Labour and Employment Newsletter: Spring, 2018
Termination Letters and Records of Employment: A Checklist of Key Steps
Ending the employment relationship with an employee can be difficult. Employers must complete the termination process in a fair manner, while covering off several legal requirements. This newsletter addresses key points to keep in mind when terminating an employee’s employment, specifically, conducting a termination meeting, drafting a termination letter and completing the Record of Employment (“ROE”).
Ending an employee’s relationship with a company is often one of the most difficult actions that a manager will take. Some terminations can be very complicated, with various choices between “severance packages” or the possibility of resigning. To keep this newsletter as straightforward as possible, we base on our comments on a basic termination. We also assume that the employment is not for a fixed term as there might be different considerations in those situations.
The Termination Meeting
When possible, the employer should meet with the employee who is losing their job to tell them that their employment is ending. If a face-to-face meeting is not possible, consider a phone call or even a video-conference session. Regardless of how a termination meeting is held, employers must conduct the meeting in a respectful manner, including not subjecting the employee to undue embarrassment or humiliation. Failure to conduct a termination meeting in a respectful manner could expose an employer to legal liability.
Ideally, two employer representatives should be present in a termination meeting, although an employer can proceed with only one management representative. If it is a unionized environment, the employee might have the right to be accompanied by a union representative. Be sure to verify the terms of the collective agreement.
If the termination will be effective immediately, the employer should request that the employee:
- Return any keys or access cards;
- Provide login information and passwords for any work-related accounts;
- Return any work or work-related items in their possession.
The employer and the employee can make arrangements to complete these tasks later if the employee will be continuing to attend work for a period of time before the termination becomes effective.
When terminating an employee, the employer will also have to address the following items:
- Removing the employee from any medical insurance plan, at the appropriate date;
- Advising any life insurance and pension plan carriers of the termination;
- Having a message ready to advise other employees, customers, suppliers, etc., that the employee will be leaving/no longer works with the company, whichever is applicable;
- Ensuring that the ROE is completed and a copy sent to the employee at the appropriate time;
Depending on the circumstances, the above steps may be modified as appropriate.
The Termination Letter
The purpose of the termination letter is to confirm the details of the termination. The letter should summarize the meeting and must give the employee any necessary information. For instance, if the employee is being terminated for just cause, the letter should say so; if the employee is being offered notice or salary in lieu of notice, the letter should make that statement.
The employer should ensure that it gives the termination letter to the employee either during or shortly after the termination meeting. If the employee is covered by a collective agreement, the termination letter will probably have to be copied to the employee’s union. Again, check the collective agreement to be sure.
The following items should be included in the termination letter.
- Effective Date of Termination
The employer must specify the date on which the employment relationship ends.
- Reasons for Termination
The Nova Scotia Labour Standards Code does not expressly state that an employer has to provide a reason for a termination of employment. However, we strongly recommend that an employer provide the reason. Legally, it will be seen to be the fair thing to do; practically, it may help the employee better accept the ending of their employment if they understand why it is happening.
If an employee is being terminated for cause, an employer should concisely summarize any incidents or issues supporting the termination. Failing to notify the employee that they are being terminated for cause can significantly weaken or completely remove the employer’s ability to rely on cause if the employee challenges their termination.
Except when terminating for cause, an employer has to give notice or salary in lieu of notice when terminating an employee. The termination letter should set out the details of the employee’s notice, including the length of the notice period and whether any pay in lieu of notice is being offered as a lump sum or salary continuation.
Employers may limit the amount of notice they are required to provide through an employment agreement. Check the hiring letter, personnel policy and any other documents that might have set out the notice required to end the employment relationship. If there is no such agreement, the employer will have to provide reasonable notice of termination.
- End Date for Benefits/Date of Last Pay
It is imperative that the employer address the issue of benefit coverage. Some plans, such as health benefits and insurance, often continue through any notice period and period of working notice. Benefits such as short and long-term disability often end on the last day the employee actually works.
If employees have the option to continue benefit coverage such as life insurance, provide contact information in the termination letter. Similarly, the contact information for pension providers should be included.
It is crucial that the employer clearly advise the employee when any benefit coverage ends.
If the terminated employee has obligations respecting confidentiality or non-competition, either because they signed a confidentiality agreement or non-compete agreement when hired or due to the nature of the position they held with the employer, it would be prudent to include a reminder of any continuing obligations or restrictions.
- Property/Login Information
The termination letter should set out the process for the employee to return any work-related property such as a phone or laptop. If the employee has any personal items at work, specify how these will be returned to the employee.
The Record of Employment
The Record of Employment (the “ROE”) is a critical document. Service Canada will use it to determine whether an employee is eligible to receive EI benefits, how much they will receive and for how long the benefits will be paid.
The employer has to arrange for a ROE to be issued when an employee experiences an interruption in earnings. If the employee is receiving their notice as salary continuation, the ROE is issued when the salary continuation ends. Further, the ROE has to be issued within five business days of the last day for which the employee was paid.
The employer will have to specify the reason for issuing a ROE. Service Canada has a number of “codes” for the most common reasons that employment relationships end. The number of codes has increased significantly in recent years, perhaps reflecting that the former codes did not always provide enough information. For instance, there used to be a code for “Quit”. Now, a quit can be coded as “E00 – Quit” and employers have the option to select from a range of reasons. These new codes include “E02 – Quit/Follow spouse”, “E03 Quit/Return to school” and “E04 Quit/Health reasons”. Additional new codes include “G7 Retirement/Approved workforce reduction” and “K13 Other/Change of ownership”.
When completing an ROE, employers must carefully consider their response. Inappropriately describing the circumstances around an employee’s departure could potentially affect any defense in a wrongful dismissal suit. Also, it is an offence to complete a ROE fraudulently.
Navigating the end of an employee relationship is difficult. However, it is possible for an employer to complete this process in a fair and respectful manner while reducing the stress for both parties and any legal liability for the employer.