When you let an employee go without cause, you owe them either notice of termination or pay in lieu of that notice. There are two layers, and most trade contractors only see the first. The statutory minimum set by your province is the floor, capped at 8 weeks in most jurisdictions. On top of that, the common law usually entitles a dismissed employee to far more, called reasonable notice, which for a long-serving worker can run to many months of pay. The only reliable way to limit your exposure to the statutory floor is a properly drafted termination clause agreed in writing before the employee starts.
Two kinds of termination
Be clear which situation you are in:
- Without cause: you are ending the employment for business reasons (a shortage of work, restructuring, or simply no longer needing the role). You owe notice or pay in lieu. This is the normal case.
- For just cause: the employee committed serious misconduct (theft, violence, gross insubordination). Just cause means no notice and no pay in lieu, but the bar is very high and the burden is on you to prove it. A single mistake, lateness or a personality clash is almost never just cause. Trying to claim cause and losing is expensive, because the court then awards full notice plus, sometimes, extra damages.
The statutory minimum notice
Your province sets a minimum notice period (or pay in lieu) that kicks in once the employee passes a short qualifying period (usually three months, six in New Brunswick, PEI and Yukon). The statutory scale is short and capped:
- 8 weeks maximum in Alberta, BC, Manitoba, Nova Scotia, Nunavut, NWT, Ontario, PEI, Quebec, Saskatchewan and federally.
- 6 weeks maximum in Newfoundland and Labrador.
- 4 weeks maximum in New Brunswick.
The scale builds with service, typically one or two weeks per year up to the cap. You can give working notice (the employee keeps working through the period) or pay in lieu (you pay out the equivalent and they leave). For a mass layoff, several provinces require longer notice and notice to the government; check the rules if you are letting go of many at once.
Ontario severance: a second, separate payment
Ontario is the standout. On top of statutory notice, Ontario imposes a separate statutory severance pay of one week per year of service, to a maximum of 26 weeks, but only where the employer's annual payroll is $2.5 million or more and the employee has at least five years of service. This is in addition to notice, not instead of it. Most small trade businesses fall under the payroll threshold, but a growing contractor can cross it without realising.
The common-law trap that catches contractors
Here is what tradespeople miss. The statutory minimum is a floor, not the bill. Absent an enforceable written termination clause, the common law entitles a dismissed employee to reasonable notice, assessed on the Bardal factors: age, length of service, the character of the job, and how hard it will be to find similar work. For a long-serving worker this routinely runs to several months, and dependent contractors get the same treatment (see Employee vs Contractor: the CRA Test). A foreperson with fifteen years in could be owed twelve months or more, far above the 8-week statutory cap.
The defence is a termination clause that lawfully limits the employee to the statutory minimum, signed before they start. But the clause must comply exactly with the provincial standard. If it tries to give even a dollar less than the statutory floor, or is ambiguous, courts strike it down entirely and the employee gets full common-law notice. A void clause is worse than no clause, because you thought you were protected.
Do it cleanly
- Decide honestly whether it is without cause or genuinely for cause; when in doubt, treat it as without cause and pay notice.
- Calculate the greater of the statutory minimum and any contractual entitlement, and pay it.
- Pay out all earned wages, accrued vacation pay and any owed stat holiday pay (see Statutory Holidays and Vacation Pay).
- Issue the Record of Employment within the deadline so the worker can claim EI (see The Record of Employment (ROE)).
- Get legal advice before dismissing a long-serving employee or claiming just cause.
Common mistakes
- Treating the statutory minimum as the whole obligation. Without an enforceable clause, common-law reasonable notice governs and is usually much higher.
- Claiming just cause for ordinary underperformance. The bar is serious misconduct; losing a cause argument costs you full notice and more.
- Relying on a defective termination clause. A clause that breaches the provincial floor is void, handing the employee full common-law notice.
- Forgetting Ontario severance. Above $2.5M payroll and 5 years of service, severance is a separate payment on top of notice.
If you have been let go
If you are the one who has been let go, the same rules work in your favour. Your employer must give you at least the statutory minimum notice, or pay in lieu, set by your province's employment standards - a scale that grows with your length of service and is capped in most provinces at around 8 weeks. If you were dismissed without cause and without a clear, enforceable contract term, you may be owed far more than the statutory minimum under common-law reasonable notice (this does not apply in Quebec, which runs on its Civil Code). You do not have to accept the first figure offered. Work out your statutory minimum first, and if the numbers are significant, get advice from an employment lawyer before you sign any release.
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