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What do I owe my employee if I have to let them go?

If you’re letting go of an employee without cause and trying to figure out what you owe them, your first guide is their written employment contract. If it was done properly, the contract must at least say that you’re paying them out the minimum amounts that they’re owed under employment standards law, plus it may add in an additional period of payment, possibly an extra few weeks or even months, that are designed to support the employee. 

If however your written contract does not include any sort of termination clause, or if it was a contract written years ago that had not been updated in some time, it may not offer any restrictions on what you would owe your former employee. In most cases, unless your contract was drafted in the last year by an employment lawyer, it is safer to assume that the contract will not properly restrict what you may owe an employee. In that case, you’ll likely owe them what is known as ‘reasonable notice of termination’ under common law. This is an analysis of judge-made law that determines how long it would reasonably take a person in similar circumstances, of a similar profile and with similar experience, to find a comparable role. It’s not a precise calculation, but lawyers will anticipate what a court would say in these circumstances if they are negotiating an employee’s exit package.

This can be where things get incredibly complicated and it is always good to seek legal advice when contemplating your exit package to assess your obligations and avoid the risk of a legal claim from the employee. The difference between a well-drafted contract and an ineffectual one can be drastic – one may restrict a payout to 8 weeks’ salary and the other can run as long as two years or more in some cases, so it is always smart to seek regular legal advice on your contracts. Learn more about terminations without cause here. 

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Markham, ON
L3R 5B4

Phone: 416-864-8500
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