Terminating for cause? How to limit your liability in Canada

By Karen Sargeant and Brian P. Smeenk

You’ve likely been in this situation before: One of your employees has engaged in questionable conduct. You’re in the process of investigating and are considering whether you should terminate the employee for cause. How do you go about it under Canadian employment laws?

Be careful

Terminating an employee’s employment for cause can be difficult and stressful for all concerned. It also can lead to increased damages and costs if you don’t do it right. That’s because Canadian courts will not award damages in lieu of notice of termination or severance pay when you have just cause for termination, but courts will often award increased damages when you make an allegation of misconduct that you can’t ultimately prove in court.

Here are some tips to help limit your company’s liability, while also reducing your stress:

1. Consider whether the employee should be removed from the workplace during the investigation. Factors to consider include:
   • the nature of the misconduct;
   • the employee’s position in the company;
   • the potential for the employee to do damage to the company and/or its systems or customers; and
   • the potential for the employee to hide or destroy evidence.

   If you decide to remove the employee from the workplace during the investigation, suspend him or assign him to his home – with pay – until the investigation is done.

2. Before you carry out the termination, make sure all necessary information has been gathered and collected centrally. For example, gather witness statements or notes of all witness interviews, gather all relevant documents, check and save computer records in a secure data bank. If the employee sues, it will be important to have such evidence that was fresh at the time of the incidents in question. It also may be important to prove that nothing was altered.
3. Make sure your termination letter:
   • refers to any previous warnings given to the employee;
   • outlines all wages or other entitlements still to be paid to the employee;
   • clearly indicates the termination is for cause, otherwise you may have waived your right to later argue cause;
   • outlines the grounds for termination in a succinct manner; and
   • describes the misconduct with reference to only those facts you can prove and without resorting to inflammatory language.
4. If you decide to offer a severance package, make the monetary offer “without prejudice” to your position that you have cause for the termination.
5. Ensure that all termination records are consistent with the termination letter. In other words, don’t allege cause in the termination letter and then state “laid off” in other documents.
6. Keep the termination meeting short. Although you should briefly outline the reasons for termination, avoid a debate with the employee.
7. Have at least two members of management at the termination meeting. Ensure that at least one person takes detailed notes of the meeting.
8. If you are providing any kind of a reference letter, ensure that it’s consistent with the termination letter.
9. Even though the employee is being terminated for cause, treat the employee in a civil and professional manner throughout the process. Perceived mistreatment during the termination process can lead to increased damage claims.

For more information on terminations in Canada see our post on Wallace damages.