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Archived - Discussion Paper on the Review of Labour Standards in the Canada Labour Code

I. Responding to the Evolving Workplace

E. Termination of Employment

1. Employee Notice of Termination

Commission Recommendations:

• Employees should be required to give their employer two weeks notice of their intention to quit. This requirement should apply only if:
  
  • the employee has been employed for at least three months;
  • the employee has not first been given notice of termination by the employer; and
  • the employer has provided the employee with a written statement of employment terms that stipulates that notice to quit must be given and that failure to give it will result in a monetary penalty.
• If an employee quits without giving notice, and the employer suffers actual loss as a result, the employer should be able to withhold one day’s pay from any monies owing to the employee for each week of the notice period that the employee has failed to complete. If an employer wrongfully withholds pay from an employee, an inspector may order the employer to repay any such sum, together with interest. (R. 8.1-8.2)

There is some merit in the reciprocal concept of employee notice. During the review, the Commission heard submissions from employers on problems caused by employees failing to give appropriate notice of their intention to quit, including cases in the trucking industry where employees driving long distances suddenly abandoned their vehicles and cargo, thus making the sudden cessation of their employment extraordinarily difficult for their employer.

The employment standards legislation in most Canadian jurisdictions requires employees to give their employer some notice of their intention to quit. Although no such requirement exists in British Columbia, Saskatchewan, Ontario, New Brunswick, Nunavut, or the Northwest Territories, employees in the other jurisdictions are generally required to give either one or two weeks notice of their intention to quit, depending on their length of service. In Newfoundland and Labrador, long-serving employees may be required to give as much as six weeks notice.

However, few Canadian jurisdictions entitle the employer to deduct wages, or otherwise financially penalize, an employee as a result of his or her failure to give notice. In Alberta, an employer may delay paying an employee who failed to give the requisite notice for up to 10 days after the last date of when the notice period would have expired. In Newfoundland and Labrador and Yukon, where an employer may make deductions from an employee’s wages if the employee fails to give the requisite notice, the deductions can only be made with the employee’s consent. Where no consent is given, the employer must deposit the disputed amount with the Director of Employment Standards. It is up to the Director to determine whether or not the deduction should be made.

Including a financial penalty may be an incentive for employees to give reasonable notice of their departure. A system similar to the one in Newfoundland and Labrador and Yukon, where the Director has the final authority in determining whether or not it is appropriate to penalize an employee for failing to give notice, may be an appropriate safeguard for employees if the recommendation is adopted.

It is also possible to amend the legislation to require employees to provide two weeks notice under certain conditions, but to not give employers the right to deduct pay if it is not provided. Given the small amount of the penalty proposed, the administrative costs of monitoring these deductions, and that an employee may have valid reasons for providing lack of notice (e.g., harassment or changes in terms of employment), the normal deterrent of a poor reference or possible prosecution may be sufficient to encourage employees to comply with the legislation and give the requisite notice.

For discussion:

• Should employees be required to give two weeks notice to their employer of their intention to quit?
• Should an employer be entitled to financially penalize an employee who fails to give notice of his or her intention to quit? If so, what is the maximum amount that an employer should be allowed to deduct, and who should make the determination of how much is appropriate in the circumstances? Should the employer be allowed to automatically deduct the money from the employee’s final paycheque, or should it have to deposit the monies with the Labour Program in order to allow a labour official to determine whether or not a deduction is warranted? What kind of “actual loss” should an employer be required to show in order to withhold pay from an employee who quits without the requisite notice?
• Would imposing a financial penalty on an employee for failing to give notice unjustly penalize those who quit for reasons where the employer is at fault (e.g., in cases of workplace harassment or where the employer unilaterally changes the terms of employment)? What about employees who are unable to give notice due to circumstances beyond their control?

2. Severance Pay for Long-Serving Employees

Commission Recommendation:

Entitlement to severance pay should accumulate at the rate of three days’ wages per year for workers with over 10 years’ continuous service. (R. 8.3)

Under Part III, employers may dismiss employees for legitimate business reasons, but must give them at least two weeks’ notice or pay in lieu. An employee whose contract is terminated in these circumstances is also entitled to severance pay based on years of service, provided he or she has worked for the employer for at least 12 consecutive months. The amount of severance pay is two days’ wages per completed year of employment, or five days’ wages, whichever is greater.

The Commission proposed that severance pay be increased to three days’ wages per year of service for long-serving employees with more than 10 years of service. This would mean, for instance, that an employee with 11 years of service would be entitled to 33 days’ wages upon termination of employment, in addition to two weeks’ notice or pay in lieu of notice.

The proposed increase of severance pay for employees with more than 10 years of service may cause concerns for some employers. However, data from the Federal Jurisdiction Workplace Survey 2004 indicates that the impact would be minimal, if any, for two reasons: (i) laid-off workers tend to have very low tenure (the mean was two years); and (ii) employers—across all sectors and all sizes of companies—tend to offer more generous severance pay, averaging eight days of pay per year of service.

There has been some strong support for this proposal. It is far less than what would be required at common law. It is also comparable to the payments that would be required under provincial employment standards legislation. While most provinces do not provide for severance pay, they do provide for increased notice periods based on length of service. The federal jurisdiction provides for two weeks of notice for all employees, regardless of length of service. When this is taken into consideration, the combined notice and severance pay entitlements for long-serving employees recommended by the Commission would be comparable to the payments that are required provincially.

One issue for consideration is whether Part III should provide for increased notice periods based on length of service, rather than increased severance pay. The only other jurisdiction that has a provision for severance pay is Ontario. All other provinces and territories have notice periods based on years of service. While some provinces have low maximums (New Brunswick with four weeks for employees with five years or more service; Newfoundland and Labrador with six weeks maximum for employees with 15 years of service), others provide up to eight weeks’ notice for long-serving employees. Part III could be amended to eliminate severance pay in favour of adopting a graduated notice period similar to those of most the provinces.

For discussion:

• Should employees with more than 10 years of continuous service be entitled to additional severance pay?
• Should the threshold for additional severance be less than 10 years of continuous service (e.g., 8 years) or higher (e.g., 12 years)?
• If there is no increase in severance pay, should Part III be amended to have a graduated notice period based on years of service similar to those of most of the provinces?

3. Employees who Resign after Receiving Notice

Commission Recommendations:

Workers who quit after being given notice of termination or layoff by their employer, but prior to the expiration of such notice, should forfeit any unpaid termination pay, but retain the right to severance pay. However, if they are discharged for just cause, they should forfeit their right to both termination pay and severance pay. (R. 8.4)

Currently under Part III, if employees who have been given notice of termination quit work before the expiry of the two-week notice period in order to search for or take up another position, they forfeit their right to unpaid termination pay, as well as any severance pay. The Commission submitted that this unduly penalized employees for trying to mitigate their losses at a time when they knew they were facing imminent unemployment.

While the Commission was sympathetic to the employer’s need to have workers continue to perform their duties for a period of time, it pointed out that it was often the case that the original employer may benefit from the employees’ departure before the end of the notice period. Any loss incurred by the employer for not having the employee stay until the end of the notice period could be made up by relieving the employer of its obligation to pay for the rest of the notice period.

For discussion:

• Are employees unduly penalized by the current provision that requires them to forfeit their right to both severance and termination pay if they leave before the end of their notice period?
• Is the current provision at odds with employees’ obligation to mitigate their losses when facing unemployment?
• Should employees who quit during their notice period forfeit both termination pay and severance pay, or just termination pay, or not be subject to any penalty at all?

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Date Modified:

2012-02-15