Canada: Important Considerations for Terminating Workers on Leave

As an employer, understanding the legal framework surrounding employee leaves is crucial to mitigating legal risks and ensuring compliance with employment laws. Employers may face challenges when making business decisions that impact employees on leave, including questions about whether termination is permissible during a leave of absence.

Statutory vs. Nonstatutory Leaves

Employers should first distinguish between statutory leaves and nonstatutory leaves when considering terminating someone on leave.

Statutory leaves are legally protected leaves under employment standards legislation (ESL), and they include those such as maternity leave, parental leave, sick leave, bereavement leave, and leave for domestic violence. Employees who are on statutory leave have explicit legal protections, including a right to return to their job or a comparable position.

Nonstatutory leaves, such as extended personal leaves and unpaid sabbaticals, may not be expressly covered under ESL. Employees taking nonstatutory leave may not have the same legal protections as those covered under ESL. Employers must still be mindful of the factors surrounding termination. Terminating individuals on nonstatutory leaves may still present liabilities if not handled appropriately.

When Is Termination Unlawful?

In Canada, employers cannot terminate an employee because they took a leave. However, this does not mean an employee on leave has absolute job security. Termination may be lawful if it is entirely unrelated to the leave.

Reasons for termination unrelated to leave could include:

• Business restructuring.
• Company closures or suspensions of operations.
• Position elimination due to operational needs. (Practical tip: This is not always enough to justify a termination.)

Employers must be able to demonstrate that the termination decision was not influenced by the employee’s leave status. A good rule of thumb for employers is to consider whether the employee would have been terminated had they been actively working at the time the operational constraint arose.

Legal Obligations Under Law

Each province’s ESL imposes several requirements on employers:

• Reinstatement: Employers must reinstate employees returning from statutory leave to their previous position or a comparable one.
• Prohibition against retaliation: Employers cannot punish or fire an employee for taking statutory leave.
• Severance and termination pay obligations: If an employer does terminate an employee on leave for legitimate business reasons, they must still comply with the ESL’s notice and severance pay requirements. (Practical tip: This means pay in lieu of notice if an employee is not onsite or able to work through their notice period at the time of termination.)

Human Rights Considerations

Each province has its own legislation pertaining to human rights. Applicable human rights legislation (HRL) provides additional protections against discrimination based on disability, pregnancy, family status, and other grounds. Even if an employee is not on an ESL-protected leave, if their leave of absence is due to a disability, family obligations, or other protected grounds, terminating their employment may constitute discrimination under HRL.

Under HRL, employers across Canada have a duty to accommodate employees to the point of undue hardship. This means they must explore reasonable alternatives and work together with the individual before considering termination. Failure to do so can (and often does) lead to a human rights complaint.

Employer Best Practices for Justifying a Termination During Leave

If an employee believes they were terminated because they took a leave, they might claim wrongful dismissal or discrimination. In these cases, courts and tribunals may assess:

• Whether the employer made the termination decision before or after the leave started.
• Whether the employer can provide documented evidence (e.g., emails, performance reviews, or restructuring plans) showing the termination decision was unrelated to the leave.
• Whether the employer terminated similarly situated employees who were not on leave.

For employers, ensuring compliance with their province’s ESL and HRL is crucial to reducing liability and ensuring best practices. To mitigate legal risks:

• Document legitimate reasons for termination and ensure they are unrelated to leave.
• Communicate openly with employees about business changes.
• Provide notice or payment in lieu and any other requirements as mandated by law.
• Accommodate as needed under HRL before terminating an employee on leave.

Steps for Terminating an Employee on Leave

When terminating an employee who is on leave:

• Review employment contracts and policies to ensure compliance with ESL.
• Assess alternative accommodations: If applicable, explore whether the employee can be accommodated in another role.
• Ensure documentation is in order: Maintain clear records throughout the entire process, demonstrating a legitimate business reason for termination.
• Seek legal advice: Consulting an employment lawyer prior to making or communicating any decisions can help mitigate risks and ensure lawful termination practices.

Final Thoughts

While employers have the right to terminate employees for legitimate business reasons, they must exercise caution when an employee is on leave. Compliance with employment laws, proper documentation, and adherence to statutory protections are key to avoiding costly legal disputes.

Jessica Paglia is an attorney with SpringLaw in Toronto. © 2025 SpringLaw. All rights reserved. Reposted with permission of Lexology.