A Guide to Dismissal, Layoff & Termination in Canada
In the Canadian workforce, the end of an employment relationship can occur in various ways—dismissal, layoff, or termination. Each situation involves different rules, rights, and entitlements for both employees and employers. Whether you’re an employer trying to understand the legal framework or an employee navigating the end of a job, it’s important to know how Canadian employment law defines and handles each scenario.
This guide provides a comprehensive overview of dismissal, layoff, and termination in Canada, including your rights, responsibilities, and key legal considerations.
Understanding Dismissal, Layoff, and Termination
Though often used interchangeably, the terms dismissal, layoff, and termination have distinct meanings in Canadian employment law.
1. Dismissal
Dismissal occurs when an employer ends an employee’s job, either with cause or without cause. It can be immediate or involve a notice period.
Types of Dismissal:
- Dismissal with cause: The employee is terminated due to misconduct, incompetence, or a serious breach of duty. No notice or severance is required.
- Dismissal without cause: The employer ends the employment relationship for business or operational reasons. In such cases, the employee must receive notice or pay in lieu of notice (severance).
2. Layoff
A layoff is a temporary interruption of employment due to lack of work, restructuring, or seasonal business cycles. Unlike dismissal, layoffs imply the employee may be recalled.
- Temporary layoff: Permitted in most provinces but subject to time limits (e.g., 13–35 weeks, depending on jurisdiction and benefits provided).
- Permanent layoff: If the employer does not recall the employee within the allowable period, the layoff is treated as a termination.
3. Termination
Termination is a broad term encompassing both dismissal and layoff. It refers to any situation where the employer ends the employment contract, whether due to performance issues, company downsizing, or other factors.
Notice and Severance Requirements in Canada
Under Canadian employment law, most employees are entitled to reasonable notice or pay in lieu of notice when their employment ends without cause.
What is Reasonable Notice?
Reasonable notice is the time period given by the employer before ending the employment. It allows employees time to look for a new job. The amount of notice depends on:
- Length of employment
- Age of the employee
- Job position and duties
- Availability of similar employment
Severance Pay
In addition to notice, employees may also qualify for severance pay. Under the Canada Labour Code and provincial employment standards, severance is typically owed when:
- The employee worked for more than five years
- The employer has a payroll of $2.5 million or more
- The termination affects 50+ employees within a short period (mass layoff)
Note: Severance and termination entitlements may differ depending on the province or territory.
Dismissal With Cause vs Without Cause
Understanding the difference between dismissal with cause and without cause is crucial.
Dismissal With Cause
Employers must demonstrate serious misconduct to justify dismissal with cause. Valid reasons may include:
- Theft or dishonesty
- Harassment or violence in the workplace
- Serious breach of policy
- Repeated absenteeism or insubordination
Because of the severe consequences for the employee (no severance, no notice), courts require strong evidence and fair treatment before approving a for-cause dismissal.
Dismissal Without Cause
An employer can terminate an employee for any legal reason, provided they offer the required notice or severance. Common examples:
- Company downsizing
- Poor fit or restructuring
- Elimination of a position
No misconduct needs to be shown in a without-cause termination, but proper compensation is mandatory.
What Happens During a Layoff?
Layoffs in Canada must follow strict rules. Here’s what employees and employers need to know:
- Notification: Employers must provide written notice for layoffs and explain if it is temporary or permanent.
- Time Limits: Most provinces allow temporary layoffs for 13–16 weeks in a 20-week period. Extended layoffs may require benefit continuation.
- Conversion to Termination: If the layoff exceeds the permissible duration, it is automatically treated as a termination, and employees are entitled to severance.
Employees on temporary layoff may be eligible for Employment Insurance (EI) benefits during the layoff period.
Constructive Dismissal: An Indirect Termination
Constructive dismissal occurs when an employer makes significant changes to the employee’s job without consent, prompting them to resign. Examples include:
- Significant pay cuts
- Major demotions
- Unfair disciplinary actions
- Relocation without agreement
Though the employee technically resigns, the law treats it as a termination, and they may be entitled to compensation.
Employee Rights Upon Termination
When an employee is terminated without cause, they are usually entitled to:
- Written notice or termination pay
- Severance pay (in some cases)
- Continued benefits during the notice period
- Record of Employment (ROE)
- Employment Insurance (EI) eligibility
If the termination violates employment standards or human rights laws, employees can file a claim with provincial labour boards or human rights tribunals.
Employer Obligations Upon Termination
Employers in Canada must:
- Provide notice or pay in lieu of notice
- Issue a Record of Employment (ROE) promptly
- Comply with all provincial employment standards
- Ensure termination does not violate anti-discrimination laws
- Respect employee privacy and dignity
Firing someone in bad faith—such as targeting whistleblowers or discriminatory dismissal—can result in additional damages or reinstatement orders.
Wrongful Dismissal and Termination Disputes
If an employee believes they were terminated without fair notice, proper severance, or due process, they may have grounds for a wrongful dismissal claim.
Many employees and employers find themselves involved in termination disputes, which may result in litigation, arbitration, or settlement negotiations. In such cases, consulting an employment lawyer is highly recommended.
Steps to Take After a Termination
If you’re an employee who has just been dismissed or laid off:
- Request a written termination letter with reasons and entitlements.
- Review your employment contract to understand your rights.
- Apply for Employment Insurance (EI) benefits if eligible.
- Consult an employment lawyer before signing any release or severance offer.
- Keep detailed records of all communications and documents.
For employers, the key is to ensure transparency, compliance with employment laws, and fair treatment to avoid legal issues.
Final Thoughts
Dismissal, layoff, and termination are significant events in any employment relationship. Understanding the legal definitions and obligations surrounding these processes is crucial for protecting your rights and avoiding costly legal complications.
Whether you’re an employee facing job loss or an employer implementing staff changes, knowing the correct procedures, entitlements, and timelines can help ensure a smoother transition and minimize risk.
If you find yourself in a situation where termination seems unfair or unlawful, seeking legal advice early on can make all the difference in protecting your financial future and legal rights.