Termination Without Cause: What Employers and Employees Need to Know

When beginning a new relationship, we do not often consider the ways in which that relationship might end. However, in the employment context, it is vital that both the employer and employee turn their minds to that potential eventuality and understand the rules that may apply – and ensure that those rules are followed if and when employment is terminated.

Termination “With Cause” vs “Without Cause”

Apart from a few exceptions, the employment relationship may be terminated in one of two ways: either “with cause”, or “without cause.”

Termination with cause occurs when an employee is dismissed due to serious misconduct. This could include theft, dishonesty, harassment, repeated violations of company policies, or issues relating to performance. In such cases, employers are expected to employ “progressive discipline,” as it is only in the most serious circumstances where employment can be terminated for cause based on a single incident. In cases where employment is validly terminated for cause, the employer may not be required to provide any notice or severance pay.

Termination without cause, on the other hand, does not involve wrongdoing. The employer may simply decide to end the employment relationship. While they do not need to justify the decision, they must provide the employee with notice or pay in lieu of notice. The amount of notice required is determined with reference to statute, contract, and the common law.

What is the Minimum Statutory Notice?

Every province (and the federal government) has its own statutory rules regarding termination of employment.

Under the New Brunswick Employment Standards Act, SNB 1982, c E-7.2 (ESA), the minimum notice periods are:

• Employees with less than 5 years of service: at least 2 weeks’ written notice
• Employees with 5 or more years of service: at least 4 weeks’ written notice (See section 30(1) of the Act)

By comparison, the Nova Scotia Labour Standards Code, RSNS 1989, c 246 provides the following minimum notice periods:

• Employees with 3 months of service or more, but less than 2 years: 1 week
• Employees with 2 years of service or more, but less than 5 years: 2 weeks
• Employees with 5 years of service or more, but less than 10 years: 4 weeks
• Employees with 10 years or more: 8 weeks (in addition, the Code provides further restrictions on acceptable reasons for termination after 10 years of employment)

Employers may also choose to provide pay in lieu of notice, meaning the employee receives compensation equivalent to the notice period without continuing to work.

It is important to keep in mind that these are statutory minimums. In addition to statutory notice, the common law and an employee’s contract of employment may entitle them to longer notice periods. In fact, an employee is presumptively entitled to common law notice, and an employer can only avoid this liability by contracting for less.

What is Reasonable Notice Under Common Law?

Reasonable notice refers to the period of time an employee is given before their termination takes effect. This allows the employee time to prepare for the transition, seek new employment, and make necessary arrangements.

The amount of notice provided under common law is not fixed, and is determined based on the individual circumstances of the employee. For that reason, common law often provides longer notice periods than employment standards. Courts use the “Bardal Factors” to assess what’s reasonable:

The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the [employee], the age of the [employee] and the availability of similar employment, having regard to the experience, training and qualifications of the [employee] (Bardal v Globe & Mail Ltd, 1960 CanLII 294 (ON SC), p 145).

In most provinces, the typical criteria are:

• Length of service of the employee;
• Age of the employee;
• Availability of similar employment.

This assessment is fact-specific, which is why it is important to consult a lawyer.

Unlike statutory notice amounts, an employee’s entitlements to common law notice are subject to a duty to mitigate – this obligation to seek out and accept comparable employment is a factor that must be taken into account when assessing the notice period.

What if There’s an Employment Contract?

Employment contracts can influence notice periods in various ways. For instance, they might:

• Provide a longer notice period than the statutory minimum, but otherwise attempt to fix the amount provided, either with a flat amount or through a formula (i.e. X weeks per year of service); or
• Attempt to limit notice to the minimum required by statute;

If the contract is silent on termination, then common law principles apply, which may result in more generous notice entitlements.

Moreover, any employment contract that attempts to provide less than these statutory minimum amounts is unenforceable – and if the language around termination is ambiguous in that regard, then the termination clause may be found invalid and therefore unenforceable.

What If Proper Notice or Compensation Was Not Provided?

If an employee is terminated without cause and does not receive adequate notice or pay in lieu of notice (either pursuant to statute, the common law, or their contract), they may have grounds for a wrongful dismissal claim. This means the employer may not have met their legal obligations when ending the employment.

Legal advice is recommended in such cases. A lawyer can review the employment contract, assess the situation, and help clarify rights and options.

Employee Takeaways

For employees, the key takeaway is that if you are terminated without cause, your employer must provide you with reasonable notice or pay in lieu of notice. In most cases, employees are entitled to more than the statutory minimums, because the common law presumes a right to reasonable notice unless the employment contract clearly and validly limits that entitlement. Common law notice is assessed based on the individual circumstances of each employee and is often higher than provincial minimums, which vary across jurisdictions (for example, 2–4 weeks in New Brunswick and 1–8 weeks in Nova Scotia). Importantly, no employment contract can provide less than the applicable statutory minimum, and any attempt to do so will be unenforceable. If an employee is let go without cause and does not receive proper notice or adequate pay in lieu (whether under the statute, their contract, or the common law) they may have grounds for a wrongful dismissal claim.

Employer Takeaways

For employers, it is important to recognize that a termination without cause requires either working notice or pay in lieu of notice, and the minimum amount owed varies by province or under federal law. These statutory minimums are only the starting point: an employee is presumptively entitled to common law reasonable notice, which is often significantly higher unless the employment contract clearly and validly limits that entitlement. Employers can only avoid common law liability through a properly drafted termination clause that meets or exceeds statutory minimums; any clause that falls below these minimum standards, or is ambiguous in that regard, will be unenforceable. If an employee is dismissed without cause and does not receive adequate notice or pay in lieu (whether assessed under statute, contract, or the common law) the employer may face a wrongful dismissal claim, exposing them to additional compensation payments and legal costs.

Because without cause terminations depend on a range of factors for both employers and employees, seeking legal advice is the best way to ensure obligations are met. Reach out to our team for guidance.

Disclosure:
The information provided here does not constitute legal advice and is based on details available at time of writing. Perspectives and interpretations around this information will vary depending on the individual circumstances to which they may apply. Consult legal counsel for information and advice relevant to your individual circumstances.