Interpretation Guidelines Manual British Columbia Employment Standards Act and Regulations

EMPLOYMENT STANDARDS ACT - PART 8 - TERMINATION OF EMPLOYMENT

ESA Section 63 – Liability resulting from length of service


Contents:

Summary
Text of Legislation
Policy Interpretation
Related Information


Summary

This section details when an employee is entitled to compensation for length of service and how these wages are calculated, and includes how this wage liability can be discharged with written notice or a combination of pay and notice. This section also establishes specific employment situations where an employee is not entitled to compensation for length of service or written notice of termination.


Text of Legislation

63. (1) After 3 consecutive months of employment, the employer becomes liable to pay an employee an amount equal to one week's wages as compensation for length of service.

(2) The employer's liability for compensation for length of service increases as follows:

(a) after 12 consecutive months of employment, to an amount equal to 2 weeks' wages;

(b) after 3 consecutive years of employment, to an amount equal to 3 weeks' wages plus one additional week's wages for each additional year of employment, to a maximum of 8 weeks' wages.

(3) The liability is deemed to be discharged if the employee

(a) is given written notice of termination as follows:

(i) one week's notice after 3 consecutive months of employment;

(ii) 2 weeks' notice after 12 consecutive months of employment;

(iii) 3 weeks' notice after 3 consecutive years of employment, plus one additional week for each additional year of employment, to a maximum of 8 weeks' notice;

(b) is given a combination of written notice under subsection (3) (a) and money equivalent to the amount the employer is liable to pay, or

(c) terminates the employment, retires from employment, or is dismissed for just cause.

(4) The amount the employer is liable to pay becomes payable on termination of the employment and is calculated by

(a) totalling all the employee's weekly wages, at the regular wage, during the last 8 weeks in which the employee worked normal or average hours of work,

(b) dividing the total by 8, and

(c) multiplying the result by the number of weeks' wages the employer is liable to pay.

(5) For the purpose of determining the termination date under this section, the employment of an employee who is laid off for more than a temporary layoff is deemed to have been terminated at the beginning of the layoff.


Policy Interpretation

Subsections (1), (2) and (3)

After being employed for three consecutive months, an employee is entitled to compensation for length of service if the employer terminates the employment.  The amount of compensation for length of service that an employer must pay increases with the employee’s length of service.  

An employer may choose to give an employee written working notice of termination instead of compensation for length of service. The employer may also give a combination of notice and pay.

The amount of compensation for length of service or written working notice the employer must give increases with the employee’s length of service.  The employer must provide the following amounts of pay or notice:

  • After three consecutive months of employment – one week’s pay or one week’s written notice;
  • After 12 consecutive months of employment – two weeks’ pay or two weeks’ written notice;
  • After three consecutive years of employment – three weeks’ pay or three weeks’ written notice, plus one week’s pay or one week’s notice for each additional year of employment to a maximum of eight weeks.

Amount of written notice or compensation required:


Length of employment

Amount of notice/pay

 

 

0 - 3 months

none

After 3 months up to 12 months

1 week

After 12 months up to 3 years

2 weeks

After 3 years up to 4 years

3 weeks

After 4 years up to 5 years

4 weeks

After 5 years up to 6 years

5 weeks

After 6 years up to 7 years

6 weeks

After 7 years up to 8 years

7 weeks

After 8 years

8 weeks

A “month” is defined in the Interpretation Act as a period calculated from a day in one month to a day numerically corresponding to that day in the following month, less one day. A year is defined as any period of 12 consecutive months.

If an employer gives written notice of termination, the employee is entitled to work during the notice period. Once notice is given, conditions of employment, including hours of work, must not be altered without the consent of the employee.

Vacation pay is payable on compensation for length of service.

Written notice of termination under this section must not coincide with an employee’s annual vacation.

Periods of temporary layoff during employment do not reduce an employee’s length of service for the purpose of calculating compensation for length of service.

