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The Toronto Sun CareerConnection

Ending the employment relationship

By Mary Lou H. Brady and Karen M. Sargeant
Special to the Toronto Sun

Not all employment relationships end in retirement. Often, an employee voluntarily resigns to seek better employment opportunities elsewhere.

Other times, an employee's departure is not voluntary -- meaning that the employer takes the initiative to terminate that employee's employment either with or without cause.

Whatever the situation, the end to an employment relationship is full of potential legal landmines for both employees and employers.

This is the second part of a two-part series dealing with the end of the employment relationship. It is intended to provide provincially-regulated employers in Ontario and their employees with a brief overview of some of the more common obligations when an employee is terminated. It is not a substitute for legal advice.

Employers generally have the clear legal right to terminate their employees' employment at any time, so long as they do not violate human rights laws when doing so. Employers can, in fact, do so in one of two ways: with cause or without cause. Of course, the legal obligations that Ontario employers owe to terminated employees vary, depending upon the reason for the termination.

When an employer has legal cause (e.g. theft, fraud, assault, serious dishonesty, etc.) to terminate an employee's employment, the employer generally has no obligation to provide notice of termination, pay in lieu of notice and/or severance pay to the terminated employee.

Cause is, however, a high standard to meet and employers should never make allegations of cause that reasonably cannot be proven.

If you are considering terminating an employee for cause, we recommend that you contact your legal advisor to determine whether you have legal cause to terminate and sufficient documentation to prove cause.

Employers who terminate for cause, but are unable to prove cause before our courts, often face increased damage awards.

On the flipside, Ontario employees who are terminated "without cause" are generally entitled to certain minimum notice (or pay in lieu thereof) under Ontario's Employment Standards Act. This minimum notice ranges from zero to eight weeks, depending upon the terminated employee's length of service with the employer.

Longer notice is, however, required where 50 or more employees are terminated in the same four-week period.

In addition to notice, employees with five or more years of service may be entitled to severance pay under Ontario's Employment Standards Act in certain cases (e.g. if the employer's payroll is at least $2.5 million per annum in Ontario).

Such severance pay ranges from five to 26 weeks, again depending upon the terminated employee's length of service with the employer. For more details, we refer you to the following website:

In addition to these statutory entitlements, non-union employees who are terminated without cause are usually entitled to reasonable notice of the termination of their employment (or pay in lieu thereof) at common law.

Common law reasonable notice is inclusive of, but generally exceeds, the statutory entitlements set out above.

There is, unfortunately, no set formulae that can be used by an employer to determine an employee's common law reasonable notice period and, in this regard, we recommend that employers seek legal advice.

In general, the more senior the position held, the older the employee, the longer his or her service and the more remuneration he or she receives, the greater the common law reasonable notice period will be.

Before terminating any employee, all applicable employment agreements and/or company policy manuals should be carefully reviewed to determine whether they impose specific termination obligations on you that differ from, or otherwise limit, those set out above.

Employees also have obligations following termination. Perhaps most misunderstood is an employee's obligation to "mitigate" after being terminated without cause.

This means that you cannot generally sit on your couch collecting money from your former employer after being terminated, while doing absolutely nothing in return.

Instead, you must make diligent and reasonable efforts to find and commence new employment as soon as possible.

Each resulting dollar that you earn from your mitigation efforts will then be deducted from the money that your former employer owes to you during the reasonable notice period.

In this regard, you should keep detailed and accurate records of all of your mitigation efforts and mitigation income, including copies of all job advertisements to which you applied and the corresponding job applications, cover letters and resumes sent.

Employers, who are able to prove before our courts that an employee has not made proper mitigation efforts, are generally successful in reducing the damages otherwise awarded to such employees.

Also often misunderstood are the obligations that an employee owes to his/her former employer respecting confidentiality, non-competition and/or non-solicitation following termination.

The fact that you have been terminated, as opposed to voluntarily resigning, from your employment does not generally negate these obligations.

Mary Lou Brady and Karen Sargeant are lawyers with the law firm of McCarthy Tetrault LLP in the firm's London and Toronto, Ont., offices, respectively. Practicing exclusively in the area of labour and employment, both Brady and Sargeant carry on general management-side labour and employment law practices in which they advise employers on a wide spectrum of matters, including employee terminations and resignations.

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