Procedures For Terminating the Agreement
The contract of employment must be terminated in accordance with its terms. Where a contract expressly provides for the manner in which termination may be affected, the provisions of the contract must be observed. Where a contract is not specific about the manner by which it may be terminated, the employer will be expected to comply with any terms implied by law, including an implied term to the effect that reasonable notice of termination must be given to an employee.
In addition to any contractual requirements, an employer must ensure compliance with the minimum standards under the Employment Standards Act. If an employee has worked at least three consecutive months, employers must prove “just cause”, or they will be liable to pay an amount which varies according to the employee’s length of service. Liability is discharged if the employee is given written notice, pay in lieu of notice, resigns or retires.
Note that a unionized employer may or may not be subject to the provisions of the Employment Standards Act which deal with termination of employment. If the collective agreement includes a termination provision, the Employment Standards Act does not apply. The Employment Standards Act requires that the collective agreement meet or exceeds the requirements under the Employment Standards Act (when considered in conjunction with certain other requirements). However, if the collective agreement contains no termination provision, the Employment Standards Act provisions are deemed to be incorporated into the collective agreement.
Under the Employment Standards Act, “just cause” is not a defined term. Instead, the test developed in the courts of common law is used. In determining what constitutes just cause, the employer may show that it has taken steps to exercise “progressive discipline” on its employee. However, just cause can also result from a single act.
There are no statutory rules relating to the specific form for terminating the agreement unless the termination constitutes a “group termination” under the Employment Standards Act ((to be discussed further below). Approval from a court or other regulatory body is not required before termination is effective.
Under both the Employment Standards Act, an employer may terminate an employee, without cause, without providing any notice or severance in lieu of notice, if the termination takes place before the employee has completed 3 consecutive months of employment. However, if there is a written employment agreement (or, for unionized employees, a collective agreement) between the employer and employee which provides for notice or severance in lieu of notice prior to the employee completing 3 consecutive months of employment, the employer must abide by the terms of the agreement. Note that if there is no written employment agreement governing termination of the employee, it is still open to the Court to award damages to the employee even if the employer has no obligation to provide the employee with notice or severance in lieu of notice under the applicable statute.
An employer may terminate an employee for just cause resulting from a single act where the act is wilful, deliberate, inconsistent with the continuation of employment, and prejudicial to the employer’s interests. However, only the most egregious single acts may constitute just cause for termination and extreme caution must be exercised before making a decision to terminate an employee for cause for a single act.
Dismissals are subject to the requirements under the Human Rights Code and may not be discriminatory.
Employment can be terminated by the employee’s resignation. For resignation to be effective, the employee must evince a subjective and objective intention to resign which is subsequently accepted by the employer. The subjective element requires a true intention to resign. The objective element requires that the employee act in a way which confirms their intention to resign. At common law, an employee is obliged to provide an employer reasonable notice of the employee’s intention to terminate the employment agreement unless the manner by which the employee may resign is expressly set out in the employment contract. Note that the “reasonable notice” an employee must provide upon resignation is much shorter than the “reasonable notice” that an employer may be required to provide to an employee upon termination.
Termination On Notice
An employer may terminate an employee at any time without cause so long as the employer provides the employee with, at minimum, the notice or severance pay in lieu of notice required by the Employment Standards Act. The Labour Relations Code provides that all collective agreements must contain a provision that the employer have just and reasonable cause for dismissal of an employee (except for employees hired on a probationary basis).
If there is a written employment agreement between the employer and employee which provides for more notice or severance in lieu of notice than is required by the applicable statute, the employer must abide by the terms of the contract.
If there is no written employment agreement governing termination of the employee, the employer’s common law obligation to provide the employee with notice or severance in lieu of notice is not limited to the minimums established by the applicable statutes. Instead, the employer is obliged to provide the employee with “reasonable notice” or severance in lieu of “reasonable notice”. The meaning of “reasonable notice” has received extensive judicial consideration and is determined by reference to a number of different factors, including the employee’s age, length of service, gender and position.
Termination By Reason Of The Employee's Age
The BC Human Rights Code prohibits discrimination based on “age”, which is defined as an age of 19 years or more. However, if an employer can prove that there is a bona fide age-related reason that means that the employee cannot adequately perform his or her work, then an employee may be dismissed for that reason. Mandatory retirement at 65 or above is not permissible, except in statutorily mandated mandatory retirement schemes.
Automatic Termination In Cases Of Force Majeure
An agreement can be terminated automatically in cases of force majeure (i.e. where the performance of the contract is rendered impossible). No notice or severance in lieu of notice is required if work is impossible to perform because of unforeseeable circumstances. In such circumstances, the contract is considered “frustrated,” and the parties are discharged from further performance. Bankruptcy, receivership, insolvency, or other adverse economic conditions do not constitute “frustration” of the contract.
