Employment Law: Termination of an Employment Contract
Written by Melissa Garska, Student-at-Law
If you are an employer faced with the difficult decision of terminating an employee, you should be aware of your options and obligations.
Without Cause
Employees can be dismissed with or without cause. Without cause termination happens when an employer decides they no longer require the employee’s services. The reasons behind a termination without cause may include downsizing, cost cutting, poor work performance, or personal differences with an employee.
Employers are entitled to terminate employment with due notice. How employers choose to dismiss an employee is subject to Alberta’s Employment Standards Code (the “Code”).¹
The Code imposes mandatory minimums on employers to provide employees with notice when they are dismissed without cause. The policy reasons behind the reasonable notice period are to provide employees time to search for new employment while they continue to earn income.
Many employers choose to pay in lieu of notice. The employee receives the pay they would have earned working during that notice period, but they no longer work for the employer during that notice period:²
(a) one week, if the employee has been employed by the employer for more than 90 days but less than 2 years,
(b) 2 weeks, if the employee has been employed by the employer for 2 years or more but less than 4 years,
(c) 4 weeks, if the employee has been employed by the employer for 4 years or more but less than 6 years,
(d) 5 weeks, if the employee has been employed by the employer for 6 years or more but less than 8 years,
(e) 6 weeks, if the employee has been employed by the employer for 8 years or more but less than 10 years, or
(f) 8 weeks, if the employee has been employed by the employer for 10 years or more.
It is important to note that the figures above are a minimum notice period. Based on court decisions in employment law, employees are presumed to have significantly longer notice periods.
With Cause
An employer is not required to provide notice if the employee is dismissed with cause due to serious misconduct. It is not enough for employers to allege serious misconduct. Serious misconduct may include insubordination, theft or acts of dishonesty, incompetence, harassment, or absenteeism.
Employers must justify a summary dismissal.³ Except in the rare cases of egregious misconduct, a single mistake is unlikely to meet the threshold of serious misconduct. Employers must demonstrate that the employee was aware of the employer’s expectations and the consequences of failing to meet those expectations.
After an employee has failed to meet an expectation, the employer must bring this to the employee’s attention, provide direction on how to improve, and allow the employee sufficient time to demonstrate improvement.
Employers are required to keep accurate records of information of any perceived issues with an employee’s performance or misconduct and steps taken to address these issues.
Courts do not look favourably at employers who attempt to circumvent providing reasonable notice by falsely alleging serious misconduct. Employers have a duty of good faith and honest performance. This duty applies at the time of termination of employment.⁴
If an employee is inappropriately terminated with cause, it may be wrongful dismissal, and they may be entitled to a reasonable notice period.
Employment Contract
Employment contracts may contain a pre-determined notice period based on the length of service. The contractual notice periods must provide at least the minimum notice period required by the Code.⁵ If an employment contract does not adhere to the minimum standards of the Code, it is unlikely to be enforceable.
Contracts may incorporate termination provisions that limit an employee’s limitation period; However, if an employer wants to rebut an employee’s right to reasonable notice at common law the termination period must be clear, unambiguous, and unequivocal.⁶ If the contract is silent, it is implied that the employee will be provided reasonable notice.
Employers should be aware that the inclusion of non-compete and non-solicitation clauses may lengthen the notice period.⁷
Key Take-Away Points for Employers
There is a statutory minimum for notice periods, but it is implied that employees are entitled to a longer notice period pursuant to the common law. Employers may include a clause that limits the notice period an employee will receive if it meets or exceeds the statutory minimum. Non-solicitation and non-compete clauses are one factor that may increase the length of the notice period.
Employers are not required to provide notice to employees who are dismissed with cause. It can be difficult for employers to justify summary dismissal as they are required to take steps to address issues before they terminate.
If you or anyone you know have been dismissed from their employment and have any questions or require any assistance, please do not hesitate to contact any of the following members of our team at SB LLP:
Michael Murray, Partner – mmurray@sb-llp.com
Peter Quansah, Lawyer – pquansah@sb-llp.com
*Disclaimer: This article is not intended to provide legal advice and is for information purposes only.
1 Employment Standards Code, RSA 200, c E-9.
2 Ibid at s 57.
3 Haack v Secure Energy (Drilling Services) Inc, 2021 ABQB 82.
4 Matthews v Ocean Nutrition, 2020 SCC 26
5 Code, supra note 1 at s 56.
6 Bryant v Parkland School Division, 2022 ABCA 220.
7 Ostrow v Abacus Management Corporation Mergers and Acquisitions, 2014 BCSC 938.