How to terminate an employee smoothly and legally without complications

Every month, Kate Teves, HR consultant, recruiter and founder of The HR Pro, answers Realtors’ questions about anything and everything related to human resources. Have a question for Kate? Send her an email.

Question: I need to terminate a seasoned employee. How do I do this without getting sued?

Kate: Terminating an employee is never easy—unless you enjoy awkward conversations, legal jargon and the possibility of a lawsuit. I prefer a shorter and to-the-point approach myself and can attest that it is the least favourite part of my role as an HR consultant and formally an HR manager.

For real estate brokerages, where relationships, agent/staff retention, and competition stakes are incredibly high, handling terminations properly isn’t just about following the law, it’s about protecting your business, your reputation and most importantly—your sanity.

“A reputation once broken may possibly be repaired, but the world will always keep their eyes on the spot where the crack was.” — Joseph Hall

Here’s what you need to know when letting an employee go in Ontario, from non-competition clauses and non-solicitation agreements to termination pay and avoiding contract pitfalls.

Know the rules before you make the call

Ontario employment law isn’t a “choose your own adventure” book—it’s a clear set of rules that every employer must follow. If you don’t, you could be in for costly surprises, even when you think you’re doing everything right. Remember that a former employee has two years to file a lawsuit after termination and can share negative comments on sites like Indeed, GlassDoor and social media that may deter amazing people from wanting to work with your company in the future.

Here’s what governs terminations:

• Employment Standards Act (ESA): This is the bare minimum standard for notice periods, severance, and termination pay. Every employee is entitled to ESA protections regardless of their contract, even a misclassified contractor can still fall under the ESA’s protection.
• Common law: Employees may be entitled to far more than ESA minimums based on age, re-employment opportunities, length of service, their title, etc (collectively known as the Bardal factors, stemming from the case Bardal v. Globe & Mail Ltd. 1960). The challenge with Bardal factors, as you can imagine, is that they are on a case-by-case basis and need to be assessed by a lawyer. It’s important to note, that if an employer lured the employee from secure employment elsewhere, this can increase notice entitlement.

• Employment contracts: If drafted properly, a strong contract can limit your exposure to common issues like protection of intellectual property, non-disparagement and non-solicitation but if it’s vague or improperly written, the court will default to common law protections (which are almost always more generous to employees, unfortunately).

The lesson? If your employment contracts were downloaded from the internet in 2015, it’s time to get them reviewed by a professional.

Understand non-competes, non-solicitation and keeping your business safe

Firing an employee is one thing—preventing them from taking your business’s best practices and/or clients with them is another.

Non-competition clauses: The (mostly) useless clause

You might think you can stop a former employee from working for a competitor because it is a part of your contract but it is not the case, since 2021 non-competes are banned for most employees (except C-suite executives) and old contracts will not be enforceable.

Non-solicitation clauses: Your best line of defence

Instead of trying to prevent employees from working elsewhere, prevent them from poaching your clients, agents, employees and referral partners.

• A non-solicitation clause should be clear, reasonable and time-limited (12 to 24 months is typical).
• It must specify that the employee cannot contact or attempt to lure away clients, team members, or key business partners they worked with while employed.
• If properly drafted, it’s enforceable and gives you legal recourse if they start making moves on your database.

How much notice (or termination pay) do you owe?

“For cause” terminations

Think you can fire someone “for cause” and walk away without paying them a dime? Think again. The ESA requires termination pay even for most “for cause” terminations unless there is wilful misconduct (which is a much higher bar than just poor performance or attitude issues). If you believe you should be terminating “for cause” ensure to have ample documentation to prove your line of reasoning.

Termination pay: What you legally owe

If you terminate an employee (except for wilful misconduct), you owe them either working notice or pay in lieu of notice: typically 1 week for each year of service is the ESA’s bare minimum. My recommendation is to always add at least 2 extra weeks to keep it above board (the Labour…