Example

Sue starts work on June 1, 2005. She is temporarily laid off for six weeks in January and February of 2007 and returns to work at the end of her layoff. She is terminated on June 1, 2008 without written notice. Sue is entitled to three weeks compensation for length of service because she completed three years of employment on May 31, 2008, the day before she was terminated. The employer could also have discharged its liability to pay compensation for length of service by giving three weeks’ written notice of termination or a combination of notice and pay equivalent to three weeks compensation.

Example

Matt’s employer is having financial difficulty and decides to close its doors. When Matt is terminated he has worked there for 4 ½ years. His employer gives him two weeks’ written working notice. When Matt goes to pick up his final paycheque at the end of his notice period, his cheque includes an additional two weeks’ pay for compensation for length of service. Matt’s employer has complied with the provisions of the Act.

Limitation to enforcement of compensation for length of service

The director can only enforce the statutory requirements set out in s.63 of the Act. An employment contract between the parties which provides notice or compensation in excess of the amounts provided in s.63 cannot be enforced under the Employment Standards Act.

Court proceedings for wrongful dismissal

Compensation for length of service is considered to be wages under the Act. A court action for wrongful dismissal is based on common law principles which are different than the rights protected by the Act. Parties are encouraged to seek independent legal advice concerning matters outside the scope of the Act. The Employment Standards Branch cannot provide this advice.
 
Mitigation

The amount of compensation for length of service an employee is entitled to under the Act is not reduced because of money an employee may receive from another source. For example, if an employee is terminated without notice and finds another job the next day, the employer who terminated the employee is not relieved of the obligation to pay compensation for length of service.

Subsection (3)(c)

An employer is not required to pay compensation for length of service or to provide written working notice of termination when an employee:

  • quits;
  • retires; or
  • is dismissed for just cause.

Section 65 of the Act outlines other circumstances where employers are not required to provide written notice or compensation for length of service.

Notice of resignation

There is no requirement under the Act for an employee to give notice of resignation.

However, if an employee does give notice of resignation, and the employer declines to accept it, the employee would be entitled to compensation equal to the lesser of:

  • the notice given by the employee, or
  • the employee’s statutory entitlement under this section of the Act.

If the employer initially accepts the employee’s notice, and then terminates the employee during the notice period, the employee would be entitled to compensation, again equal to the lesser of:

  • the remaining notice period, or
  • the employee’s statutory entitlement under this section of the Act.

Example

Donna, who has completed 4 years of employment, provides her employer with two weeks' notice of her intention to quit. Upon receiving the notice, the employer tells Donna she can leave that day. Donna would be entitled to 2 weeks' compensation for length of service in keeping with the length of notice she had provided to her employer.

Matt has worked for his employer for six months. He gives two weeks’ notice that he is quitting. His employer finds a replacement for him two days later, and tells him that he is not required to finish working out his notice period. The employer must pay him one week’s compensation, his statutory entitlement under the Act, which is slightly less than the remainder of his notice period.

Quit versus fire

Sometimes disputes arise as to whether an employee quit or was fired. The onus for proving an employer is relieved of the need to give written notice or compensation for length of service is on the employer who asserts it.

Burnaby Select Taxi (BC EST #D091/96) sets out the following test to determine whether an employee quit or was fired, for the purposes of the Employment Standards Act:

The right to quit is personal to the employee and there must be clear and unequivocal facts to support a conclusion that this right has been voluntarily exercised by the employee involved. There is both a subjective and an objective element to a quit:  subjectively, the employee must form an intent to quit employment; objectively, the employee must carry out an act inconsistent with his or her further employment.

Retirement

As of January 1, 2008, there is no mandatory retirement age in B.C. When an employee chooses to retire, an employer is not required to pay compensation for length of service.

Just cause

An employer is not required to pay compensation for length of service or provide written working notice of termination if an employee is dismissed for just cause. The burden of proving that the employee’s conduct justifies dismissal for just cause is on the employer.

When an employee does not agree that his or her termination was for just cause, recourse exists through:

  • Statute law (Employment Standards Act and Regulation, Human Rights Code);
  • Common law action for wrongful dismissal.

