When terminating an employee without just cause in most cases an employer is required to give that employee reasonable notice or pay in lieu of reasonable notice.
For a discussion of reasonable notice, follow the link to our blog post on common law notice here: Common Law Notice in British Columbia – Carter Litigation
The option to provide reasonable notice or pay in lieu of reasonable notice is entirely the choice of the employer.
If the employer chooses to give reasonable notice rather than paying the employee an amount equivalent to that, this is referred to as “working notice”. Paying out an amount equivalent to the notice period on termination is commonly referred to as “severance pay”.
There are pros and cons to the employer of each of the approaches.
One advantage to the employer of giving working notice is that the employer actually gets something of value in return for the money the employee is paid over the working notice period, in that the employee continues to provide their labour over that period of time.
Another advantage is that if the employee finds another job over the working notice period and quits to start that job, then the employer is not required to provide any more notice or pay in lieu of notice as the employee has voluntarily left their employment.
The downside to working notice is that most employees are not going to go the “extra mile” in terms of their work ethic if they know their job is coming to an end. Also, in extreme circumstances, a disgruntled employee who still has access to the employer’s computer systems, financial systems, or customer lists, as a few examples, could do considerable damage to a business if they chose to sabotage it. In a less extreme example, an employee on working notice could bring down the morale of other employees.
The main advantage of paying out notice right away is that it avoids all the potential problems just mentioned as the employment relationship immediately comes to an end and the employee no longer has access in any way to the employer’s business.
The primary downside to paying severance is that it can be a significant financial liability for the company, particularly in the case of long term employees.
Because of the pros and cons discussed above, in most cases immediate termination and paying severance pay make the most sense for the employer.
However, in cases where a company has a very long term employee making a good wage where the amount of notice required to pay out might be quite high, then it might make sense to consider using working notice, especially if things are ending with that employee on good terms and the employee is one whose character can be trusted not to sabotage the business.
The requirements for providing working notice are legally specific and the notice must be given in wrting. Also, if an employee stays on and works even one day after the working notice period is up that will legally reset the employment and notice will have to be given again and will start again (basically the clock is reset). For these reasons, we recommend you consult with a lawyer like Robert Carter before attempting to provide working notice as a strategy if you are an employer.