Where an employer intends to terminate the employment of 50 or more employees at a single location within any 2-month period, the Employment Standards Act requires the employer to give advance notice of that intent to the Minister of Labour, the affected employees, and any involved union. Under the Employment Standards Act an employer is required to give this notice in writing, and to specify the number of employees who will be affected, the effective dates of termination, and the reasons for termination. There are also requirements under the Employment Standard Act regarding the timing of this notice (which varies depending on the size of the termination).
Termination By Parties’ Agreement
Employment may be terminated by the parties by mutual agreement at any time.
Directors Or Other Senior Officers
There are no separate rules for terminating directors or other senior officers. Directors and officers may be removed in accordance with the BC Business Corporations Act, however, the removal of an individual as a director does not impact their entitlement to contractual notice further to their employment agreement with the employer.
Special Rules For Categories Of Employee
There are no special rules which apply to different classes of employees within an organization, but there are different remedies available to terminated employees who belong to a union. Unionized employees (through their union) have a right to file a grievance through the collective agreement’s grievance process. The grievance will be dealt with in an arbitration, and one of the remedies available to the arbitrator is to reinstate the employee to his or her former position. (All other employees must bring either an action in the BC courts, or a complaint pursuant to the Employment Standards Act, and reinstatement is not an available remedy in either of those forums).
Furthermore, there are certain categories of employees to which the Employment Standards Act does not apply or to which the application of the Employment Standards Act may differ. These categories are generally based on the industry or profession of the employees.
There is no specific whistleblower statute. However, a number of statutes have whistleblower provisions including the Employment Standards Act, Workers’ Compensation Act, Labour Relations Code, Personal Information Protection Act, Freedom of Information and Protection of Privacy Act, and Human Rights Code. These protect employees from harassment or discriminatory action because the employee has reported a breach of the statute or has exercised a right under the law.
For instance, it is a violation of the BC Human Rights Code for a person to intimidate, impose a penalty on, deny a benefit to, or otherwise discriminate against another because they filed a human rights complaint or assisted with a complaint.
Specific Rules For Companies in Financial Difficulties
If a business experiences financial difficulty, the legal requirements for termination must still be followed.
If wages are not paid to employees, the Employment Standards Act imposes a statutory lien for the unpaid wages without requiring steps from any party. The lien is imposed on the real and personal property of the employer at the time wages were earned, and automatically attaches to any property the employer may subsequently acquire. Examples of the types of property that can be subject to a lien include land, buildings, vehicles, equipment, stocks, bonds, and bank accounts.
The Employment Standards Act also provides that officers and directors can be personally liable for up to two months unpaid wages for each employee.
Special Rules For Garden Leave
There are no special rules for employees who are provided working notice in relation to the termination of their employment but are asked to remain away from the workplace for the duration of the notice period. However, at common law, garden leave could result in a constructive dismissal claim, as it is a fundamental term of a contract of employment that an employee be provided with work.
Restricting Future Activities
There are no statutory rules that encumber a departing employee’s ability to work. However, the parties are free to enter into contractual non-competition and non-solicitation agreements. Such restrictive covenants may be enforced if they are reasonably required to protect the proprietary interests of the employer. The employer must establish that the covenants are reasonable, both from a temporal and geographical perspective. To the extent that such clauses are considered to be injurious to the public interest, they will not be enforced. In the absence of restrictive covenants, employees are free to work for other employers, even those who may be in competition with the dismissing employer. All employees are restricted from removing confidential information, including customer lists. There are certain employees who, by virtue of their senior positions, are considered to be “fiduciaries” who may be restrained, for a reasonable period, from soliciting customers of a former employer.
Whether a dismissed employee is entitled to any payment depends upon whether the employee was dismissed with or without “just cause”. As stated above, “just cause” is determined using tests developed in the courts of common law.
If there was just cause for the employee’s dismissal, then no notice or payment is required.
If the employee was dismissed without just cause, then the amount of the notice or equivalent payment depends upon whether the employee is subject to the relevant provisions of the Employment Standards Act or Canada Labour Code, the terms of a contract, and/or the entitlement to “reasonable notice”.
Special Tax Provisions And Severance Payments
Severance payments are taxable. If the severance payment constitutes a “retiring allowance” under the Canada Income Tax Act, , it is subject to a withholding tax rate which varies depending on the amount of the payment.
Damage awards obtained for human rights violations are not taxable.
Allowances Payable To Employees After Termination
Where the employee continues working for a period of time after termination (referred to as “working notice”), the employer should continue to make contributions. However, if the employee is offered a salary continuance or a lump sum payment, the employer must determine which benefits are included in the offer. There is no “COBRA” type legislation as in the United States.
Time Limits For Claims Following Termination
In a union setting, the time limit is set by the collective agreement. The time limit for commencing an action in the BC courts for breach of the employment contract is 2 years for claims arising on or after June 1, 2013 under the BC Limitation Act. There are specific limitation periods under legislation, including the Employment Standards Act (varies depending on nature of claim) and the Human Rights Code (12 months) to bring claims within the applicable tribunals.