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WHENTO TERMINATE AN EMPLOYEE DIRECTORS’ LIABILITY · 2014-08-06 · Marc Belaiche is a 1990 CA...
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18 Mississauga Board of Trade 19 Volume Seven | Issue 3 | 2012 WHEN TO TERMINATE AN EMPLOYEE By Marc Belaiche T erminating an employee can be one of the most difficult decisions a manager has to make. This article will cover some signs of when it may be time to start considering termination. QUALITY OF WORK HAS DETERIORATED When an employee’s performance has deteriorated to the point that work is not getting done on time or at the quality expected for the position, even after warnings, it may be time to terminate that employee. There could be underlying reasons why quality has deteriorated, so give them an opportunity to explain their poor performance. RESTRUCTURING A company may need to restructure a position, for example, to be more competitive or reduce costs. JUST CAUSE/VIOLATION OF COMPANY POLICIES OR PROCEDURES This revolves around the following two questions: Can the employee misconduct be proven; and, is the nature and degree of the misconduct sufficient to dismiss the employee? Answers to these questions must be yes in order to have possible grounds to justify termination for just cause. NEW EMPLOYEE/PROBATION Employment agreements typically give the opportunity to terminate an employee during the probationary period (usually between 3-6 months), without notice or cause. Make sure to know responsibilities of terminating an employee through their probationary period. INSUBORDINATION An employee who willfully disobeys their manager’s authority can be grounds for dismissal, provided that the manager doesn’t ask the employee to do something that would be unethical or illegal. INCOMPETENT EMPLOYEE An employee may appear to be competent when hired but it may take some time before you realize they aren’t. DISTRACTION TO OTHER EMPLOYEES It can be extremely detrimental to your organization when an employee distracts other employees from completing their work or creates a negative influence with others. UNMOTIVATED EMPLOYEE When an employee loses their motivation to do their job, it may be difficult to regain that. In most situations, an employee needs to be able to motivate themselves to complete the work. CAREER LIMITATIONS An employee may have reached a limit, but unfortunately, you can’t provide them with an opportunity to move upwards in your organization. Consider internal restructuring or creating a position more challenging for them. OTHER CONSIDERATIONS Consider giving additional training before termination Review the employment agreement for any terms or conditions prior to termination Give proper warning(s) Speak with an employment lawyer prior to termination to ensure there is nothing else to consider, from a legal perspective Document all performance reviews, meetings, conversations, warnings, etc. in writing in the employee’s file, in the event there is a legal issue later If the employee is a member of a union, there may be further considera- tions involved There are many signs of when an employee needs to be terminated. You may have others to add to the list above. Don’t forget the old management principle of hiring slowly and firing fast. Note: This article is not intended to provide any legal advice and readers of this article are encouraged to consult with a lawyer for any legal advice pertaining to the points raised in this article. Marc Belaiche is a 1990 CA and is President of TorontoJobs.ca, an internet recruitment business and recruiting firm located in the Greater Toronto Area. TorontoJobs.ca allows companies to post their positions online, search a resume database to find candidates, provides outplacement services and full temporary and permanent recruitment services. You can reach Marc at [email protected] and by visiting www.TorontoJobs.ca DIRECTORS’ LIABILITY PAYING BILLS FROM THE HST ACCOUNT CAN MAKE CORPORATE DIRECTORS PERSONALLY LIABLE T he directors of a corporation in distress have a lot to worry about when money is flowing out of the corporation faster than it is flowing in. It is tempting to use the “rob Peter to pay Paul” strategy to pay the bills, but this a bad idea, especially if the money comes from tax withheld from employees or collected from customers. This is because several federal and provincial tax statutes can make directors personally responsible for amounts collected or withheld by the corporation, but not properly remitted to the appropriate taxing authority. Under the Income Tax Act (Canada), for example, a director can be found personally liable if the corporation fails to withhold or remit taxes from employees’ wages and benefits or from dividends and other amounts paid to non-residents as required. The director may be jointly liable with the corporation (and its other directors, if any) for the full amount that should have been withheld or remitted, plus penalties and interest. The taxation authority must first show, however, that it cannot directly recover the amounts owed from the corporation. The federal Excise Tax Act, the Employment Insurance Act and the Canada Pension Plan and provincial tax legislation all contain similar provisions imposing liability on directors for the corporation’s failure to collect, withhold, and remit tax as required. Directors of a non-profit corporation that pays salaries and wages or collects HST or GST from customers may also be held liable under all of these provisions. THE ACCIDENTAL DIRECTOR These are the risks to becoming a director and it is wise to be aware of them. If you are a director of a corporation in dire financial straits, you should take steps to clearly document your position. Most of the time, a director will give his or her express