into account several factors:

    • The employee's position
    • Work performed
    • The ability to find other work
    • Length of service
    • Age
    • Security provisions in contract
    • Whether they were persuaded away from another job
    • Whether or not they have attempted to find other work

    The employee is entitled, during the notice period, to whatever benefits they were receiving during the employment. This may include vacation pay, insurance, and health/dental care.

    In many litigated wrongful dismissal claims, there is a claim for mental distress and/or punitive damages, which can lead to large amounts of money. Although punitive damages are rarely awarded in wrongful dismissal cases, they are awarded in cases where the employer dismissed the employee in an unseemly way (ie: claiming just cause when none existed). Mental distress claims tend to be successful where mental suffering was caused by an unkind or improper behaviour during the firing (ie: physically escorting an employee out of the building in front of peers).

    A dismissed employee is required to reduce damages by attempting to obtain other employment as quickly as possible. They are obligated to attempt to find equivalent employment at equivalent compensation.

  3. Just Cause
    If you fire an employee for cause (ie: theft) you must pay them amounts owing, but do not need to give them notice. But, it is extremely difficult to establish cause for dismissal in the courts. The onus is on the employer and the standard of proof is high. Be sure to have followed these steps before dismissing an employee:

    • Proper warnings and opportunity to improve
    • These should be clear, concise and in writing
    • If a specific problem occurs, confront the employee (verbally and in writing)
    • Give the employee a chance to explain
    • Check performance appraisals
    • Check raises/bonuses/incentive payments to ensure that you're your actions are consistent with the position that the employee is not performing well

    Smart Tip: If you regularly let some employees engage in prohibited conduct, you'll be on shaky legal ground if you fire others for the same reason.

  4. Conducting a Safe Exit Interview
    Follow this list to ensure a safe dismissal session:

    • Have two people present, in case there is a dispute about what went on
    • One person should speak, while the other takes notes
    • Say why you are firing the employee
    • Remind them of the warnings you gave
    • Ask the employee to return all documents and records belonging to the company
    • Remind the employee to maintain the confidentiality of the company's business after her departure
    • Make arrangements for the employee to remove her personal belongings at your mutual convenience
    • Tender a cheque to the employee for outstanding salary, commission, vacation time etc.
    • If the employee disputes the amount, make a record of their version, and offer to get back to them
    • Obtain a release

    Always listen to the employee, but do not argue with them. Things said in the heat of the moment may come back to haunt you later. Do not call the employee incompetent or dishonest as such statements may later form the basis for a defamation suit.

  5. The Final Checklist

    • Consult your legal advisor
    • Review and comply with the employment contract
    • Review and comply with any written company procedures regarding firing (ie: manuals, internal policies)
    • Ensure you follow the same procedures as were followed in similar situations with other employees
    • Give the employee adequate and documented warnings that they will be fired unless improvements are made
    • Conduct a sound exit interview
    • Do not discuss the circumstances surrounding the termination with anyone other than the employee to avoid a defamation/character claim

    Consider offering a termination package that the employee may receive upon executing and delivering a release of liability to you.

    Smart Tip: If you are asked to give a letter of recommendation, or are called upon by a prospective new employer, it is safest to just confirm the position held and dates of service.

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