With contributions from Erin Brandt (nee Kizell), Lawyer.
Living in Canada, many of us take for granted the idea that, absent serious misconduct, a fired employee is entitled to some form of compensation on termination, commonly referred to as “severance”. In British Columbia, as in most other Canadian provinces, an ex-employee’s severance rights arise under both statute and the common law.
In our view, this is one area of the law where common sense clearly takes precedence, since it seems only fair and appropriate that a dismissed employee receive some financial support from his former employer, both to recognize his past service to the company and to bridge him financially until he finds new work.
This “common sense” perspective, however, is not taken in all common law jurisdictions throughout the world. Most notable, and perhaps surprising, given the other similarities in workplace culture between Canada and the United States, is the different approach taken in the US, where (with the exception of Montana) the notion of “at will” employment prevails.
The “at-will” presumption and its exceptions
What does it mean to be employed “at will”? It means that an employer can fire you at any time, for any reason (except an illegal one), without incurring any liability.
Some state governments and courts have introduced exceptions to the at-will rule; for example, legislation protects employees from discrimination based on various protected grounds (race, religion, sex, etc.). Other exceptions include implied contract (i.e. the employer has made some kind of promise to the employee regarding the length of his employment), and public policy (e.g. you can’t be fired for engaging in an act that is in the public interest, like performing jury duty).
However, the presumption that an employment relationship is “at-will” is very strong in the US, and it can be difficult for an employee to prove she falls within one of the exceptions.
A recent example of the potentially harsh effects of an at-will employment relationship received media attention earlier this year. A motel employee at a Days Inn in Indiana was allegedly summarily dismissed for agreeing to be interviewed for a Washington Post story about a minimum wage hike and its effect on the working poor. While the employer has disputed the employee’s claim that she was actually fired, there would have been no legal ramifications to the employer had she been.
Protections for employees in Canada
Canadian employees, by comparison, experience significant legal protections against arbitrary and summary dismissals. As noted above, these protections have been created by both the legislature and the courts:
- Under British Columbia employment standards legislation, once an employee completes three months of employment, she will be entitled to between one to eight weeks of notice (or severance), depending on her length of employment. Any attempt by an employer to waive or avoid this law, for example, through the terms of an employment contract, will be ineffective.
- The same employee is also entitled to “reasonable notice” (or equivalent pay) under the common law, which may be greater than what is available under the statute, and which will vary depending on various factors, such as the employee’s age, length of service, and job position. However, the employer can override this entitlement through a severance-limiting clause in the employee’s employment contract.
Tips for US employers
Any American employer with operations in Canada will need to become well-versed in a variety of tax, corporate, employment and other laws which may differ from those they are familiar with. We offer here just a few simple employment law tips for US employers who are used to an “at-will employment” culture and want to do business in BC:
- Familiarize yourself with the provisions of section 63 of the BC Employment Standards Act (“ESA”), which sets out an employer’s liability to a dismissed employee, based on the employee’s length of employment (referred to as “compensation for length of service”). These are your minimum severance obligations under BC law.
- Decide how much severance you are willing to pay your employees on termination, then set this out in a carefully-drafted severance clause in their employment agreement. You can limit their severance to the ESA amounts, or you can pay more. Whatever you do, be clear and specific, and make sure your employees sign these contracts before they start working for you.
- Don’t use the language of “at-will employment”, in writing or otherwise. The concept doesn’t exist in BC, and will only create confusion for employees, and possibly lead to trouble down the road if an employee argues that you tried to violate BC laws by imposing an at-will arrangement.
Have questions about employment law in British Columbia? Contact us!