Employment Law Update in Terminating Employees in Canada
Jan 2007

Termination of Employees, Recent Trends

Recent court cases have made termination of employees more risky and more complex. These cases make it clear that the courts will scrutinize the dismissal process closely, and where employers demonstrate bad faith or mishandle an employee termination, they will remedy the error by extending the employee's period of reasonable notice.

Typically, the employer cannot dismiss an employee without providing adequate notice or payment in lieu of notice. However, there are certain situations where an employer may be able to terminate the employee without providing the required notice or payment in lieu thereof. In these situations, a court would decide that the employer terminated the employer for "just cause".

Over the past few years, the courts have become increasingly protective of employees who are particularly vulnerable at the point of termination, and have developed principles requiring that employers deal with employees in good faith when terminating employment. This has complicated the termination process, particularly for just cause. Employers must be careful that just cause is only alleged where there is a reasonable basis for doing so. Care should also be taken to ensure the employee is treated fairly in other respects, such as providing an opportunity to answer allegations of misconduct.

Terminations for just cause generally fall into three major areas - dishonesty, performance issues, and absenteeism - two of which are discussed below as it relates to disability and terminations. Courts have developed principles that can act as a guide for employers in these situations.

Poor performance

Where an employer finds that an employee is unintentionally incompetent and incapable of meeting the standards set out in the employment contract and/or performance management system, it may conclude that no amount of employee development would be sufficient in order to rectify the employee's competency problems.

In order to justify termination for just cause for reasons of poor performance, however, the employer must show more than mere dissatisfaction with the employee's performance. Real incompetence must be established by proving the following steps were taken:

        ¨       the objective standard was established;   

¨       the objective standard was communicated to the employee;

¨       the employee's performance fell below the objective standard; 

¨      the employer gave the employee a clear written warning that failure to meet the standard, after a certain reasonable period of time, would result in the employee's dismissal; 

¨      the employer gave suitable instruction to the employee in order for the employee to correct any deficiencies and meet the objective standard; 

¨      the employer allowed for the employee to improve over the specified time;   

¨      the employee was still incapable of improving after a specific period of time in order to meet the objective standard.

If the employer fails to follow these steps, a court will probably find that the employee was improperly dismissed. This could lead to extra costs for the employer, not only for an unjustified dismissal, but also for damages for the lack of a reasonable notice period.

Employers should also be aware that a single incident of a failure to meet objective standards will probably not justify a dismissal for just cause. The courts generally examine whether a reasonable employee could achieve the standard in question through the employee's efforts given the following:

        ¨       the circumstances of employment; 

¨       the volume of business;

¨       the state of the economy; 

¨       the resources available to the employee; 

¨       the employer's provision of training, assistance, and supervision; 

¨      whether the employee had a record of long and faithful service to the employer; 

¨       whether the employee was under stress or on medication; 

¨       the potential for the employee to improve; 

¨       the standards set for comparable employees; and   

¨       any other surrounding circumstances.

To avoid problems, employers should make any expectations and performance standards clear at the time of the job offer, and should ensure that the prospective employee understands the job offer is conditional upon meeting those expectations and objective standards.

Employers should have an effective performance management system in place that can be applied consistently throughout the organization. The system should include performance plans; regular channels of communication and feedback; annual review procedures; and procedures for creating new goals for the year. If an employer has established such a performance management system and subsequently discovers that the employee is incapable of meeting the objective standards and expectations, it should begin laying the groundwork for dismissal as soon as the problems become apparent to protect itself and justify the dismissal without notice or payment in lieu thereof. The employer can accomplish this by establishing the following:

¨       all instances of employee incompetence are documented;  

¨       the objective standard is established and communicated to the employee; 

¨       on discovering that the employee's performance has fallen below the objective standard, the employee is given a clear written warning that failure to meet the standard, after a certain amount of time, will result in dismissal; and

¨       any necessary instruction is provided to the employee to correct any deficiencies and meet the objective standard, and sufficient time is given to the employee to improve.

If the employee is still incapable of meeting the objective standard by the time specified by the employer, the employer may terminate without notice or payment in lieu thereof. Employers should ensure that these points are properly documented and can be properly proven in court. This is especially important when supporting the establishment of the objective standard created in the performance management system.

Absenteeism

The duty to report for work regularly and on time is the employee's most important obligation. However, not all absences will justify termination. When considering termination for just cause the courts will consider a number of factors, including:

¨       the nature and degree of absences over time;  

¨      the prejudice, if any, to the employer resulting from the employee's absence;   

¨      the warnings, if any, given to the employee relating to absenteeism.

When considering taking action for innocent absenteeism, employers should be careful to find out if there is a handicap or special circumstance that needs to be explored for reasonable accommodation or expected accommodation. In every case, terminating an absent employee is a tricky situation that requires an assessment of the circumstances specific to the case, as well as consultation with a lawyer to ensure the actions taken against the employee will not result in a human rights or wrongful dismissal complaint.

