HRM3103: Module 9 Notes

Module 9: Termination of Employment

In this module, we will examine the legal aspects of termination of employment, concentrating on
termination of non-unionized employees.

MODULE 9 OBJECTIVES
Upon completion of this module, you will be able to:
1. Describe the legal requirements related to resignations, terminations, and
constructive dismissals.
2. Apply termination procedures appropriately to case studies related to union and
non-union settings.
3. Distinguish between termination for cause and termination for unjust cause.
4. Describe legal procedures for terminating probationary employees.
5. Describe legal procedures for calculating severance pay and pay in lieu of notice.

To do in Module 9
1. Read the Module 9 notes (below).
2. Read the textbook, Chapter 11-16.
3. Complete Unit 9: Termination of Employment in the workbook.
4. Contribute to the Graded Discussion Board (5%).
5. Submit Individual Assignment 1 using the dropbox.
6. Start working on Individual Assignment 2.

Important topics related to terminations

Termination of employment is an important topic for human resources professionals to master.
Here are some of the skills and information you must have/know:

o ways in which an employment contract could be ended

o the uses of a fixed-term contract
o the requirements for an employee resignation
o ways to calculate termination notice required by legislation vs. required by common law
o ways to calculate severance pay
o factors that determine a reasonable notice period
o constructive dismissal
o dismissal for cause
 o the essential elements of a wrongful dismissal action and the remedies
o the duty to mitigate damages
o events which could cause the frustration of a contract
o procedures to follow when responding to a reference inquiry regarding an employee
o how a probationary period could be established and the legal obligations of the employer
when discharging probationary employees
o strategies to maintain an organization’s non-union status (see Module 10)

Ways an employment contract can end

There are a number of ways in which the employment relationship could end:

o the expiry of a fixed term or task agreement

o the resignation of the employee
o the retirement of the employee
o frustration of the employment contract
o dismissal for just cause by the employer
o dismissal without cause by the employer
o constructive dismissal

FIXED-TERM CONTRACTS
A fixed-term contract is simply an employment contract for a specified period of time. When the
contract is over, the employment relationship simply expires, and the employer does not have to
give notice.

REQUIREMENTS FOR EMPLOYEE RESIGNATION

An employee can revoke or withdraw a resignation if the employer has not yet accepted it.
Employees do have a Common Law duty to provide reasonable notice to the employer if they
quitting; that period is based on the amount of time it would be required for the employer to find
a replacement.

TERMINATION NOTICE - LEGISLATION VS. COMMON

LAW
The ESA provides two separate obligations for employers who are terminating employees: they
must provide severance pay, and they must give notice (or pay in lieu of notice).

SEVERANCE PAY
Severance pay is necessary if the employer has a payroll of more than $2.5 million OR if the
employer has severed 50 or more employees within 6 months (due to a full or partial business
closing) AND the employee has at least 5 years of service. The severance pay amount is 1 week’s
pay for each year of service, to a maximum of 26 weeks. Severance pay is a specific statutory
entitlement on termination paid in a one-time lump sum payment. It is calculated by multiplying
the employee’s regular wages for a regular work week by the sum of the number of years of
employment PLUS the number of completed months of employment divided by 12 for a year that
is not completed, to a maximum of 26 weeks.

REASONABLE NOTICE

Reasonable notice for terminations without cause is set out under Common Law. Under the ESA,
no notice is required if employment is less than 3 months but will be between 1 and 8 weeks
depending on length of service. The reasonable notice period is based on

o the employee’s age

o the employee’s position
o the employee’s length of service
o the employee’s level of compensation
o 5the availability of similar employment, given the employee’s experience, training and
qualifications.

Constructive dismissal
Constructive dismissal is a fundamental breach by the employer of an employment contract that
entitles the employee to consider himself/herself dismissed and able to sue for wrongful
dismissal. This breach can be caused by a fundamental change in compensation, duties,
relocation, scheduling, or other relevant contractual items, if these changes were made without
providing advance notice to the employee or advising the employee of the consequences of
rejecting the change.

Termination with just cause

Just cause occurs when an employee breaches the employment contract in a fundamental way.
The employer is therefore not bound by Common Law to provide reasonable notice of termination
or pay in lieu of notice. Factors that affect a just cause termination are:

o onus of proof
o proportionality and contextual approach
o procedural fairness
 o stating the grounds for dismissal
o condonation

COMMON GROUNDS FOR JUST CAUSE

Dishonesty; insolence and insubordination; incompatibility; off-duty conduct; disobedience;
absenteeism and lateness; sexual harassment; intoxication; substance abuse; incompetence. It
should be noted that the onus of proof of any of the above grounds is on the employer. An
employer risks significant damage to its public image for any unjust dismissal suit.

DISMISSAL WITHOUT NOTICE

Employees can be terminated without notice for misconduct or problems relating to job
performance. Note again, however, that these issues must be definitely proven by the employer
in court, resulting in risks of the company’s corporate image.

