The relationship between an employer and employee is contractual. As such, there is no general principle that an employer has to employ any particular person. Employment contracts, whether written or unwritten, can therefore be terminated provided certain requirements are met. To terminate an employee, an employer must give an employee notice that they are being let go or pay the employee compensation in lieu of giving notice.

Section 63 of the Employment Standards Act provides a severance formula for employees whose employment has been terminated. However, employees are frequently entitled to more than the amount stipulated in the Act.

In Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986 (S.C.C.) at paragraph 19, the Supreme Court of Canada stated “employment contracts for an indefinite period of time require the employer, absent express contractual language to the contrary, to give reasonable notice of an intention to terminate the contract if the dismissal is without cause.”

The Court then wrote at paragraph 22 that “what constitutes reasonable notice will vary in the circumstances of any particular case.” While calculating the exact amount of compensation varies from case to case, employees are frequently entitled to one month’s notice of termination or pay in lieu for each year they were employed with a company. In other words, if an employee worked at a company for 10 years and is dismissed without cause, the employee may be entitled to 10 months of notice or compensation in lieu of notice.

In van’t Slot v. Oncogenex Technologies Inc., 2010 BCPC 249 at paragraph 14, the court wrote that the Employment Standards Act sets out the “minimum notice” to which an employee is entitled upon being let go from a job. In van’t Slot, the court found that an employment contract can be drafted to expressly provide that an employee’s severance will correspond with the amounts in the Employment Standards Act.

The result of Machtinger and van’t Slot is that employers and employees can contract a specific time period for notice of termination or compensation in lieu. However, any provision setting out the notice or compensation period must line up with the termination sections of the Employment Standards Act, at a minimum. Employers and employees may wish to create certainty in the terms of employment by drafting a clause in the employment contract which provides that if an employee is dismissed without cause, the employee’s severance will mirror the termination sections of the Employment Standards Act. Without such a clause, an employee may be eligible for significantly more compensation than what is provided by the Act.

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