Generally speaking, occasional lateness will not amount to just cause for dismissal. However, chronic tardiness over time may constitute just cause for dismissal after the employee has been provided with appropriate warnings in advance of dismissal.

When is Termination an Option?

Courts dislike holding that an employee has been terminated for cause, except in cases of egregious conduct such as theft, fraud, assault or harassment. Long-term employees are protected carefully by the courts. It is, however, possible to establish cause based on chronic breach of company rules, including attendance policies. For example, if you terminated your employee based on being absent for just three days, the following factors would be critical if the employee sued you for wrongful dismissal:

¨       Has the lateness caused prejudice to your company's operations? For example, a front-line receptionist or an assembly-line worker may be treated differently than an IT person or researcher.

¨       Have you warned the employee of the standard of attendance expected and the consequences of failure?

     ¨       Do you treat all employees consistently?  

¨       Have you been guilty of sending "mixed messages?" There should be no doubt in the employee's mind that further misconduct will lead to termination. If one manager drafts warning letters and another manager re-assures the employee that his or her job is not in jeopardy, the warning letter will be rendered ineffective.

¨       Have you condoned the misconduct? Employers who choose not to dismiss an employee for certain misconduct cannot later invoke that same misconduct as a basis for termination. In certain cases, the court will review both the earlier misconduct and subsequent behaviour in determining whether there is a "culminating incident" or cause.

¨       Does the employee have a reasonable explanation? For example, an employee who is late in order to attend medical appointments will be treated sympathetically.

Duty to Accommodate

One of the most difficult challenges for employers is the duty to accommodate employees to the point of undue hardship. Discrimination and accommodation issues are increasingly complex, forcing employers to consider questions they are not always well-equipped to answer. For example, short- and long-term disabilities, religious beliefs and observances, aging workforces, treatment of individuals with cognitive and psychological disabilities, and employees' child-care concerns have become volatile issues in the law of accommodation. Applying the concepts of discrimination, accommodation and undue hardship to the real world is not an easy task and imposes considerable obligations on employers.

An employer has an obligation to undertake a thorough and good-faith analysis of any situation where accommodation may be required. It must ensure that it understands an employee's needs and makes an effort to consider the implementation of all possible accommodation measures. An employer should be diligent in documenting its assessment of the employee's needs and the accommodation measures considered in order to demonstrate that it has discharged its duty. An employer has an obligation to actually implement accommodation measures, where to do so would not lead to an undue hardship. Such measures are highly dependent on the circumstances of each individual case, but may include modifying the employee's work environment, schedule, job duties or, in some instances, providing the employee with an alternate position within the organization.

In assessing whether the implementation of accommodation measures would result in an undue hardship to the employer, various factors must be considered. These include the cost of the accommodation, health and safety implications, the size of the employer's operations, its resources and flexibility, as well as factors relating to workplace morale and the disruption of rights provided for under a collective agreement.

Given these factors, there are no "off the shelf" solutions to accommodation dilemmas. The exact nature of an individual employee's circumstances and an employer's operations means that the definition of undue hardship will vary from case-to-case. As stated by the Supreme Court of Canada, accommodation and the definition of undue hardship must be assessed with common sense and flexibility.

Recent cases serve to demonstrate that although the duty to accommodate creates significant employer obligations, the duty is not without limits. Emerging trends from the courts include:

Employees must be forthcoming with respect to their needs in seeking accommodation and seek assistance if they are suffering from a disability;

Accommodation to the point of undue hardship does not include tolerating excessive innocent absenteeism. Thus, even where an employee suffers from a disability, if the employee's high level of absenteeism pre-dates the onset of the disability and is expected to continue to a similar degree, it is not reasonable to require an employer to tolerate such absenteeism;

Employees have no right to dictate a new job description; the employer does not have to "create a job" to meet its duty to accommodate;

There is no requirement to a modify a job to eliminate bending, twisting, and lifting where these were a regular part of employee's job duties; or to bundle other light-duty functions into the position to make a full-time modified position;

While human rights legislation requires that employers make considerable efforts to accommodate disabled employees, it does not require that they provide pay and benefits to accommodated employees that amount to more than the value of the work being performed.

Regarding medical information for disability leave, employers are generally not entitled to know the precise medical diagnosis of an employee. However, if the information is relevant in the circumstances, employers may be entitled to know the basic nature of the illness or disability in question. The employer is entitled to enough information as is reasonably necessary to make a preliminary assessment about whether the absence (and duration of the absence) is justified. If this basic information raises a reasonable suspicion that the employee is not entitled to sick leave, the employer may request more detailed information so it can assess the claim. If an employee is applying for short-term disability or very short sick leave, the employer is almost never justified in asking for more than the most basic medical information. As the length or seriousness of the illness increases, or the type of benefit shifts from short-term to long-term disability, the employer is entitled to ask for more detailed information. Also, if the employee is applying for an extension to his sick leave, the employer may be entitled to more detailed information.

Employers are neither required to indefinitely maintain an employee on their workforce if the employee is permanently incapable of performing his or her job, nor required to tolerate excessive absenteeism or substandard performance.