Termination of Employment

HISTORICAL BACKGROUND

Termination of employment has always constituted an important part of labour law. "Damage actions by salaried employees alleging wrongful dismissal account for the vast majority of reported court decisions dealing with the individual employment relationship."[1]

The statutory provisions of notice of termination of employment take their origins in the breach of contract rules in common law or in very similar rules of Quebec civil law. A person who is employed for an indefinite term, and whose employment is terminated for reasons other than disciplinary, is entitled under common law to a period of reasonable notice prior to termination, or to an amount of pay that he or she would have received if he or she had worked for that period. The courts have determined the period of notice that would have reasonably been required on the facts of each case. In doing so, they have considered the nature of the work, the length of service of the employee, age, experience and training and on an assessment of how long a person in the plaintiff's line of work and with the same attributes would need in order to find another suitable job. Employees doing work requiring little skill or responsibility have been considered to be entitled to shorter notices, while professional and managerial employees usually command longer periods.

The advent of employment standards legislation altered and expanded the protection afforded blue collar and low-skilled workers. While the statutory notice periods are to be treated as minimal, and do not pre-empt the right to longer reasonable notice periods, they have more relevance for the vast majority of employees than any rights they may have at common law.[2]

When an employee has been dismissed without notice or without pay in lieu of notice, he or she becomes a creditor with a claim for wages against his or her employer. The employee may, in most jurisdictions, initiate an ordinary civil action to recover the amount due.

"To do this he will have to seek out legal advice and wait out the time required to get to trial, to obtain a judgement, and to execute on the judgement, before receiving his money. The costs recovered in a successful action do not cover all the costs of the action, and this usually makes it uneconomical to bring a civil action for amounts not measured in the thousands of dollars."[3]

Because the amounts involved are usually much smaller in the case of an employee with little skill or responsibility, a civil action to recover them is not a practical solution. An action in a small claims court may mitigate some of these difficulties, but there may still be a need for legal advice and the delays to settle the matter still would be lengthy. Above all, the process of execution would be just as cumbersome.

Consequently, there is a particular need for a speedy and inexpensive legal recourse available to employees against a defaulting employer. Employment standards legislation usually provides employees with this kind of administrative recourse. The legislation generally empowers an employment standards officer to investigate employee claims and encourages an amiable settlement between the parties involved. Failing such a resolution, the director of employment standards can issue a certificate of unpaid wages, which, once registered with the clerk of the court of first instance of the province in question, becomes enforceable as a judgement of that court.

The need for a regulatory process in the case of collective dismissals is of another order. Large scale group terminations create special economic problems in the regions affected and government authorities must be sufficiently warned so they may attempt to alleviate the negative consequences of mass layoffs through cooperation with the parties involved.

THE PRESENT SITUATION

All Canadian jurisdictions have legislation requiring an employer to give notice to the workers whose employment is to be terminated for operational or other economic reasons. However, with regard to large scale group terminations, Prince Edward Island is the only jurisdiction in Canada which does not require a minimum notice period of at least four weeks prior to any permanent layoff of a group of employees.

In general, employment standards legislation requires that notice of termination be given to workers who have been employed for three months or more. Most jurisdictions have included exceptions in the legislation from the requirement to give notice of termination, for example, to employees hired for a definite term or task; employees who have been temporarily laid off or dismissed for just cause; employees who have refused reasonable alternate work; or those who are employed under a contract that has become impossible to perform or is frustrated by a fortuitous or unforeseeable event. Additionally, certain categories of employees, such as agricultural workers, domestics, professionals and managerial employees are often excluded from the application of these provisions.

In the cases of both individual and group termination, the employer may give pay in lieu of notice equivalent to the wages the employee would have received during the period of notice he or she would have been entitled to.

Individual Terminations

Normally, the legislation provides for increases in the individual notice of termination period based on the years of service of the employee. For example, the provisions may require one week's notice for an employee who has been employed for three months or more but less than two years; two weeks' notice where employed for two years or more but less than five; four weeks' notice where employed five years or more but less than 10; and eight weeks' notice where employed 10 years or more.

It is usually prohibited for an employer to make the period of notice coincide with an employee's vacation.

Group Termination

Notice of group termination of employment is usually served upon the employees involved, and/or upon the trade union, and on the government authorities. The length of the notice period usually increases with the number of redundant employees involved, and can range from four to eighteen weeks.

