Dignity, timing and a legally scripted exit strategy matter as much as the severance package itself, according to employment lawyers at HRFest Canada 2026
Terminating an employee in Canada has become a more contested and litigious exercise. Speaking at HRFest Canada’s panel “Termination Risk Reimagined: Severance, Strategy and Reputation in 2026,” Claudia Desjardins-Bélisle, managing partner of the Montreal office at Miller Thomson LLP, and David Tsai, a partner in the firm’s Toronto office, made clear that the fundamentals of termination have not changed – but the landscape surrounding them has shifted considerably.
The most significant shift Tsai said he has observed in termination practice is that, in Ontario and British Columbia in particular, the employee-side legal bar has expanded. Termination packages are routinely reviewed by employee legal counsel and demand letters arrive raising bad-faith allegations alongside notice claims. Employers in those provinces should expect legal scrutiny following any termination, according to Tsai.
Documentation is the first line of defence
“You need to do your homework and planning before you pull the trigger on the termination,” he said. “Document in writing why you have a business need, for example, for an executive’s role to be eliminated – don’t focus on that person as an individual or anything specific to them necessarily, but maybe if you’re dealing with a restructuring and you know somebody might potentially say they were selected for termination for bad-faith reasons, drop down your internal memos talking about why this role is obsolete.”
The risk intensifies when a termination follows an accommodation request, a leave of absence, or a harassment complaint. Tsai said employee-side counsel in Ontario are increasingly filing applications with the province’s Labour Relations Board or Human Rights Tribunal – bodies that can order reinstatement – as leverage, increasing the importance for organizations to “document, document, document.”
In Quebec, courts may consider overall circumstances in assessing cause even when documentation is imperfect – sometimes making it advantageous to state reasons in the termination letter itself, Desjardins-Bélisle said.
Employment agreements are your leverage
The Ontario Court of Appeal’s 2026 decision in Baker v. Van Dolder’s Home Team Inc. has shifted terrain in employers’ favour, said Tsai. The ruling – which HRD Canada has covered as the Court of Appeal’s return to a practical, common-sense approach to termination provisions in Ontario employment agreements – confirmed that well-drafted termination clauses limiting employees to minimum statutory entitlements under the Employment Standards Act, 2000 (ESA) are enforceable, provided they demonstrate an intention to comply, according to Tsai.
“There’s now a lot more guidance and a lot more employer-friendly case law out there in terms of how your provisions are going to be interpreted that will allow you to have clauses that limit entitlements on termination,” Tsai said, noting that the decision is under appeal but its near-term effect has been tangible. “I can certainly tell you after that decision came out, I’ve had a lot more cases settled a lot easier.”
Tsai’s practical recommendations for organizations include reviewing employment agreement templates every two years and extend that review beyond the termination clause itself. Bonus cut-off dates, commission treatment, and equity vesting each represent significant exposure if not addressed, he said. Courts have increasingly scrutinized variable compensation structures in wrongful dismissal disputes, as Ontario’s IBM wrongful dismissal judgment – which reached nearly $900,000 and involved heavily contested equity and compensation structures – illustrated in 2026.
Cutting executives loose requires a different playbook
Senior executive departures involve a category of risk beyond the financial package, said Tsai. When a long-tenured leader exits – whether a board relationship has broken down or business priorities have shifted – the manner of that exit shapes both the settlement and an organization’s reputation, he said.
“We've seen situations where a senior executive has been working for an organization for decades, still has significant influence in the business, and perhaps has been the public face of the business, and one day suddenly the relationship with the board just breaks down for some reason,” said Desjardins Bélisle.
“The number one thing to think about when you’re exiting an executive at that level is you come from it from a place of respect,” Tsai said. He outlined a framework involving a short working notice period, alignment on a mutually agreed public message, and where appropriate, a reference letter, cautioning against walking an executive out the door on the day of communication, which could harden the relationship and make settlement more difficult. As HRD Canada has reported, bad faith claims brought by senior executives following dismissal carry real legal and reputational consequences, making how the departure is managed as important as its financial terms.
Where a leadership shift or performance issues make an exit foreseeable, Tsai recommended a proactive and legally scripted conversation ahead of a formal termination letter – one that opens the door to a mutual parting of ways without the adversarial dynamics of a unilateral termination. In Quebec, executives do not hold the reinstatement rights protecting non-executive employees after two years of continuous service, added Desjardins-Bélisle.
“Not in every case do you want [executives] to be gone in a week or two – there are some where you want to have them around for a longer transitional period and be on their best behavior,” said Tsai. “So that's where you will want to be somewhat attractive in terms of the portion that you're going to pay, contingent upon them being in good standing as the date that you put down for the transition period – and for the working notice period, you want to be very clear on your expectations and the deliverables… in order to get that payment at the end of the day.”
Mass terminations demand proactive compliance
Large-scale workforce reductions draw added regulatory attention. Tsai flagged the importance of reviewing mass termination provisions under each province’s employment standards legislation and filing ministry notice requirements correctly and on time.
Desjardins-Bélisle sounded a particular alarm for employers with Quebec operations. The province’s Act Respecting Labour Standards requires advance notice to the Minister of Labour for group terminations – ranging from eight to 16 weeks depending on the number of employees affected – and enforcement has tightened significantly since the pandemic, she said.
“Since COVID, the Minister of Labour has been scrutinizing the mass terminations that occur in the province of Quebec,” said Desjardins Bélisle, who noted that for the first time in her practice she had seen the question of penalty proceedings raised against employers for failing to provide mass termination notice on time.
Both lawyers emphasized the same key point: no termination is a one-size-fits-all exercise. Strategy, documentation and timing determine exposure as much as the size of the severance package itself.
“Not all exits are created equal, whether an organization is looking at terminating a senior executive or doing an entire company-wide reorganization that will lead to termination,” said Desjardins Bélisle. “And the challenge for HR professionals is not just to understand how to do the termination and how to implement termination, but also to think strategically about how they should be done and the impact [they] can have on the business.”