 
The Human Rights Code has jurisdiction to proceed with complaints where employees allege they were terminated as a result of discrimination that contravenes the Code. The Human Rights Code and the Employment Standards Act both have jurisdiction to proceed with complaints from employees who allege that their employment was terminated for reasons related to pregnancy. Section 79(2) of the Employment Standards Act discusses the remedies for contravening pregnancy and other leave provisions of the Act.
 
Examples of “just cause” for termination

The degree of employee misconduct which gives an employer just cause for termination depends on the facts of each case. One thing to be considered is whether the employee behaved in a manner that was not consistent with the continuation of employment.

Sometimes a single act of misconduct may constitute just cause. The misconduct must be serious, deliberate and intentional, and fundamentally breach the employment contract.

Some actions which may result in an employee’s termination for just cause are:

  • wilful misconduct;
  • gross incompetence;
  • theft;
  • fraud;
  • conflict of interest;
  • serious undermining of the corporate culture;
  • serious breach of employer rules and policies;
  • failure to respond appropriately to corrective discipline.

Wilful misconduct

It is often accepted that wilful misconduct means that the employee knew what they were required to do, and deliberately did not do it, or that they knew what was not permitted, but did it anyway. An act of wilful misconduct is inconsistent with the continuation of the employment contract or the proper discharge of the employee’s duties. It is prejudicial to the employer’s interests, or is a breach of trust. A mistake, especially if due to inexperience or lack of training, is not considered to be wilful misconduct.

Theft

If an employer is relying on a single incident of theft to justify dismissal without compensation or notice, the incident must be proven on “the balance of probabilities”. The employer cannot rely only on suspicion or speculation. There must be clear and convincing evidence that no other conclusion is likely.

Personal safety

An action which puts the employee’s or others’ personal safety at risk may constitute just cause. For example, failing to engage in safety precautions (drilling during a blasting period, or failing to turn off a power source before repairing machinery); or failing to comply with legal requirements (attempting to operate a motor vehicle while under the influence of alcohol or drugs or while a driver’s licence has been suspended).

Whether or not these sorts of actions will constitute just cause will depend on the facts and circumstances of each individual case.

Minor misconduct

More commonly, minor misconduct over a period of time results in dismissal. Issues like poor performance, low productivity, absenteeism or tardiness do not normally constitute just cause for dismissal. In order to establish just cause in these circumstances, the employer must be able to satisfy all of the elements of the following test:

  • The employer established a reasonable standard of performance and communicated that standard to the employee;
  • The employer provided the employee with sufficient time and a reasonable opportunity to meet the standard (may include providing training or tools);
  • The employer warned the employee that failure to meet the standard was serious and would result in termination; and
  • The employer can show that the employee still did not meet the standard.

There is no requirement for an employer to warn an employee in writing, although the existence of written warnings may make it easier for the employer to prove just cause.

Employees who fail to respond to the employer’s attempts to improve performance through the above steps may be terminated for just cause. The termination must relate to the matters that gave rise to the employer’s disciplinary efforts.

Subsection (4)

This subsection sets out the calculation method to be used in determining the amount of compensation for length of service payable on termination of employment.

Only regular wages are included in the calculation. Overtime wages earned under sections 37 and 40 of the Act are excluded. If an employee, such as a manager, is excluded from the overtime pay provisions of the Act by regulation, regular wages for all hours worked are included in the calculation.

The eight-week calculation period is limited to weeks in which the employee worked “normal” or “average” hours. Any week an employee did not work or when the only wages paid were a result of annual vacation or statutory holiday pay under the Act are excluded.

“Normal” or “average” weekly hours

Establishing “normal” or “average” weekly hours of work is determined by the circumstances of each employment situation.

“Normal” weekly hours are the hours an employee regularly works. “Normal” weekly hours refers to a circumstance in which the employee has a consistent schedule of hours of work from week to week and those hours usually do not fluctuate.

Where an employee’s normal weekly schedule has been temporarily reduced (not a normal seasonal reduction) in one or more weeks during the last eight weeks in which the employee worked, due to reasons such as illness or a change in the schedule, the calculation under this section will exclude the reduced week(s) from the calculation. 

