What you need to know before hiring in Canada: A guide to terminations

When making your first Canadian hire, termination policies might be far from your mind. But if you don't know the basics about terminations in Canada, you'll be sailing into a storm when you eventually part ways with a Canadian employee.

Employees in Canada have strong protections against hasty or unwarranted dismissals. If you don’t adhere to minimum notice or pay requirements, all while failing to prove a just cause for involuntary termination, you could be subject to wrongful dismissal claims from Canadian courts.

Read on to learn everything you need to know before hiring Canadian employees—and how hiring through an Employer of Record (EOR) can spare you from bungling any local dismissal requirements.

6 essential things to know before hiring in Canada

• You must establish terms of dismissal in your employment agreement. The offer letter to your Canadian employee must include a termination clause that spells out the notice periods for termination without cause. Make sure you’re complying with minimum statutory requirements. Otherwise, the fired employee may be entitled to longer notice periods or bigger compensation packages under Canadian common law.

• Canadian laws don’t recognize at-will employment. You can only immediately terminate employees for just cause.

• You can only dismiss without cause if you give notice or pay in lieu of notice. Employees can work through minimum notice of termination periods that vary by province (find the details later on). If you instead decide to pay an employee out and have them stop working for you immediately, you have to pay them in full for the equal length of their minimum notice period (known as lieu of notice, or working notice).

• Terminated employees can choose where and how to pursue wrongful dismissal claims. Employees can bring civil claims to Canadian courts, statutory claims to the Ministry of Labour, and can also pursue arbitrators if their employment contract has an arbitration clause.

• Federal employment laws apply to less than 20% of the Canadian workforce. The Canada Labour Code sets termination of employment rights (with provisions on severance pay and unjust dismissal) that only apply to federal workers and jobs that span across provincial borders. Other employees will have different termination standards based on their jurisdiction.

• Most Canadian provinces don’t require minimum severance pay. Ontario is the only Canadian province or territory that requires severance pay, which is entitled to employees after at least five years of service, paid out at one week’s salary per year of employment.

Termination rules in Canada: What are acceptable grounds for firing an employee?

Canadian employees can leave their job voluntarily for any reason, so long as they give the advance notice stipulated in their employment agreement (usually two weeks). Here are the reasons an employee can be terminated involuntarily in Canada:

• Termination during the probationary period. Probationary periods need to be defined in the contract of employment, and they typically last three months. They allow employers to evaluate a new hire’s suitability for a new job. Employers can terminate the employee during their probationary period without providing any notice or pay in lieu of notice, so long as the termination is in good faith.

• Termination without cause. At-will employment does not exist in Canada (more on that below). A Canadian employee is entitled to written notice of the employer’s intention to terminate their employment or pay in lieu of notice. The length of the required notice period is defined by each province and depends on how long the employee has worked for the company (see table below).

• Termination for cause. If employment is terminated with just cause, then no notice or pay in lieu of notice is required. The onus is on the employer to show just cause. Examples include gross misconduct, conflict of interest, theft, or violence.

Canada’s termination requirements might differ from those in other countries where you hire, and it’s crucial to keep your global hiring compliant with local laws.

What are the mandatory notice periods and termination pay for Canadian employees?

The Canada Labour Code sets dismissal requirements for the federal workforce and employees in interprovincial industries, including airlines, banking, and shipping. These workers are entitled to at least two weeks written notice of an employer’s intention to terminate without just cause, or two weeks pay in lieu of written notice.

Labour Code-covered employees are also entitled to severance pay of two days’ pay per year of employment if they’ve worked at least a year, for at least five days.

All other Canadian employees are subject to provincial labor laws. For a list of notice periods showing employee entitlements by their province and the amount of time they’ve worked for a company, see the table below.

Frequently asked questions about terminating employees in Canada

Do you need a reason to terminate an employee in Canada?

You can involuntarily dismiss an employee in Canada without cause as long as you give the required advance notice or pay in lieu of notice. In addition to varying by province, notice periods can also vary according to an employee’s age (workers close to retirement should get more notice), length of tenure, or access to comparable employment.

If you forgo notice or pay in lieu requirements, you need to have just cause for involuntarily terminating a Canadian employee.

What is considered just cause for terminating an employee in Canada?

In Canada, termination with just cause is when an employee is let go for actions related to serious misconduct. This can include:

• Theft

• Physical assault

• Sexual harassment

• Fraud

• Severe breaches of company policies

• Fraud

• Insubordination

Poor performance or incompetence can be just cause for termination, but Canadian laws and norms encourage employers to consider other disciplinary proceedings first. Most workplaces try to correct less severe misconduct with verbal and written warnings, followed by suspensions with or without pay, before firing an employee outright.

In general, just cause is tricky to prove in Canada. Employers should ensure they have strong evidence of any serious breach of conduct before terminating an employee without the minimum required advance written notice.

What qualifies as wrongful dismissal in Canada?

In Canada, wrongful dismissal is when an employee is terminated without proper notice. It can happen when an employer:

• Fires an employee without cause but doesn’t pay them out.

• Claims they’re firing an employee for cause but the actual reason is illegitimate or without proper evidence.

• Changes working conditions to make them untenable and effectively coaxes an employee into resigning (this is known as constructive dismissal).

Employees who think they’ve been wrongfully dismissed can hire counsel and attempt to recoup the compensation they’re owed. In Ontario, wrongful dismissal claims involving discrimination can be taken to the province’s Human Rights Tribunal.

What is always required when an employer terminates an employee in Canada?

Once a Canadian employee is terminated, employers need to issue the final salary payment by the next pay date, send a Record of Employment (ROE) to the employee, and pay out any eligible paid time off and bonuses. Violating any of these requirements can result in fines and possible jail time.

What is the law for dismissing a contractor in Canada?

The termination process for independent contractors in Canada can vary depending on the terms of the contract.

Typically, either party may terminate by providing notice as specified in the contract. If the contract does not specify a notice period, the reasonable notice period will depend on the length of the contract and the nature of the work performed.

If an independent contractor is found to be misclassified, they may be entitled to employment standards legislation protections and notice or termination pay in lieu of notice.

What are layoffs in Canada?

In Canada, layoffs are periods where struggling companies don’t pay or give work to employees, but provide them the opportunity to get reinstated back to a normal employment relationship if the company can get normal business operations back up and running. Employees often retain their benefits during temporary layoffs, which can only turn into outright dismissals after a certain minimum period passes, which varies by province (e.g., six months for Quebec and 20-35 weeks for Ontario, depending on whether benefits were retained).

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