Employers have a basic right to terminate an employee, but along with that right, come responsibilities. Employers must comply with the Employment/Labour Standards and human rights legislation for their jurisdiction and beyond that, employers must treat employees fairly and in good faith as defined by common law or civil law (Québec).
All jurisdictions have minimum standards for periods of notice required for termination without cause, and requirements for compensation in lieu of notice. A poorly handled termination can lead to legal action; therefore it is wise to consult a lawyer before terminating an employee for whatever the reasons.
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Important terms
Termination with cause puts the onus on the employer to show that an act by an employee has seriously impacted, or a further similar act could seriously impact the organization.
Termination without cause usually requires advance notice and/or compensation be given to the employee. In the voluntary and non-profit sector, termination without cause is often the result of restructuring the organization or changes in funding.
Wrongful dismissal is a legal claim about the cause or notice given to the employee when they are terminated. Constructive dismissal is when there is a significant change in the employment relationship, for example, the employer significantly reduces an employee’s salary or makes a significant change to an employee’s work location, hours of work, authority or position (without the employee being separated from the organization). You want to avoid both of these.
Employers should develop standard procedures governing both voluntary termination of employment by employees and involuntary termination of employment by the employer. Adopting and following such policies and procedures will help to reduce the risk of litigation by employees and help to ensure the employer’s compliance with federal and state laws related to termination of employment. Because of the numerous legal issues found within the context of termination, employers are strongly encouraged to consult with experienced employment counsel to review any termination policy.
Voluntary Termination
Voluntary terminations occur when an employee resigns or retires. With certain exceptions, voluntary terminations are generally not saddled with the negative emotions which may be present when an employee is terminated involuntarily. In the case of a voluntary termination, the employer’s primary concern is to assure that the employee has the necessary information to obtain benefits to which the employee is entitled, e.g., COBRA, disability benefits, and retirement benefits, and to tie up any loose ends, such as collecting employer property in the employee’s possession.
Special Note: Sometimes an employer may seek to force an employee to resign rather than taking the initiative to terminate the employee. A constructive discharge occurs when an employee’s resignation or retirement may be found not to be voluntary because the employer has created a hostile or intolerable work environment, or has applied other forms of pressure or coercion which forced the employee to quit or resign. This often arises when an employer makes significant and severe changes in the terms and conditions of a worker’s employment.
What constitutes a constructive discharge is usually defined in state law and varies from state to state. However, employers should be aware that compelling an employee to resign may expose the employer to potential liability for wrongful termination.
Involuntary Termination
Involuntary termination typically takes two forms. First, an employer may have to undertake a reduction in force (RIF) and lay off employees, often with no realistic hope of recall. Second, the employer may have to terminate employees from time to time because of poor performance or as a disciplinary measure.
Reduction in Force
Due to the potential cost and other negative impacts that a reduction in force may trigger, employers should carefully explore all other options before deciding to implement a RIF. If an employer determines that a RIF is necessary, then the employer should adopt and utilize objective criteria in implementing the RIF and take steps to assure that there is no violation of employment discrimination or other laws. A RIF which has a disparate impact on a protected class of employees may be unlawful, even if the employer harbors no discriminatory motive. Employers are strongly advised to consult with experienced employment counsel before implementing any RIF.
Disciplinary Termination
Inasmuch as most states in the United States follow the traditional “employment-at-will” doctrine, employers are generally free to discharge an employee for any reason not expressly prohibited by law. However, if the reason for discharge seems unreasonable, the reason may be deemed a pretext for discrimination or some other unlawful motive should litigation follow the discharge. Therefore, it is in the best interest of all employers to carefully document the reasons for terminating an employee and make every effort to avoid arbitrary and capricious terminations.
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