Example:

Fred is entitled to one week’s compensation for length of service. His schedule over the last 11 weeks he worked is as follows:


Week one

40 hours

Week two

40 hours

Week three

40 hours

Week four

Week of annual vacation

Week five

40 hours

Week six

47 hours (7 hours of overtime)

Week seven

no hours (sick)

Week eight

16 hours(3 days off sick)

Week nine

40 hours

Week ten

40 hours

Week eleven

40 hours

Weeks four and seven are excluded from the calculation since they were not worked.
Week eight is excluded since it was not “normal”. Week six hours are calculated as 40 since seven hours of overtime are excluded.

Fred is entitled to receive 40 hours of compensation for length of service since 40 is the normal hours of work for a one-week period.

“Normal” weekly hours may change during the year, such as when based on seasonal requirements.

If an employer’s operational requirements fluctuate on a seasonal basis, the employee’s normal hours of work may change from season to season. It may be normal for the employee to work 20 hours each week October through February and 40 hours each week for the rest of the year.

If employment is terminated without written notice of termination at the end of January, employees would receive 20 hours per week in compensation for length of service, because this was their normal hours of work for the last eight-week period. Conversely if employment is terminated at the end of September they would receive 40 hours per week in compensation for length of service, as their normal hours of work in the last eight-week period was 40.

Example

Ravi starts work in July 2007. He works 40 hours a week until October and then continues to work 20 hours a week through the normal seasonal reduction. He starts working 40 hours a week again in March 2008. His hours are reduced to 20 hours per week for the seasonal reduction on October 1, 2008. Two weeks later he is terminated without written notice. Compensation for length of service is calculated based on the total of the “normal” hours he worked over the last eight weeks of employment as follows:

6 weeks x 40 hours per week= 240
2 weeks x 20 hours per week=   40
Total hours last 8 weeks=         280

280 hours ÷ 8 weeks = 35 hours per week. Since Ravi is entitled to two weeks’ pay for compensation for length of service, he will receive 70 hours of pay.

Where “normal” weekly hours cannot be established, such as where the hours of work fluctuate weekly, the calculation is based on the total of all weekly wages during the last eight weeks in which the employee worked. These total wages are divided by eight and multiplied by the number of weeks’ entitlement an employer is required to pay under subsection 63(2). 

Example:

An employee is entitled to one week’s compensation for length of service, based on a schedule over the last eleven weeks of work as follows:


Week one

35 hours

Week two

27 hours

Week three

No hours

Week four

Week of annual vacation

Week five

40 hours

Week six

47 hours (7 hours of overtime)

Week seven

15 hours

Week eight

No hours

Week nine

50 hours (10 hours of overtime)

Week ten

17 hours

Week eleven

21 hours

Weeks three, four and eight are excluded from the calculation since they were not worked. The overtime hours in week six and nine are excluded from the calculation. This leaves 235 total weekly hours during the last eight weeks the employee worked. The total of 235 divided by eight equals 29.38 hours per week.
 
The employee is entitled to receive 29.38 hours of compensation for length of service.

Shift straddles midnight

Under section 63 of the Act the calculation of compensation for length of service is based on the last eight weeks in which the employee worked normal or average hours. A “week” for the purposes of this section is a period of seven consecutive days beginning on any day. Therefore if a shift straddling midnight ends within the eight week period being examined, the time worked on that day will be considered part of the eight week period for the purposes of calculating compensation for length of service.

Subsection (5)

This subsection only applies to employment relationships where temporary layoff is clearly provided for through a provision in the employment contract. If there is no written employment contract, the employer must be able to show that the circumstances of the employment relationship permit temporary layoff. (See s.1(1), definition of “temporary layoff”.)

For the purposes of section 63, if a temporary layoff exceeds 13 weeks in a 20 week period, the employee is deemed to be terminated effective the first day of the layoff.

