Employers are avoiding terminations by not-so-subtly phasing employees out. Cue the lawsuits

In Canadian workplaces, termination no longer begins with a meeting, but with silence. Photo by Getty Images/iStockphoto

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In Canadian workplaces, termination no longer begins with a meeting, but with silence.

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An employee is not fired — at least not formally. There is no without-cause termination, no severance package, no final date.

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Something more subtle occurs. Responsibilities are reduced. Direct reports disappear. Decisions are made elsewhere. Meetings proceed without them. Titles remain. Authority does not.

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The employee is still “employed” but only in the most technical sense.

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Employers increasingly treat this as a form of “working notice” — a less confrontational way of managing exits. Why terminate and pay severance, the thinking goes, when you can simply ease someone out?

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Working notice, properly understood, requires that the employee continue in substantially the same role during the notice period. The bargain is straightforward: the employer provides advance notice of termination and the employee continues working on the same terms and conditions of employment.

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What is occurring today in many Canadian workplaces bears little resemblance to that.

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When a senior employee loses their team, budget or decision-making authority, the change is not cosmetic. It strikes at the heart of the employment relationship. Courts have long held that a substantial reduction in duties or prestige can constitute constructive dismissal. Calling it “transition,” “realignment,” or “organizational change” does not alter that analysis.

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Nor does the absence of a termination letter.

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Employers often believe they are reducing legal risk by avoiding the formal step of dismissal. In reality, they may be triggering liability earlier — on dramatically less favourable terms.

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An employee who has been effectively sidelined may be entitled to treat the relationship as having been terminated immediately and claim damages.

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Worse still for employers, the period during which the employee was “benched” may not count as valid working notice at all. If the role no longer resembles what the employee was hired to do, there is no legal notice being provided since the employee was never given a final date, which is a prerequisite for working notice.

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The risk is particularly acute for senior employees. Titles can be preserved with substance stripped away. But courts are not misled by titles. They examine what the employee actually does, not what appears on an organizational chart.

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There is a further, often overlooked, consequence. By failing to clearly communicate termination, employers may also undermine their ability to enforce mitigation — the obligation on an employee to find other work so as to reduce the employer’s financial obligations.