5 Steps to Legally Fire an Employee

Even when you have a grossly incompetent employee, firing him or her can be a risk. If you do it wrong, or for the wrong reasons, you can be forced by the court to pay damages. There are, however, several steps you can and should take in order to reduce the chances of being sued for wrongful dismissal.

1. Employment Contract

A properly written employment contract can help you avoid lawsuits in the future. Make sure you go over it for provisions that limit your ability to fire, like job security promises, guaranteed employment for a certain period of time, and conditions that limit firing to certain causes. The contract should also spell out the employee’s obligations to you and your company. If he or she isn’t performing properly, they may be in breach of the contract, which gives you the legal right to terminate his or her employment.

If you don’t have a written contract, the law sees the employment relationship as one of indefinite duration and ongoing. The work relationship can be terminated for just cause, with reasonable notice, or with payment in lieu of notice.

2. Just Cause

If you have just cause to fire someone, like they stole something, you must pay them any amounts owing, but you don’t have to give them notice. It’s very difficult, however, to establish cause for constructive dismissal at court. The onus will be on you to prove, and the standard of proof is very high. Always make sure you follow certain steps before dismissing an employee for just cause:

  • proper warnings with an opportunity to improve;
  • warnings should be clear, concise, and written;
  • confront the employee with a specific problem, both verbally and in writing;
  • give him or her a chance to explain;
  • check performance appraisals; and
  • check raises, bonuses, and incentive payments to make sure your actions are consistent with the opinion that the employee isn’t performing to expectations.

3. Reasonable Notice

The Employment Standards Act of Ontario sets a mandatory minimum notice period of one week for every year worked. This is a minimum guideline only, and the court will take several factors into consideration, such as the employee’s position, work performed, the ability to find other work, the length of that employee’s service, employee’s age, any security provisions in an employee contract, whether they were persuaded away from another job, and whether or not they have tried to find other work.

During the notice period the employee is entitled to any benefits they received during employment, including insurance, health and dental care, and vacation pay.

4. Conduct an Exit Interview

In order to ensure a safe dismissal session, there are several things you should do:

  • always have two people present in case there’s a dispute about what is said
  • one person should speak while the other takes notes
  • tell the person why they are being terminated
  • remind the person of the warnings given
  • ask the employee to return any records or documents belonging to the company
  • remind him or her to keep confidentiality of the business after departure
  • make arrangements for the employee to remove personal belongings at a mutually convenient time
  • when possible, write a cheque for outstanding salary, commission, vacation time, or other monies owed
  • if the employee disputes the amount given, make a record of what was expected, and offer to get back to him or her regarding the discrepancy
  • obtain a signed release

5. Final Checklist

If you’ve made the decision to terminate an employee, always follow these steps:

  • consult an employment lawyer
  • go over and ensure your actions comply with the employment contract
  • review and ensure your actions comply with written company procedures regarding dismissal
  • make sure you follow the same procedures as were performed in similar situations with other employees
  • give adequate and documented warnings that the employee will be fired unless he or she makes improvements
  • conduct an exit interview
  • never discuss circumstances surrounding the dismissal with anyone else in order to avoid a defamation claim

You may also want to offer a termination package upon executing the dismissal and delivering a release of liability to your company.