The legislation usually contains a number of technicalities which may affect the calculation of the number of redundant employees and, consequently, may preclude the application of these provisions. For example, an employee must, in many cases, have been employed for a minimum of three months or more to be counted, and cannot have been employed for a definite term or task. The group of employees must have been employed in the same establishment (usually defined in terms of regional or local operations), and have been terminated within a specified period (usually four weeks).

The legislation usually distinguishes between a temporary layoff and a permanent termination. Generally, a layoff not exceeding 13 weeks, or one exceeding 13 weeks if the employer has advised that it intends to recall the employees within a specified time as approved by the director of employment standards, is not deemed to be a termination of employment. Some jurisdictions nevertheless do not make that distinction and require an employer to give a notice in cases of mass layoffs.

The federal, Manitoba and Quebec legislation requires that the employer must cooperate with the Minister responsible for labour and, under the Canada Labour Code, with the Canada Employment Insurance Commission (CEIC) officials. Alberta, British Columbia, Ontario, New Brunswick, Newfoundland, Nova Scotia, Saskatchewan, the Yukon, the Northwest Territories and Nunavut are jurisdictions that have group termination legislation and, although they do not specifically require cooperation between the employer and the Minister responsible for labour, they nevertheless require that notice of the projected layoff be given to that Minister or to another government official.

In the federal jurisdiction, employer and employee representatives are required, with some exceptions, and in British Columbia, Manitoba and Quebec, employer and employee representatives may be required by the Minister responsible for labour to participate in a joint planning committee whose mandate generally is to eliminate the necessity for the terminations or to minimize their impact on the redundant employees as well as to assist the terminated employees in obtaining other employment. The adjustment program prepared by the committee would normally tap into early retirement and work sharing schemes offered through various government programs. Such a committee would also work in close cooperation with CEIC and other governmental officials.

Other Related Provisions

The Canada Labour Code also provides for severance pay to employees who have 12 months service or more. Ontario has a similar provision covering employees with five years' service or more. In both jurisdictions, severance pay is payable in cases of both group and individual termination of employment provided the eligibility requirements are met.

In addition to the various termination of employment provisions, employment standards legislation in Canada usually makes it illegal to dismiss employees contrary to human rights legislation, or because of pregnancy, trade union activities, participation in proceedings under industrial relations, employment standards or occupational health and safety legislation, or for garnishment or attachment of wages.

To these "illegal dismissal" provisions must be added the "unjust dismissal" clauses found in the labour standards laws of Nova Scotia, Quebec and the Parliament of Canada. Such a provision is a...

"...departure from the status quo, both statutory and at common law, in Canada because, (...), it entitles the employee to reinstatement. It gives a right not just to due notice but to the job; a right similar to that enjoyed by employees governed by collective agreements".[4]

The courts had never before recognized reinstatement as being a possible remedy for a dismissal without just cause. The only available remedy, once the employment relationship had been severed by one of the parties, was appropriate compensation for damages, including the remuneration that would, but for the dismissal, have been earned by the employee. The reason invoked by the courts for refusing to consider reinstatement as a possible remedy was simply that the court could not substitute its judgement for that of either party. The reinstatement of an employee to his or her previous position, after the employer/employee trust had been affected to the point of the severance of the relationship, was considered to be beyond the courts ambit.

Because of the fact that the unjust dismissal provisions create a right to the job, it is reserved for long-standing, loyal employees. An employee in Nova Scotia acquires it only after 10 years of continuous service with the same employer; in Quebec, an employee acquires this right after two years; and under the Canada Labour Code, the unjust dismissal provisions are available to employees who have worked for twelve consecutive months. In the three cases, these provisions do not apply to employees covered by a collective agreement.

A relatively recent development has been the extension of this legislated direction to the courts (or other authority) to consider the option of reinstating an employee when ruling on a complaint concerning an "illegal dismissal" in contravention of employment standards legislation. The legislation of certain jurisdictions provides that the employment standards officer, the director, or a magistrate ruling on such a complaint may order, among other remedies he or she may impose, the reinstatement of an employee, and the payment of lost wages and benefits.

This direction is often restricted to the violation of specific provisions of the legislation, for example, the maternity or parental leave provisions, contravention of which is deemed to be particularly serious in nature.

Finally, any portion of unused vacation must be paid upon termination of employment during a working year.

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