Elements of wrongful dismissal action

and the remedies
Wrongful dismissal in Common Law means that the employer has failed to give reasonable notice
of an employee’s termination. In a wrongful dismissal, the employee is entitled to not only his/her
salary for the reasonable notice period but also any additional compensation which he/she might
have earned during the notice period including benefits, bonuses, and pension entitlements.
Damages can also include aggravated damages, Wallace damages (based on the Wallace case),
and punitive damages. However, the employee also has a Common Law obligation to mitigate
his/her circumstances/damages by taking all reasonable steps to find alternative employment
during the notice period. Earnings from the new job are usually deducted from the amount the
employer is required to pay the employee as damages for wrongful dismissal.

Frustration of a contract
If an event occurs after a contract was formed that is beyond the control of the parties (e.g., fire,
explosion, flood), making the performance of the contract impossible, the contract is deemed to
be frustrated. The result is that the contract is ended and both parties are released from their
obligations. Hence, the employer’s obligation under Common Law for reasonable notice is
eliminated. However, the obligation to provide notice of termination and severance pay under
the ESA is eliminated only if the cause of frustration is something other than the employee’s
health.

References
Employers are not required by law to provide letters of reference to dismissed employees.
However, if the employee is terminated without cause, a letter of reference should be provided. If
the employee if terminated with cause, the employer should be extremely cautious about
providing a reference letter, since it could be used in court to contradict the termination with
cause. If a letter is provided, it should avoid commenting on performance.

Probationary employees
A written contract can outline that the employee acknowledges that employment is subject to a
set probationary period. The provision of the policy should state that the employer can terminate
the employee at any time for any reason within the probationary period (for example, 3 to 6
months). If the probationary period is longer than 3 months, the ESA requires the employer to
provide one week’s notice or pay in lieu if the employee is dismissed.

Termination of Unionized Employees

Management has the right to discipline unionized employees, subject to the terms and conditions
of the collective agreement. The collective agreement constitutes an expressed contract of
employment for employees within that particular bargaining unit. Discipline can include
termination with just cause for serious infractions or infractions which have followed lengthy
disciplinary records. Unions can, however, argue that the discipline issued to a particular
employee was without just cause and therefore subject to the Grievance/Arbitration provisions of
the collective agreement. The right to Grievance/Arbitration is provided to unions in exchange for
a no-strike/no lockout provision in the collective agreement.

GRIEVANCE PROCEDURES
Usually the collective agreement outlines the specific steps in the grievance procedure. Most
procedures have three steps.
Step 1: The employee, union steward, and employee’s immediate supervisor discuss the
grievance. The employee’s supervisor provides a written response to the union regarding the
grievance. If the union is not satisfied with the outcome, it can proceed to Step 2.

Step 2: The issue is passed to the department head. If the outcome is still not satisfactory, the
union proceeds to Step 3.

Step 3: The issue is passed to the plant manager and likely the business agent or senior plant
steward of the union. If the grievance remains unresolved, the union can elect to have the
grievance proceed to third-party arbitration.

Unions usually take this final action if the employee has been terminated or is facing a lengthy
unpaid suspension. In fact, there is a legal reason for unions to take cases to arbitration – the
notion of ‘failure to represent’. Employees can sue their union if they feel they haven’t been
represented properly by their union.

ARBITRATION BOARDS
The collective agreement often specifies the type of third-party arbitration hearing that will take
place. One common type of hearing is a three-person arbitration board: it consists of a
chairperson, a company nominee, and a union nominee. This board hears the grievance and
makes a decision – to uphold the discipline, remove the discipline or amend the discipline in
some way. A majority decision (2 out of 3 members) is usually required.

Typically, a company lawyer or representative, a union lawyer or representative, and other

appropriate parties associated with the case (including the employee) present the arguments and
evidence to the arbitration board. The board decides based on a standard of a balance of
probabilities not the legal standard of beyond a reasonable doubt. Because there are three
people on the board, their decisions tend to be viewed as more fair and balanced than those
made in other types of arbitration formats (below). However, it takes longer for an arbitration
board hearing to be set up and take place and it is decidedly more expensive for the parties. (The
union and the company usually split arbitration costs on a 50/50 basis.)

SINGLE ARBITRATOR
Some collective agreements have opted for a single arbitrator to hear arbitration cases for their
employees. A single arbitration process is usually both cheaper and faster than an arbitration
board. The problem, of course, is that the parties are then subject to the biases of one person in
the ruling.
ARBITRATION DECISIONS
How do arbitrators make their decisions? They can uphold a discipline, remove a discipline, or
amend a discipline. They make decisions based on a balance of probabilities. The key to every
arbitrator’s decision, however, is the decisions that were made previously – the decisions that set
a precedent. Arbitrators look to previous similar cases and are guided by the decisions that
previous arbitrators made. It is up to the company and union lawyers to argue how previous
cases support or not support their position.

