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Managing employees is a common challenge for many business owners. Even a single employee can have a significant impact on your business’ success, particularly if you are running a small enterprise.

For this reason, many employers are eager to part with employees who do not meet their immediate needs. But are there limits to how, when, and why you can hand a staff member their pink slip?

As an employer, you have the right to terminate your employee for nearly any business reason, provided the reason or manner of termination is not discriminatory. This right to terminate your employee, however, is subject to a corresponding obligation to provide the employee reasonable notice of termination or pay in lieu of notice. Some employees may also have a right to severance pay and other benefits on termination. An exception to the reasonable notice requirement is where the employee is guilty of misconduct that gives the employer just cause to terminate the employment contract immediately, without further obligations to the employee.

"Just cause for termination" may be broadly described as serious misconduct by the employee which violates a fundamental condition of employment resulting in a breakdown of the employee-employer relationship. Whether just cause exists depends on a variety of factors, including the terms of employment, nature of the misconduct, and the effect of the misconduct on the employer’s operations. All of those factors must be considered in the overall context of the employment relationship. Except in particularly serious cases (e.g. criminal activity, sexual harassment), one episode of employee misconduct typically does not justify dismissal without notice. Courts generally expect an employer to warn and/or progressively discipline an employee before finding that the employer has just cause for dismissal.

Although misconduct amounting to just cause releases an employer from his or her obligations to provide notice under the law of contract, unless the conduct was intentional, the employer may still be required to provide the minimum amount of notice, severance, or other entitlements required by Ontario’s Employment Standards Act.

An employer either has cause to immediately dismiss its employee or it does not. There is no middle ground, or “near cause” to justify a reduction in notice or other termination benefits. To this end, unless your employee’s misconduct is serious enough that a court would find you to have just cause for immediate termination, you must provide the full amount of notice, pay in lieu of notice and other benefits upon termination.

The decision to terminate your employee is not one to be taken lightly. Unless your employee has engaged in especially serious misconduct (e.g. harassment, criminal or dangerous conduct), it is prudent to consult with your lawyer before dismissing the employee without the required amount of notice or pay in lieu of notice. Failure to provide the required amount of notice of termination to your employee can result in significant (and avoidable) financial liability.

Written by James Coristine.