All employees in Canada are employed either the terms of collective agreement, or alternatively pursuant to an oral, or written, individual contract of employment. No employee has a right to retain her or his job, whether one is employed under the terms of a collective agreement, or an individual contract of employment. It is true that employees who fall under the provisions of a collective agreement typically have more protections against termination without cause, as compared to those falling under an individual contract of employment. What follows here is a general description of employment termination. 

  1. Termination Under Individual Contract

In a workplace that is not governed by a collective agreement, each employee has a contract with the employer. This is called an individual contract of employment.  The terms and conditions of an individual contract of employment can vary. So, as a matter of a person’s rights on, termination one must first examine the contract between the employee and the employer.  Subject to the provisions of human rights legislation, and employment standards terms, It is the terms and conditions contained in the individual contract of employment that governs the rights and obligations of an employee upon termination.

Generally, there are no fewer than nine ways that an individual employment contract can be terminated, namely:

  1. Termination in or at the end of a probationary period;
  2. Termination Without Cause
  • Termination With Cause
  1. Death of an Employee
  2. Contract Frustration
  3. Expiry of Term
  • Bankruptcy and Insolvency
  • Quitting
  1. Constructive Dismissal
  1. Termination in or at the end of a probationary period

Individual contracts of employment typically contemplate a probationary period. In a typical individual contract of employment, the probationary period lasts for the first ninety days, although the period of probation is always going to be the subject of negotiation between the employer and employee.  Probationary periods are understood widely to be a trial period for both the employer and the employee to assess suitability for the job assessed in several ways.  An employer is typically permitted to terminate a probationary employee at any time during the probationary period without any financial consequence, subject always to the provisions of human rights legislation.

  1. Termination Without Cause

An employer is not obligated to continue to hire any employee, subject to the provisions of the human rights code. Typically, this means that an employer can terminate the employment of any employee for any reason or no reason, subject to the provision of various statutes, most notably human rights legislation, and in the case of a pregnant female certain employment standards legislation.  Termination without cause frequently happens when a corporation reorganizes and terminates one or more employee, or in the context of mergers and acquisitions, when one corporation acquires another.

When an employee is terminated without cause, the employer’s obligation is either to give sufficient notice, or pay the employee reasonable notice. What constitutes reasonable notice is first an issue of statute, followed by the provisions of the specific terms of a written contract of employment respective notice, and judicial pronouncements.  Employment standards legislation sets out the minimum an employer is required to pay when an employee is terminated without cause.

  • Termination With Cause

Cause for termination of an individual contract of employment is a moving standard. While there are certain established employee conduct that will virtually always substantiate cause (theft, time theft, etc.), other offensive conduct unfold with time. For instance, the Ontario Court of Appeal less than a decade ago established sexual harassment as grounds for termination for cause in some situations and circumstances.  An employer has no obligation to pay an employee terminated for cause reasonable notice. A dispute may arise between an employer and an employee about whether the employee’s conduct

  1. Death of an Employee

Although it appears obvious that death of an employee ends an individual contract of employment, there are fact situations in which it is not easy to determine if and when an employee is actually ”dead”. Without getting into this area, it is sufficient to say that an employer has no obligation to pay reasonable notice or make any payment to the deceased estate when the contract is terminated by the employee’s death, except for earnings and other payment already accrued.

  1. Contract Frustration

A contract is frustrated when an unforeseeable intervening event results in the terms of the contract being impossible to perform. In the context of an employment contract, frustration most often occurs when an employee suffers prolonged illness resulting in her/him being unable to do the job for which he or she was hired.  A longer period of illness is generally required to substantiate frustration of contract where an employer and employee agree upon long-term disability payments as part of the employee’s compensation arrangement.  An employer has no obligation to pay reasonable notice when a contract is frustrated, subject to the provisions of any written contract to the contrary, or to a judicial finding that the facts of the particular case do not amount to frustration.

  1. Expiry of Term

Sometimes an employer and employee agree to what is called a “fixed term contract of employment”, for example one year.  Fixed term employment contracts arise is a variety of ways. For example, employers sometimes resort to fixed term contract to replace an employee off on pregnancy leave or parental leave. At the end of the fixed term, the parties may extend the term of the contract on the same or different basis. When the term ends, the employer has no obligation to pay the employee reasonable notice, except in accordance with the terms of the employment contract.

  • Bankruptcy and Insolvency

When a company goes bankrupt and is forced to liquidate its assets then the individual contract of employment gets terminated. Bankruptcy proceeding is federal law. The provisions of the Bankruptcy and Insolvency Act, in general terms, supersede the provisions of provincial law. In any event, there are special rules that deal with bankruptcies.  A bankruptcy is not “cause” to terminate an employment contract. And so even in the case of bankruptcy, an employer is still obligated to give notice of employment termination or pay.

  • Quitting

Employees quit their jobs all the time. The act of quitting ones job is most often voluntary. Quitting one’s job can be driven by a variety of factors.  Generally speaking, an employee who quits her or his job is not entitled to pay in lieu of notice from the employer, unless there are contractual terms to the contrary. It should be noted that in rare cases an employer can refuse to accept an employee’s resignation and move for the judicial remedy of specific performance. This kind of thing happens when the employee is a “key” person and the effect of the resignation may have serious economic consequences to the employer.

  1. Constructive dismissal

Constructive dismissal refers to a scenario in which an employee quits her or his job and sues the employer for reasonable notice. In this kind of case the employee takes the position that quitting was not voluntary, but induced by conduct of that employer that repudiates the underlying employment contract.  Constructive dismissal cases are risky business as it involves a judge making a decision that the employers conduct repudiated the underlying employment contract.  Alternatively, the parties can agree on a settlement.

  1. Termination Under Collective Agreement

In unionized workplaces, employers are severely restricted on when they can terminate the employment of a worker covered by a collective agreement. No employee can have an individual contract of employment if the job function is governed by a collective agreement negotiated by a recognized bargaining agent.  A unionized employer wanting to terminate the employment of an employee can typically only do so for cause, subject to principles such as innocent absenteeism, and breach of a last chance agreement.

Unionized employees have less freedom to deal directly with the employer about termination matters than employees covered by the provisions of an individual contract of employment. In the typical collective agreement, the provisions requiring employment termination solely on the basis of  “just cause”, or similar language are set out, as is the grievance process by which termination, and other disputes get addressed and ultimately addressed. Again, generally speaking, unions are vigilant in processing grievances pertaining to the termination of bargaining unit members.