Every employer must deal with the termination of an employee at some point, either through resignation or a company-initiated termination. As an employer, you must be aware of your obligations and the employee’s rights. Following proper termination procedures will help the transition to proceed more smoothly.

Voluntary termination

Voluntary termination (that is, resignation) occurs when the employee decides to end the employment relationship. Like employers, employees must also give reasonable notice of their intention to terminate. However, there is no formula to determine how much notice is required. To protect yourself, it is advisable to include a termination clause in the original offer of employment.

As the employer, ask the employee to provide written notice of his or her decision to resign, including the effective date of resignation. When you receive the letter, determine if you want the employee to either remain for the duration of the notice period or leave sooner. In either situation, you are generally obligated to pay the employee’s regular salary for the entire notice period.

The exit interview

It is generally good practice to conduct an exit interview with the departing employee. This exercise can be invaluable as departing employees are often willing to share information and provide feedback that you might not receive otherwise. Questions you may want to ask include:

  • What prompted you to leave?
  • How were you recruited away from us?
  • What was your reason for accepting the new position?
  • What did you think about this company as an employer? What did we do well? What could be improved?
  • What is the competition offering—salary, benefits, other perquisites?

Involuntary termination

Involuntary termination occurs when the employer decides to end the employment relationship. In Ontario, the basic rule is that employers can terminate the employment relationship as long as they are willing to provide the necessary written notice (determined by length of employment), pay in lieu of notice, statutory termination pay, or severance pay. While there are exceptions, the employee has no legal right to their job. (Note the courts do have a power of reinstatement in certain cases, such as discrimination). The rules regarding the amount of notice or pay in lieu of notice to which an employee may be entitled can be complex. It is recommended that you obtain legal advice with respect to any company-initiated termination.

Reasons for involuntary termination

Involuntary termination may occur on a number of grounds:

  • business reasons—changes in business conditions
  • performance, fit and attitude reasons—the employee does not perform at the expected level and/or achieve the necessary results, or the employee’s attitude negatively impacts company morale
  • reasons of just cause—the employee is guilty of serious misconduct, habitual neglect of duty, incompetence or conduct incompatible with his or her duties

Involuntary termination meeting

Termination can be a difficult and emotionally trying time. It is important to handle the termination meeting in a sensitive, forthright and professional manner:

  • Have at least two people conduct the termination meeting with the employee.
  • Stay on topic—do not discuss anything other than the termination.
  • Let the employee know (in no uncertain terms) that he or she is being terminated, and that the decision is final.
  • Provide the employee with a termination letter.
  • Show empathy and concern. End the meeting by shaking the employee’s hand and thanking them for their past contributions.
  • Make arrangements for the employee to return company property, and allow them to remove personal effects.
  • On the whole, treat the dismissed employee as you would wish to be treated in the same situation. Dismissal treatment characterized as harsh, insensitive or vindictive can be used against an employer in litigation.

Notification of termination

Notify employees and key customers of the termination as soon as possible. Unless it was for just cause, remain positive when explaining what happened and the reasons for the termination, including an expression of thanks to the employee for their contribution. Give assurances and explain the contingency plan to everyone involved.

The Employment Standards Act

The Ontario Employment Standards Act states that, when an employment relationship is terminated (voluntarily or involuntarily), the employer must:

  • maintain benefits throughout the notice period
  • advise the employee of benefits that may be converted to personal coverage (and the time frame for conversion)
  • notify the benefits carrier if the employee’s benefits are covered beyond the notice period
  • calculate vacation pay/entitlement to the end of the notice period, and make payment within five business days of the termination date or as part of the next regularly scheduled payroll cycle
  • issue a“Record of Employment” form within five business days of final payment

Note: The information above provides a summary only. It is not intended to be an exhaustive discussion of termination pursuant to applicable law and should not be taken as legal advice. Readers should review the full text of the Employment Standards Act and seek legal advice for more detail. If you are outside of Ontario, consult applicable employment standards legislation and seek legal advice with respect to your jurisdiction.

Useful Templates

References

Butteriss, M. (1999). Help Wanted: The Complete Guide to Human Resources for Canadian Entrepreneurs. Toronto: John Wiley& Sons.
Your Guide to the Employment Standards Act, 2000. (n.d.). Retrieved March 3, 2009 from Ministry of Labour website, http://www.labour.gov.on.ca/english/es/guide.