consent to being appointed. In certain circumstances, however, an individual can be considered a de facto director without a legally valid appointment, just by acting like a director. Avoid activities that make it look like you’re running the corporation. Similarly, an individual may wish to step down as a director (particularly if the corporation is not doing well), but fail to properly paper the resignation. If an individual appears to be acting like a director to those outside the corporation by, for example, signing resolutions or attending directors’ meetings, she may be considered a de facto director and be held responsible for the corporation’s tax liabilities even without being validly appointed or even after resigning from the board of directors. WHAT’S A DIRECTOR TO DO? Generally, a taxation authority cannot proceed against the director for unremitted taxes more than two years after he or she resigns as a director. To start the two-year clock running, the resigning director must ensure that the resignation is promptly and properly documented, both in the corporation’s minute book and in the appropriate federal or provincial corporate registry. The corporation’s receiver or trustee in bankruptcy should also be advised in writing of the director’s resignation. After resigning, the former director should take care to avoid being considered a de facto director by avoiding doing anything to suggest she is still involved in the corporation’s affairs, particularly if all the other directors have also resigned. A director who can show that she exercised the degree of care, diligence and skill to prevent a corporation’s failure to withhold or remit tax as required may escape liability through what is known as a due diligence defence. The director will have to show that, considering her personal knowledge, experience, background as well as the corporation’s organization and resources, she acted appropriately under the circumstances. Directors should also communicate regularly with officers and staff and should obtain regular reports confirming that taxes are being remitted to the proper authorities in full and on time. Wojtek Jaskiewicz is a member of the Insolvency and Corporate Restructuring Practice and Commercial Litigation Practice at Pallett Valo, Mississauga’s largest business law firm. He can be reached at [email protected] and at (905) 273-3022 ext. 285. Call Me Let’s meet for coffee! SEVERAL FEDERAL AND PROVINCIAL TAX STATUTES CAN MAKE DIRECTORS PERSONALLY RESPONSIBLE FOR AMOUNTS COLLECTED OR WITHHELD BY THE CORPORATION, BUT NOT PROPERLY REMITTED TO THE APPROPRIATE TAXING AUTHORITY.
Transcript of WHENTO TERMINATE AN EMPLOYEE DIRECTORS’ LIABILITY · 2014-08-06 · Marc Belaiche is a 1990 CA...
18 Mississauga Board of Trade 19Volume Seven | Issue 3 | 2012
WHEN TO TERMINATE AN EMPLOYEEBy Marc Belaiche
Terminating an employee can be one of the most difficult decisions a manager has to make. This article will cover some signs of when it may be time to start considering termination.
QUALITY OF WORK HAS DETERIORATEDWhen an employee’s performance has deteriorated to the point that work is not getting done on time or at the quality expected for the position, even after warnings, it may be time to terminate that employee. There could be underlying reasons why quality has deteriorated, so give them an opportunity to explain their poor performance.
RESTRUCTURINGA company may need to restructure a position, for example, to be more competitive or reduce costs.
JUST CAUSE/VIOLATION OF COMPANY POLICIESOR PROCEDURESThis revolves around the following two questions: Can the employee misconduct be proven; and, is the nature and degree of the misconduct sufficient to dismiss the employee? Answers to these questions must be yes in order to have possible grounds to justify termination for just cause.
NEW EMPLOYEE/PROBATIONEmployment agreements typically give the opportunity to terminate an employee during the probationary period (usually between 3-6 months), without notice or cause. Make sure to know responsibilities of terminating an employee through their probationary period.
INSUBORDINATIONAn employee who willfully disobeys their manager’s authority can be grounds for dismissal, provided that the manager doesn’t ask the employee to do something that would be unethical or illegal.
INCOMPETENT EMPLOYEEAn employee may appear to be competent when hired but it may take some time before you realize they aren’t.
DISTRACTION TO OTHER EMPLOYEESIt can be extremely detrimental to your organization when an employee distracts other employees from completing their work or creates a negative influence with others.
UNMOTIVATED EMPLOYEEWhen an employee loses their motivation to do their job, it may be difficult to regain that. In most situations, an employee needs to be able to motivate themselves to complete the work.
CAREER LIMITATIONSAn employee may have reached a limit, but unfortunately, you can’t provide them with an opportunity to move upwards in your organization. Consider internal restructuring or creating a position more challenging for them.
OTHER CONSIDERATIONSConsider giving additional training before terminationReview the employment agreement for any terms or conditions prior to terminationGive proper warning(s) Speak with an employment lawyer prior to termination to ensure there is nothing else to consider, from a legal perspectiveDocument all performance reviews, meetings, conversations, warnings, etc. in writing in the employee’s file, in the event there is a legal issue laterIf the employee is a member of a union, there may be further considera-tions involved
There are many signs of when an employee needs to be terminated. You may have others to add to the list above. Don’t forget the old management principle of hiring slowly and firing fast.
