Employees are often, but not always, entitled to notice of termination or pay in lieu of notice. Presumptively, employees should receive advanced notice of dismissal. But there are various situations in which a worker could lose his or her job without notice or a claim to financial compensation.
But first a quick note about terminology: “severance pay” can mean different things in different provinces. In Alberta, it is synonymous with pay in lieu of notice of termination.
The circumstances in which an employee can be dismissed without severance include:
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Cause for dismissal: If an employee misconducts themselves or is not competent to discharge their duties (setting aside issues of human rights and similar nuances), the employer might have cause (i.e. sufficient justification) to dismiss the employee without notice or pay in lieu.
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Working notice: An employer has the right to give you advance notice of when your job will end and require you to work out that period. This is called “working notice.” In that event, you would not be entitled to severance, which is pay in lieu of notice. Similarly, an employer has the right to give you a combination of working notice and pay in lieu of notice that together meet its obligations.
This rule doesn’t apply to many federally regulated employees under the Canada Labour Code, which prohibits the “unjust” dismissal of an non-union employee after 12 consecutive months of employment. Different rules also often apply to unionized employees under their collective agreements.
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Probationary employees: The Alberta Employment Standards Code mandates that employees who have worked for a company for more than 90 days can only be dismissed on the minimum statutory notice. Employees who have worked for less than 90 days aren’t entitled to Code notice. Sometimes that is loosely referred to as the “probationary period” because up to that point.
However, even employees who are not entitled to notice of termination under the Employment Standards Code are generally entitled to reasonable notice of termination at common law. The term “probationary employee” is most commonly (and more precisely) used to refer to employees who are not entitled to the statutory minimum notice and who’s contracts state that they are also not entitled to common law notice for the probationary period allowed by the Code. Probationary employees in that sense can be dismissed without notice or severance.
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Frustration of contract: An employment law contract may be frustrated when it can’t be completed for reasons that are not the fault of either party (roughly speaking). When this happens, the contract has effectively ended, with neither party owing further obligations to the other (though some provinces other than Alberta may provide for obligations upon frustration).
This situation can arise, for example, when an is no longer medically capable of working, there is no recovery in sight (likely the state is indefinite), and the condition cannot be accommodated without undue hardship to the employer. An extreme example would be an employee who goes into a coma for a very long period, with little hope of ever coming out of it. The employee can’t complete their end of the bargain (i.e. work for their pay) and so the contract terminates without damages payable to either party.
When the frustration event relates to employee illness, the court would not ask whether the employee is currently unable to work, but typically focus on whether there is any reasonable likelihood of the employee being able to return to work in the foreseeable future.
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Independent Contractors: Independent contractors are workers who are not employed by the entities they work for but who are in business for themselves. If the independent contractor’s agreement does not provide for notice of termination, then they are presumed not to be entitled to notice or pay in lieu of notice. (Note, however, there could be scope for other contractual damages for breach of contract.)
On the other hand dependent contractors are presumptively entitled to notice of termination, unless their contracts provide otherwise.
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Fixed Term Employees: Some employees have contracts for a definite term. Such contracts are presumed to automatically end at the expiry of the term, with no need for either party to communicate an intention to terminate it. Fixed term employees are not entitled to advanced notice that their contracts will not be renewed or extended, unless there are explicit terms providing for such notice.
But note, if the employee continues working past the end of the term and the employer permits that, then the contract could transform into an indefinite term contract, in which case it would include an implied term that the employee is entitled to reasonable notice of termination, again absent any specific language providing otherwise.
However, if the employer terminates a fixed term contract prior to the end of the term, it would have to provide notice in compliance with legislation and any early termination clause in the agreement. If the agreement did not provide for early termination, then the employee could be entitled to receive compensation for lost wages during the unexpired remainder of the term.
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Resignation: Employees who resign their employment are not entitled to severance, unless there is constructive dismissal—or potentially a statutory basis for compensation, such as human rights legislation.
However, if an employee resigns and then quickly has a change of heart and asks to continue their employment, the employer may have to either permit them to keep working or confirm the termination but pay compensation in lieu of notice. This issue arises most often when an employee quits in a moment of emotional upset. Some cases hold that an employee only has the option of walking back their resignation up to the point where the employer accepts it. On this line of cases, once accepted, the resignation has binding effect and there is no claim for damages if continued employment is not allowed.