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What the Heck is Employment at Will?

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Just about everyone responds to “termination” the same way:  personally!  My “role has been declared redundant” in two corporate mergers so I know exactly how it feels:  gutted! 

 

During initial chats with career transition clients, coaches talk about the concept of “employment at will” but many people hear it for the first time after the fact.    

 

So what is it exactly?  This is a traditional principle of law which states that, in the absence of a contract to the contrary, an employment relationship can be terminated at any time, by the Employee or the Employer, for any reason or for no reason.

 

If you are resigning, your Employer likely assumes that you will give notice as you’ve been paid or has been defined in your Employment Contact.  For example, if you’ve been paid every two weeks, you’d typically give two weeks notice.  While this isn’t legislated, I’ve found it’s a good practice not to burn bridges;  who knows if you might not want to return to your Employer some day?  By giving your Employer time to start replacing you, participating in an exit interview, sharing what went well during your tenure as well as what led you to resign, you keep doors open.  But just to be clear:  Employees who resign do not receive a “package”.     

 

If your Employer is terminating your employment, there are a range of categories.

 

  1. Temporary Layoff

This occurs when your Employer cuts back or stops your work without ending your employment (e.g. when there is not enough work to do).  The assumption is:  when there is enough to work to do, you will be recalled.  Please consult the Employment Standards Act for more details. 

 

  1. Termination with Cause

Generally the reasons “for cause” include:

·         Misconduct, e.g. theft, dishonesty and assault.  Absenteeism, lateness and poor performance are not considered “with cause” unless there is a documented record of progressive discipline

·         Neglect of duty or incompetence, e.g. when you have a clear Job Description outlining reasonable requirements of your role but, when problems have been raised, assistance given and a reasonable time to improve has been granted, you have not been able to “meet expectations”

·         Conflict of interest, e.g. when you engage in activities during the workday that interfere with the stated employment obligations or compete with the Employer’s business generally

·         Willful disobedience, e.g. when you challenge or disobey specific instructions given by your Employer

 

While the onus is on your Employer to provide just cause, it is not required to offer Termination Pay or Pay in Lieu of Notice or Severance Pay.


 

  1. Termination without Cause

Your Employer is not required to offer you a reason why your employment is being terminated.  It is required to offer your Termination Pay or Pay in Lieu of Notice.  It may also be required to offer Severance Pay.  Both of these “pays” are defined in The Ontario Employment Standards Act.  If you have an individual Employment Contract or Collective Agreement, these documents will clarify your entitlements.  You may also want to refer to Case Law.

 

                     i.      Termination Pay (written Notice of Termination is required) is determined by how long you have been employed.  Your Employer can require “working notice” whereby you remain  at work during the following notice periods

 

Length of Employment

Notice Required

Less than 3 months

None

3 months but less than 1 year

1 week

1 year but less than 3 years

2 weeks

3 years but less than 4 years

3 weeks

4 years but less than 5 years

4 weeks

5 years but less than 6 years

5 weeks

6 years but less than 7 years

6 weeks

7 years but less than 8 years

7 weeks

8 years or more

8 weeks

 

If you do not receive written notice under The Employment Standards Act, you must be given Termination Pay in Lieu of Notice.

 

                   ii.      Severance pay is not the same as Termination Pay.  Rather, it is compensation in recognition of long service as well loss of senior and job related benefits that is paid to a qualified Employee who has had his or her employment “severed” .

 

You qualify for Severance Pay when:

·         Your employment is severed

·         You have worked for your Employer for 5 or more years

·         Your Employer has a payroll in Ontario of at least $2.5 million OR severed the employment of 50 or more employees in a 6 month period because all or part of the business closed

 

The Employment Standards Act details how Severance Pay is calculated but it provides minimum standards only.  You may have rights under your individual Employment Contract, Collective Agreement (if a Union member) or Case Law so view checking with an employment lawyer as an investment not a cost.

 

You may be offered payment:

·         As salary and benefits continuance but be aware there could be a “claw-back” clause requiring you to pay back all or part of the balance should you find employment before the last payment is made

·         As a lump sum

 

In both cases, the RRSP implications can be tricky so always consult with an accountant or financial advisor.  Your credit union or financial institution can help.

 

                iii.      What is Constructive Dismissal?

This occurs when your Employer makes a significant change to a fundamental term or condition of employment without your actual or implied consent.

 

Again, you’ll want to consult with an employment lawyer about your situation.

 

                iv.      What is Case Law?

Case Law provides factors to be considered for “packages” at the other end of the spectrum from the minimum requirements detailed in the ESA, e.g.:

·         Age

·         Length of service

·         Seniority of position within your Employer’s hierarchy

·         Re-employability in the current labour market in your geo-area

·         The circumstances of your hiring (e.g. were you “headhunted” away from gainful employment?) and termination

 

Always consult with an employment lawyer as to the feasibility of negotiating a severance package beyond the ESA. 

 

                  v.      A word about “packages”

In an ideal world, you’d receive a “package” and move immediately into a new role allowing you to take that round the world cruise, buy that new car, put a down payment on that new condo or invest.

 

However the intent of “packages” is to provide you with a reasonable financial cushion so that you can secure the best fit role post termination.

 

For those people who grab the first thing on offer…even though they know the role and/or the corporate culture isn’t a good fit, let alone a best fit for them…almost always ends in disaster!  Seek the expertise of a good job search coach, plan a strategic job search and pursue the best fit role:  it’s always worth it.

 

Many Employers will provide you with career transition counseling (outplacement) to help you find that best fit role.  If it hasn’t been offered, ask!  You have at least a 50% chance of your Employer saying “yes”.  

 

 

                vi.      What is your duty to mitigate by seeking re-employment?

Under Ontario Law, a terminated Employee is required to make reasonable and diligent effort to secure re-employment after a dismissal.


 

File for EI (in person, by phone or on-line) as quickly as possible after your termination date whether you think you’ll access it or not.  Your Employer is required to provide you with an ROE (Record of Employment) within 5 days of your last payment (if you’re on salary and benefits continuance, that could be weeks of months away). 

 

So…just as you have rights in the workplace, you also have responsibilities.   Make sure you’re well informed about both and take charge of your career.