FACTORS ARBITRATORS WILL CONSIDER

Based on previous cases, arbitrators consider the following in rendering a decision in a discipline
case:

o severity of the infraction;

o the employee’s previous work record;
o the employee’s previous disciplinary record;
o seniority;
o age;
o the employee’s re-employability in a termination case;
o the economic climate: how easy it will be for the employee to get another job;
o company rules: history of enforcement, past practice, publication of the rules;
o formal apology: whether the employee gives a formal apology regarding the
infraction; company image: to what extent the infraction tarnishes the company
image;
o time limits: whether either the company or union has exceeded the time limits for
responses to the grievance as outlined in the collective agreement;
o provocation: whether the employee was provoked into the infraction by
circumstance or another employee or manager;
o premeditation: whether the employee committed the infraction on the spur of the
moment or with forethought; and
o duty to accommodate: whether any duty to accommodate provisions under the
OHRC were not fulfilled, such as for an employee with an addiction. (OHRC
requires an employer to accommodate an employee who has a disability,
including addiction to alcohol or drugs.)

An arbitrator looks at these factors and others prior to making a decision on a discipline case. It is
safe to say that, in many instances, arbitrators tend not to support termination of an employee,
particularly one with significant seniority.

So let’s look at a hypothetical discharge case and get a sense of the arguments that the
Company and the Union would present to the Arbitrator or Arbitration Board. In a discharge case,
the arbitrator has the right to uphold the discharge, dismiss the discharge, or amend the
discipline to something less than a discharge (for example, a lengthy suspension without pay).
THE SONJA KRAJEVSKI CASE SCENARIO
Case scenario written by Charles Purchase, Lambton College (based on an actual
case)

Sonja Krajevski came to Canada twelve years ago as a widow mother and sole support of two
young grandchildren. She didn’t have much formal education, but she was willing to work to
support her family. She secured a job as a cook’s assistant at the Devonshire Hotel downtown.
Sonja had been in that position for 11 years at the time of the incident and had a clean
disciplinary record with her employer. On January 10, 2010, she was seen by her supervisor,
Diana Logan, removing a small amount of food product from the kitchen freezer, putting it inside
her jacket, and then attempting to leave the premises as her shift had ended. Diana confronted
Sonja at the time, at which point Sonja denied that she had taken anything from the kitchen.
Diana indicated to Sonja that she was suspended without pay at that point, subject to further
discipline based on an investigation. Two days later, after an investigation, the hotel advised
Sonja in writing that her services were terminated for just cause because of theft of company
product. Sonja contacted her union, and the union filed a grievance disputing the termination for
cause. The case went to arbitration and was heard by a single arbitrator.

ARGUMENT AT ARBITRATION:

THE COMPANY ARGUED:

1. Theft is theft, a very serious offence; and regardless of the amount of the product taken,
the employee has irreparably damaged the employment relationship with the employer.
2. While 11 years of seniority is significant, it does not override the seriousness of the
infraction.
3. The hotel’s image has been damaged because arbitration decisions are public and future
customers may think twice about coming to a hotel that has a thief on staff.
4. The act was premeditated as Sonja had her jacket on for the purpose of hiding the
product.
5. Sonja was not provoked into the infraction.
6. No formal apology was received from the employee.

THE UNION ARGUED:

1. The value of the product taken was less than $10. As a result, the infraction could not be
characterized as theft, but rather, petty theft.
2. Sonja took the product because she was having problems financially and therefore
difficulty feeding her grandchildren.
3. Sonja had indicated she had seen many other employees do the same, and so she
thought it was acceptable to management. No one had told her otherwise, and there was
no formal policy written on the subject at the hotel.
4. Sonja had a clean disciplinary record to this point.
5. The theft would not impact on the hotel’s image because Sonja was a cook’s assistant
and had no interaction with the hotel’s customers.
 6. Sonja had no formal education, she was 54 years old, and the labour climate was poor: it
was going to be extremely difficult for her to get another position.

THE ARBITRATOR DECIDED:

The Arbitrator decided to alter the discipline from a discharge with cause to
a reinstatement and a suspension without pay for a period of six months. He was persuaded by
the following points:

1. He saw a difference between theft and petty theft.

2. He sympathized with Sonja’s likely difficulty in finding another position.
3. He felt that the hotel’s image would not be severely damaged.
4. He saw the petty theft as a ‘one off’ in that Sonja had a clean disciplinary record; and 11
years of seniority with the hotel to that point in time.

SUMMARY
In a termination case for a unionized employee, the rules and procedures are significantly
different than those applied to non-union employees. To be upheld, the termination must be for
just cause, and the decision to terminate has to pass a formal review. Otherwise, Grievance and
Arbitration may result in the termination being dismissed or altered.