Need to Reduce Staff? The Most Expensive Termination Is the One That Was Never Properly Planned
When business gets difficult, employers sometimes need to make difficult decisions. The problem is not necessarily the decision to terminate — it is making that decision without first understanding the cost, the process and the risk.
A major customer leaves.
Orders decline.
Financing becomes tighter.
A department is no longer sustainable.
Technology changes the work.
Two positions can be combined.
A business needs to restructure to remain viable.
These are real business circumstances.
Sometimes workforce reductions are unavoidable.
But a necessary business decision can still become an expensive employment dispute if it is implemented poorly.
Start With the Contract — Not the Termination Letter
One of the first questions should be:
What does the employee's contract actually require?
Employers sometimes assume statutory minimums are the entire termination obligation.
That can be a costly assumption.
Ontario's ESA establishes minimum standards concerning termination notice or pay, and statutory severance pay is a separate potential entitlement for qualifying employees.
But the employment agreement also matters.
Before determining what to offer, employers should understand whether the termination language they intend to rely upon is enforceable and what exposure could exist if it is not.
This should happen before the termination meeting.
Not afterward.
Do Not Create a Constructive-Dismissal Problem While Trying to Avoid a Termination
Economic pressure sometimes causes employers to attempt intermediate measures first.
Reduce compensation.
Cut hours.
Remove responsibilities.
Change reporting structures.
Move employees.
Suspend benefits.
Change schedules dramatically.
Some changes may be permissible.
Others may create significant legal risk depending on the contract and circumstances.
Employers should therefore assess significant unilateral changes before implementing them.
Trying to save the cost of a termination can sometimes create a much larger dispute.
Layoffs Require Planning Too
Calling a workforce reduction a “temporary layoff” does not automatically make it legally safe.
Ontario's ESA contains specific rules governing temporary layoffs and when a layoff becomes a termination. Ontario's employment-standards framework also now includes rules concerning extended temporary layoffs.
Contracts and the circumstances surrounding the employment relationship may raise additional considerations.
Before laying employees off, determine what legal authority exists to do so and what happens if the anticipated “temporary” interruption becomes much longer than planned.
Human Rights Cannot Be an Afterthought
Businesses may legitimately restructure.
But the selection process still matters.
The Ontario Human Rights Code applies to dismissals and layoffs.
Suppose three positions need to disappear.
One employee is currently on disability leave.
Another recently asked for accommodation.
A third recently returned from parental or disability-related leave.
That does not automatically prevent the business from proceeding with a legitimate restructuring.
But the company should be able to demonstrate that its selection criteria and decision-making process were legitimate and non-discriminatory.
Where disability is involved, accommodation obligations may also need to be considered before conclusions are reached regarding an employee's ability to meet job requirements.
Documentation Matters
When a restructuring occurs, the employer should be able to explain:
Why was the change necessary?
How were positions selected?
What business criteria were used?
Who made the decision?
Were protected characteristics considered?
Were accommodation obligations reviewed?
What did the applicable contracts say?
What termination obligations were calculated?
What happens to benefits?
What happens to bonuses, commissions and accrued vacation?
What information will be communicated internally?
Who will conduct the termination meeting?
What will be said?
What will not be said?
Good planning creates consistency.
And consistency becomes extremely important when decisions are later challenged.
How a Termination Is Handled Matters Too
The Ontario Human Rights Commission specifically notes the importance of dignity and respect in the manner in which employment is ended.
Terminations should therefore not be treated simply as administrative transactions.
Managers should be prepared.
Information should be accurate.
The employee should understand what is happening.
Documents should be ready.
The conversation should be respectful.
Internal communication should be controlled.
Access, equipment and confidential information should be handled appropriately.
A poorly managed termination can turn an already difficult decision into unnecessary conflict.
You Do Not Need a Large HR Department to Do This Properly
Smaller businesses often tell us:
“We don't have HR.”
That does not eliminate the obligation to manage employment decisions properly.
It simply means the business may need outside support.
That is where D&DCPD fits.
We help employers plan workforce changes before decisions are implemented.
That can include:
reviewing employment contracts
assessing termination exposure
restructuring planning
temporary layoff considerations
reviewing proposed selection criteria
accommodation and human-rights risk
termination packages
termination letters
manager preparation
termination meeting planning
internal communications
performance and disciplinary documentation
post-termination negotiations
coordinating with external counsel when litigation advice or representation is required
The Best Time to Get Help Is Before the Employee Knows a Decision Has Been Made
Once the letter has been delivered, the business has fewer options.
Once an employee has been told their pay is being reduced, the change has already happened.
Once a manager sends the wrong email, you cannot unsend it.
Once an employee receives a poorly drafted termination letter, the record exists.
Planning before acting gives the employer options.
That is particularly important in uncertain economic periods when businesses may already be under financial pressure.
The objective is not to make termination complicated.
It is to prevent a necessary business decision from becoming unnecessarily expensive.
D&DCPD Workplace Protection and Compliance Group
📞 613-866-8637
Before you restructure, lay off or terminate — understand the risk.
Protect what you've built.
This article provides general information and does not constitute legal advice. Every employment decision depends on the applicable contract, legislation and circumstances.
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