Understanding the legal requirements and best practices for ending employment

At some point, employers will need to say goodbye to employees. When the separation is initiated by the employer, it is most often the result of a termination without cause. Even when there seem to be good grounds for terminating “with cause”, proving “cause” can be so challenging that terminating “without cause” is often the preferred route.

When the need to end employment arises, providing the employee with a properly crafted severance package will help that process occur as smoothly as possible, with the least amount of risk to the employer. To determine the best approach, employers must have a good understanding of their legal obligations. Employees who have their employment terminated without cause are entitled to receive notice of termination or pay in lieu of notice.

Many employers do not appreciate that they may have termination obligations that exceed what is written in legislation. Fortunately, there are ways to manage the risk associated with terminating employment.

Statutory Entitlements: B.C. Employment Standards Act

The B.C. Employment Standards Act (“ESA”) sets out the minimum termination entitlements for most employees, except those explicitly excluded from the ESA. Employees must receive working notice of termination or pay in lieu of working notice, or a combination of both, as follows:

After 3 consecutive months of employment, one week of notice or pay in lieu of notice per year of service.
After 12 consecutive months of employment, two weeks’ notice or pay in lieu of notice.
After 3 consecutive years of employment, three weeks’ notice or pay in lieu of notice, plus one additional week for each additional year of employment to a maximum of eight weeks’ notice or pay in lieu of notice.

Working Notice

If employees are provided with working notice, they continue working during their notice period. Since it can create challenges for both employers and employees to have the employee remain at work after being given notice of termination, this is often not the ideal approach.

Pay in lieu of Notice

When pay in lieu of notice is provided, the ESA sets out parameters for calculating the proper amount and it must include vacation pay. ESA pay in lieu must be paid out within 48 hours of termination.

Even when ESA entitlements are satisfied, employers may have additional severance obligations to employees under the judge made law (common law).

Common Law Termination Entitlements

The courts have established that most employees are entitled to “common law reasonable notice”. This period of notice usually exceeds ESA entitlements and is typically measured in months, rather than weeks. The rough upper limit for common law reasonable notice is 24 months.

To establish common law reasonable notice periods, the courts try to identify how long it will take that particular employee to secure new employment. While many factors can be taken into account, the four primary considerations are:

the employee’s age
the employee’s length of service
the character of employment
the availability of similar work

Other relevant factors sometimes include an employee’s disability, their otherwise limited work experience and education, or even the economic climate.

Examples of notice periods awarded by the B.C. courts are:

Chapple v. Big Bay Landing Ltd., 2018 BCSC 1666: 2 years, 2 months of service = 9 months’ notice
Ashby v. EPI Environmental Products Inc., 2005 BCSC 1190: 1 year of service = 5 months’ notice
Robinson v. Fraser Wharves Ltd., 2000 BCSC 199: 10.5 years of service = 15 months’ notice

Employers are expected to consider the employee’s personal characteristics and the substantial body of caselaw to provide employees with their common law notice entitlement. Clearly, this is a complex assessment that can make decisions to terminate expensive and risky.

Employment Contracts

It is possible to have more certainty around employee termination entitlements by using written employment agreements with a termination clause.

Employers and employees are free to contract for termination entitlements as long as employees do not receive less than what is provided for in the ESA. Termination clauses may limit employee termination entitlements to only ESA notice or set out a more generous formula for calculating notice periods.

Using written employment agreements is best practice for employers. Employment agreements provide certainty and flexibility to employment relationships and a termination clause can avoid having the courts award a more costly severance package.

If your organization does not have employment contracts in place, or you have questions about whether your current employment contracts adequately protect your interests, please do not hesitate to contact us. Our Employment Law Team is here to assist.

Pamela Connolly is a lawyer at Nixon Wenger LLP who works extensively with employers and employees within many sectors practicing Employment Law.