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3 Important Things to Consider When Terminating Employment

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Several companies have been in the news lately regarding the termination of employment of large numbers of employees. Shopify recently announced it would be terminating 10 percent of its workforce, which is estimated to be 1000 employees.  Other large companies, including Wealthsimple, Twitter, and Netflix have also been in the news as a result of terminating the employment of hundreds of employees or more.  Increasing inflation and rumours of a recession are likely to lead to more terminations in organizations both big and small, although in many organizations the number of terminations will be smaller.

Big or small, as an Alberta employer if you are considering terminating the employment of an employee or multiple employees without cause there are three important things to keep in mind (four if terminating a large number of employees in a short period of time):

  1. The employee(s) must be paid any accrued but unpaid earnings, including accrued but unused vacation pay, up to and including the date of termination.
  2. A majority of employees have entitlements to termination notice or termination pay under the Alberta Employment Standards Code (or the Canada Labour Code if the employer is federally regulated). The amount owed is dependent upon the employee’s length of service. The exceptions are quite limited, and it is not possible to contract out of this entitlement.
  3. Employees may have entitlement to common law reasonable notice or pay in lieu thereof. It is possible to contract out of the common law.  Employers will need to review the employment agreements/offers for the employees in question to determine if there is a termination provision that applies.  Not all termination provisions are drafted equally and if the provision is not worded properly, it may not be upheld by a court.  If a termination provision is not upheld, or if there is no termination provision, then a court will award common law reasonable notice.
  4. If you are a provincially regulated employer in Alberta and you are terminating 50 or more employees at one location within a 4-week period, you must give the Minister written notice at least 4 weeks before the date on which the first termination is to take effect (unless unable to do so). The notice must include:
  5. The number of employees whose employment will be terminated; and
  6. The effective dates of the terminations.

Where employment agreements or offer letters do not currently contain provisions setting out the employee’s entitlements upon termination without cause, we recommend adding those provisions for new employees and considering implementing revised agreements for current employees.  An employer cannot simply add a new provision to an existing employment agreement; there is a process that must be followed in order for the new provision to be enforceable. The wording of the termination provision is also very important; a poorly worded clause will not be enforceable.

If you need legal advice about how to terminate employees or add an enforceable termination provision to your employment agreements, we are here to help.  We can provide sound advice that is specific to your situation. Please call our team of experienced employment lawyers today.

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