Note: This article is not intended to provide any legal advice and readers of this article are encouraged to consult with a lawyer for any legal advice pertaining to the points raised in this article.
Marc Belaiche is a 1990 CA and is President of TorontoJobs.ca, an internet recruitment business and recruiting firm located in the Greater Toronto Area. TorontoJobs.ca allows companies to post their positions online, search a resume database to find candidates, provides outplacement services and full temporary and permanent recruitment services. You can reach Marc at [email protected] and by visiting www.TorontoJobs.ca
DIRECTORS’ LIABILITYPAYING BILLS FROM THE HST ACCOUNT CAN MAKECORPORATE DIRECTORS PERSONALLY LIABLE
The directors of a corporation in distress have a lot to worry about when money is flowing out of the corporation faster than it is flowing in. It is tempting to use the “rob Peter to
pay Paul” strategy to pay the bills, but this a bad idea, especially if the money comes from tax withheld from employees or collected from customers.
This is because several federal and provincial tax statutes can make directors personally responsible for amounts collected or withheld by the corporation, but not properly remitted to the appropriate taxing authority.
Under the Income Tax Act (Canada), for example, a director can be found personally liable if the corporation fails to withhold or remit taxes from employees’ wages and benefits or from dividends and other amounts paid to non-residents as required.
The director may be jointly liable with the corporation (and its other directors, if any) for the full amount that should have been withheld or remitted, plus penalties and interest. The taxation authority must first show, however, that it cannot directly recover the amounts owed from the corporation.
The federal Excise Tax Act, the Employment Insurance Act and the Canada Pension Plan and provincial tax legislation all contain similar provisions imposing liability on directors for the corporation’s failure to collect, withhold, and remit tax as required.
Directors of a non-profit corporation that pays salaries and wages or collects HST or GST from customers may also be held liable under all of these provisions.
THE ACCIDENTAL DIRECTORThese are the risks to becoming a director and it is wise to be aware of them.
If you are a director of a corporation in dire financial straits, you should take steps to clearly document your position.
Most of the time, a director will give his or her express consent to being appointed. In certain circumstances, however, an individual can be considered a de facto director without a legally valid appointment, just by acting like a director. Avoid activities that make it look like you’re running the corporation.
Similarly, an individual may wish to step down as a director (particularly if the corporation is not doing well), but fail to properly paper the resignation.
If an individual appears to be acting like a director to those outside the corporation by, for example, signing resolutions or attending directors’ meetings, she may be considered a de facto director and be held responsible for the corporation’s tax liabilities even without being validly appointed or even after resigning from the board of directors.
WHAT’S A DIRECTOR TO DO? Generally, a taxation authority cannot proceed against the director for
unremitted taxes more than two years after he or she resigns as a director. To start the two-year clock running, the resigning director must ensure that
the resignation is promptly and properly documented, both in the corporation’s minute book and in the appropriate federal or provincial corporate registry.
The corporation’s receiver or trustee in bankruptcy should also be advised in writing of the director’s resignation. After resigning, the former director should take care to avoid being considered a de facto director by avoiding doing anything to suggest she is still involved in the corporation’s affairs, particularly if all the other directors have also resigned.
A director who can show that she exercised the degree of care, diligence and skill to prevent a corporation’s failure to withhold or remit tax as required may escape liability through what is known as a due diligence defence. The director will have to show that, considering her personal knowledge, experience, background as well as the corporation’s organization and resources, she acted appropriately under the circumstances.
Directors should also communicate regularly with officers and staff and should obtain regular reports confirming that taxes are being remitted to the proper authorities in full and on time.
Wojtek Jaskiewicz is a member of the Insolvency and Corporate Restructuring Practice and Commercial Litigation Practice at Pallett Valo, Mississauga’s largest business law firm. He can be reached at [email protected] and at (905) 273-3022 ext. 285.
Call Me
Let’s meet
for coffee!
SEVERAL FEDERAL AND PROVINCIAL TAXSTATUTES CAN MAKE DIRECTORS PERSONALLY
RESPONSIBLE FOR AMOUNTS COLLECTED ORWITHHELD BY THE CORPORATION, BUT NOTPROPERLY REMITTED TO THE APPROPRIATE
TAXING AUTHORITY.
![AARP MASSACHUSETTS RETIREMENT SECURITY SURVEY · 0 Yes (TERMINATE) 100 No 0 Don’t know (TERMINATE) 0 Refused (TERMINATE) Q1. [ALL] As you think about your finances in the future,](https://static.fdocuments.net/doc/165x107/5e2172967bc52a4a3b67ce71/aarp-massachusetts-retirement-security-survey-0-yes-terminate-100-no-0-donat.jpg)
