There are 3 different ways employers may terminate employment: allowing employees to work out the notice period, paying salary continuance or terminating without notice. All three have an impact on when the employment relationship ends and when employee rights and benefits under that relationship end.
Let’s look at this from the perspective of the 4 western employment standards: BC, Alberta, Saskatchewan and Manitoba. Let’s also be clear that we are speaking of employment relationships ended by the employer, where employees are otherwise entitled to notice under the applicable employment standards.
In all 4 jurisdictions, if employees are given notice, the employment relationship ends with the expiry of that notice. For this purpose, it does not matter whether employees work out their notice or are given salary continuance.
When employees work out their notice, it’s normally understood employees will earn whatever they would normally have been paid for any work actually performed during the notice period, including any applicable employee benefits.
However, the situation isn’t so clear where employees are not expected to work the notice period and instead are paid salary continuance. In this situation, the employment standards in these 4 jurisdictions are split evenly.
Alberta and BC require that employers may not change the terms or conditions of employment during any period of notice actually given. This means that in those 2 jurisdictions whatever benefits employees enjoyed under the contract of employment must be maintained during any notice actually given.
Example: Julia is terminated, without cause by her Alberta employer. She is given the minimum notice of termination required by the Alberta employment standards, which in her circumstances is 8 weeks. Julia’s employment contract specifies that Julia is entitled to short and long term disability coverage, fully paid by the employer. This disability coverage must be provided throughout the 8 week notice period.
By contrast, in Saskatchewan and Manitoba, the employment standards only require that employees be paid, as wages in lieu of notice, what they would otherwise have earned as normal “wages” during the notice period. In these 2 jurisdictions there is no requirement to maintain non-cash or in-kind benefits. This means that in Julia’s example, above, the disability coverage would not have to be maintained during the notice period.
Note, in Saskatchewan there is new employment standards legislation, passed through the legislature but not yet proclaimed into law. This new legislation makes it very clear that the requirement to pay wages in lieu of notice is based on monetary compensation only, rather than benefits in kind, such as disability coverage.
Above, the term “notice” means the notice required by the applicable employment standards and actually given by an employer. Sometimes employers use a combination of notice and wages in lieu of notice to end employment.
Example: Harvey is terminated, without cause by his employer. Notice of termination was given to Harvey on Monday, July 8, 2013, with effect 2 weeks later on July 22nd. Harvey is entitled to 8 weeks notice under the BC employment standards. In this situation, Harvey’s employer must only continue his employment benefits for the period of time that notice was actually given, 2 weeks. Harvey’s employment contract stipulates that he be provided with employer-paid group term life insurance. Under the BC employment standards, this coverage can’t terminate earlier than July 22, 2013.
Notice, of course, is still required under the employment standards in all 4 jurisdictions, even if it’s not actually given. Not giving notice means that employment is terminated with immediate effect and that wages in lieu of notice are owing. If employers wish to terminate without notice, the best practice is to do so in writing, informing employees, that among other things, employment is being terminated on receipt.
In these 4 jurisdictions, when notice is not given, there is no requirement to extend the rights and benefits of employment past the actual termination date. For example, if either Julia or Harvey had been terminated without notice, their employee benefits could have been stopped on the actual date of termination.
Employers, of course, often extend employee benefits past the actual date of termination, or past the end of the notice period, whether given or not. Sometimes this is done as part of a settlement package, to end an employee action for wrongful dismissal. Sometimes, it’s done voluntarily, as one aspect of maintaining a generous compensation package. What are described above are the employment standards minimum requirements.
One reason that employers wish to end employee benefits, especially wage loss replacement coverage, is that the primary driver for disability claims is notice of termination. If an employee is on salary continuance, and is not actually working, the insurance contract may not extend to employees no longer in active employment. In jurisdictions like BC or Alberta, where employees on salary continuance must be kept on benefits during the notice period, this may result in the employer becoming directly liable for disability claims filed by employees on salary continuance. This is one reason why employers often terminate without notice.
Alan McEwen is a Vancouver Island-based HRIS/Payroll consultant and freelance writer with over 20 years’ experience in all aspects of the industry. He can be reached at email@example.com, (250) 228-5280 or visit www.alanrmcewen.com for more information. This article was first posted to Canadian HR Reporter on July 8, 2013.