Common Mistakes Ontario Employers Make When Terminating Employees
Terminating an employee is never an easy task, but it’s important to handle it with care to avoid costly mistakes and legal trouble. In Ontario, the rules around termination are quite strict, and failing to follow them can lead to significant legal consequences. Here are some of the most common mistakes employers make when terminating employees and how to avoid them.
1. Not Seeking Legal Advice from Employer Counsel
Employment law can be complex, and what may seem like a straightforward termination could have hidden legal risks. Employers sometimes fail to seek legal advice or use an outdated template for a termination letter, which can lead to mistakes.
How to Avoid This: If you’re unsure about the legal aspects of terminating an employee, seek advice from an employment lawyer or HR professional. They can help you navigate the process and avoid potential legal pitfalls.
2. Not Having an Appropriate Employment Contract
One of the biggest mistakes Ontario employers make when it comes to terminating employees is not having an employment contract in place. While it may seem unnecessary, a formal employment contract is one of the most effective ways to protect both the employer and the employee in case of termination.
Why it is a Mistake: Without a written employment contract, both the employer and employee are left with limited clarity about the terms of employment, including key elements like the notice period, severance pay, and the rights and obligations of both parties upon termination. If no contract exists, the employer may be obligated to follow the minimum requirements set out in the Ontario Employment Standards Act , which may be costly if the employee has been with the company for an extended period.
Additionally, lacking a contract can make it harder for employers to defend against claims of wrongful dismissal or constructive dismissal. If the employee feels they are owed more than the minimum requirements (e.g., based on prior agreements, promises, or expectations), they might file a claim, and it could be difficult to prove that the employer acted within their rights.
How to Avoid This: Always provide employees with a written employment contract. The contract should outline critical aspects of the employment relationship, such as the notice period for termination, severance arrangements, any bonus structures, and other relevant conditions of employment. Having this document in place gives employers greater control over the termination process, as they can rely on the contract to enforce agreed-upon terms. It also allows for clarity in managing expectations and reducing the likelihood of disputes.
3. Not Providing Adequate Notice or Severance Pay
In Ontario, employees are entitled to a certain amount of notice or severance pay (called a severance package) when they are let go, depending on how long they have worked for the employer. If an employer doesn’t provide this, they may be required to pay a severance package. Employers sometimes think they can simply terminate an employee without notice, but this can lead to claims for wrongful dismissal.
How to Avoid This: Always review an employee’s length of service before termination. The Ontario Employment Standards Act sets out the minimum notice period (ranging from one week to eight weeks) based on years of service. If the employee has been with you for a long time, they may also be entitled to severance pay, which is different from regular termination pay.
4. Failing to Document Performance Issues
Performance issues should be addressed with clear, documented evidence. Sometimes employers assume they can just fire someone because of a vague “bad attitude” or “poor performance.” However, if you have not documented the problem, or provided the employee with a chance to improve, you could be at risk for a wrongful dismissal claim.
How to Avoid This: Keep detailed records of any performance issues, warnings, or disciplinary actions. Make sure employees are aware of the problem and give them a chance to improve before taking further action.
5. Terminating for an Inappropriate Reason
Terminating an employee for discriminatory reasons, such as age, gender, race, or disability, is illegal under Ontario’s Human Rights Code. Employers cannot fire someone because they have filed a complaint, are pregnant, or are part of a protected group.
How to Avoid This: Ensure that the reason for termination is clear, legitimate, and non-discriminatory. Avoid terminating an employee based on personal characteristics or in retaliation for exercising their rights, including regarding workplace harassment complaints or human rights violations.
6. Failure to Consider all of an Employee’s Potential Claims and Entitlements
Some employers might forget to consider other entitlements, such as bonuses, commissions, or pension contributions when terminating an employee. If these items were part of the employee’s compensation, they may still be owed upon termination.
How to Avoid This: Review the employee’s contract and compensation package before termination to ensure all owed entitlements are accounted for.
7. Improper Handling of Constructive Dismissal
Sometimes employees are not directly fired, but their working conditions change so drastically that they feel forced to quit. This is known as “constructive dismissal,” and it can be just as costly as a direct termination if the changes are unreasonable.
How to Avoid This: Avoid making major changes to an employee’s job, such as reducing their pay, changing their hours, or demoting them without proper consultation. If changes are necessary, ensure that the employee agrees to them.
Conclusion
Termination is one of the most sensitive areas of employment law. To avoid costly mistakes, it’s crucial to understand your obligations under Ontario’s Employment Standards Act and the Human Rights Code. By providing proper notice or severance pay, documenting performance issues, avoiding inappropriate reasons for dismissal, and seeking legal advice from an employer lawyer when necessary, you can minimize the risks and ensure that the process goes smoothly.
Remember, treating employees fairly during the termination process not only helps you avoid legal headaches but also leaves a positive impression on your remaining team. It is always best to handle employee terminations thoughtfully and professionally.
For many employers, termination of employment is a difficult and confusing time, especially when it comes to drafting severance packages. Therefore, in a wrongful termination of employment, it is important for employers to consult with an experienced Ontario employment lawyer for a severance package review to understand the impact of wrongful dismissal on pension plans. If you are an employer or employee needing to speak with an experienced Ontario wrongful dismissal lawyer to discuss your options and next steps on how to deal with workplace issues, call Bune Law, employment law firm in Toronto. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.