How Can I Limit my Potential Liability to Employees?

Contracts, contracts, contracts.  It cannot be said enough times.  The only way to limit potential liability to employees on termination is through a comprehensive employment agreement that sets out at the commencement of the employment relationship, what will happen on termination.  Without such an agreement, plan on being exposed to liability for common law notice in a without cause termination, including one that results from a restructuring or shutting down of part of your business.

The minimum requirements of all employment contracts are those specified in the BC Employment Standards Act (the “Act”).  The Act imposes obligations on employers when terminating employees to provide a minimum amount of notice or pay in lieu of notice.  The amount of notice required is essentially one week per year of service up to a maximum of eight weeks.  These are only the minimums and almost all employees will be entitled to a greater amount of notice than that required by the Act, unless the employment agreement specifically limits the amount of notice to that required under the Act.  The courts have held that there are very specific requirements in order for an employment contract to limit an employee to the notice required under the Act and if those requirements are not met, an employee will be entitled to common law notice.  Common law notice can often be in excess of one month for every year of service and extends up to two years or greater of notice.  This demonstrates the significant potential liability that employers are exposed to if they fail to limit their liability through an enforceable termination clause in the employment contract.

Do not simply cut and paste from agreements that you have seen.  Invest in getting a template agreement specific to your business that fits your needs and update it occasionally through discussions with your legal counsel.  This is an area of the law that evolves over time with courts giving guidance on the wording that is necessary to limit the liability of employers.


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