Example

Corey is hired on June 1, 2009. She is laid off on October 7, 2009. Her employer tells her that she will be called back in four weeks. Corey does not have a written employment agreement, and her employer had not raised the possibility of layoff with her when she was hired. Corey’s employment has been terminated and she is entitled to one week’s pay for compensation for length of service. She is not required to wait and see if she is recalled to work.

When Friedrich is hired on October 1, 2007, he signs an employment agreement that states he may be temporarily laid off due to fluctuations in demand for the employer’s product. Friedrich is temporarily laid off on October 31, 2008. Friedrich is told to anticipate being recalled. Due to a continued downturn in business, Friedrich is not recalled. Upon exceeding 13 weeks layoff, Friedrich is entitled to two weeks’ compensation for length of service. The date of termination is considered to be November 1, 2008, the commencement of his layoff.

Wanda is hired to work in a manufacturing operation on August 1, 2007. Layoffs are known to occur and Wanda is aware that most employees face layoff at times. Her employer discusses the probability that she will be laid off at some point while working at the business. She accepts the employment. Wanda is laid off December 15, 2007 due to a business downturn. She returns to work six weeks later and works until June 1, 2008. She is laid off again because a delivery is delayed. Wanda is recalled to work two weeks later. Wanda is not considered to be terminated under the Act because neither layoff exceeded 13 weeks in a 20 consecutive week period. Wanda’s length of service is continuous from August 1, 2007, her original date of hire.

Employees covered by a collective agreement

Under s.3 of the Act, where a collective agreement contains any provision respecting seniority retention, recall, termination of employment or layoff, s.63 does not apply. If a collective agreement does not contain any provision respecting seniority retention, recall, termination of employment or layoff, s.63 is deemed by s.3 to be incorporated in the collective agreement as part of its terms.

Under s.3(7) where there is a collective agreement, the enforcement of matters relating to s.63 is through the grievance procedure, not through the enforcement provisions of the Act.


Related Information

Employment Standards Tribunal Decisions

General overview: Victoria Books and Volumes Bookstores Ltd.(BC EST #404/98)

Quit/fire test: Zoltan Kiss (BC EST #091/06); Dr. D. Ciarniello Inc. (BC EST #027/08)

Termination during the notice period: Golden Rock Products, Inc. (BC EST #040/08)

Alleged malicious conduct: HCAS Supply Ltd; (BC EST #D094/96);

Incompetence and poor work performance and the need to warn that job is in jeopardy: Hall Pontiac Buick Ltd (BC EST#D073/96);

Poor work performance where one incident is insufficient to justify dismissal: Kenneth Kruger (BC EST #D003/97); Veeken’s Poultry Farm Ltd (BC EST #D165/97)

Employer’s failure to act on information in a timely way: Reycraft (BC EST #263/97)

After-aquired cause: BNW Travel Management Ltd. (BC EST #170/04)

Alleged breach of company policy: Black & Lee Formal Wear Rentals Ltd. (BC EST #226/97)

Behaviour inconsistent with continuation of employment: Grouse Mountain Resorts Ltd. (BC EST #143/96)

Criminal activity on the employer’s premises: Martin Andrew Craigdallie (BC EST#313/97)

Dealing with a single act of alleged theft, dishonesty or serious misconduct: Interior Pacific Litho Inc. (BC EST #D098/98)

Conflict of interest: TMSI Telephone Maintenance Services Inc. (BC EST #D510/98)

Corrective Discipline: Sambuca Restaurant Ltd. (BC EST#322/97); Robert Hegyi, (BC EST #144/98)

Misconduct/minor infractions: Adam Ellison (BC EST #122/03)

Difference between compensation for length of service and damages for wrongful dismissal: Bill Sitter (BC EST #520/00); Grant Howard (BC EST #011/07)

Related sections of the Act or Regulation
ESA

Other

See Employment Standards Factsheets

Factsheets

Termination of Employment

Collective Agreements and the Employment Standards Act

Just Cause

Peter Z. Colak v. UV systems Technology Inc., 2007 BCCA 220

BC Human Rights Tribunal http://www.bchrt.bc.ca/