In this article we provide a brief overview of the implications of ending an employment relationship in British Columbia.
An employer may end an employment relationship: [a] with just cause, or [b] with working notice (or pay in lieu of notice).
Just cause is misconduct which goes to the heart of the employment relationship. An employer who has just cause to end the employment relationship may do so without providing the employee any notice or severance pay. Examples of misconduct that may constitute just cause include:
[b] a serious act of dishonesty;
[c] a serious breach of a fiduciary duty;
[d] a conflict of interest;
[e] assault; or
[f] sexual harassment.
Usually, a single act of misconduct will not be sufficient to establish just cause. However, where the act in question is serious or is a “culminating” incident (the last in a series of incidents), the employer may be justified in summarily dismissing the employee. The threshold for proving just cause is quite high, and the Courts have found that only the most serious misconduct will give rise to just cause to fire an employee.
Economic considerations, including the business losing money, is not just cause.
Notice or Pay
In the absence of just cause, the parties will have to provide some combination of notice or pay in order to end the employment contract. The parties may contract for the terms on which the employment relationship will end – such provisions are common in employment agreements. The parties may agree on any number or formula to calculate notice or pay, provided it does not result in the employee receiving less than the minimum employment standards entitlement.
In B.C., the applicable employment standards legislation entitles an employee to approximately one week’s notice, or pay in lieu thereof, per year of service up to a maximum of eight weeks notice or pay in lieu after eight or more completed years of service.
If the parties have not expressly agreed to the terms on which the employment ends, or if those terms are less than the employment standards minimum and hence void, the Court will imply a term of reasonable notice. Determining how much notice is “reasonable” is more an art than a science and the Courts have consistently rejected fixed formulas for making such a determination.
The Courts will look at the entire context of the employment relationship to determine “reasonable”, but will focus on four factors:
[a] the age of the employee (the older the employee the greater the notice entitlement);
[b] the nature and character of the employee’s position (the more senior the employee’s position the greater the notice entitlement);
[c] the employee’s length of service (the longer the employee has been with the employer the greater the notice entitlement); and
[d] the availability of alternative employment in the market (the harder it is for the employee to find a new job the greater the notice entitlement).
The Courts have fixed a rough maximum of 24 months for the reasonable notice period.
An employer that does not give notice, must provide pay in lieu of that notice. The pay in lieu includes not only base pay, and also bonuses, pension contributions, car allowances, and in some cases benefits and stock options, that the employee would have received during the notice period had the employee worked.