Can I Terminate an Employee for Poor Performance?

The legal test courts apply to performance-based dismissals

Terminating for poor performance is legally possible everywhere in Canada, but “possible” and “without notice or pay” are different questions. Courts assess just-cause dismissals, including performance-based ones, using a contextual test that weighs whether the employee’s conduct or performance can still be reconciled with the employment relationship, a standard set out in McKinley v British Columbia Telephone Co and applied across Canada. This is not a checklist; it is a proportionality test, meaning the sanction (termination) must fit the seriousness of the problem.

In Ontario, the Court of Appeal’s approach, applied in Park v. Costco Wholesale Canada Ltd., asks whether the proven performance failures are serious enough to cause a breakdown in the employment relationship. A pattern of missed targets that never improved despite warnings can meet that bar; a single weak quarter almost never does.

Why “just cause” for performance is hard to prove

Courts in both provinces expect employers to have tried less severe responses first. In Ontario, Lewis v Lavern Heideman & Sons Limited applies the principle that the sanction must be proportionate to the failure, which in practice means progressive discipline (verbal warning, written warning, performance improvement plan) is expected before summary dismissal for performance reasons. Skipping that sequence weakens a just-cause defence considerably.

Alberta courts take the same view. In O’Driscoll v Suncor Energy Inc., the Court of King’s Bench held that progressive discipline or lesser sanctions should be used before terminating for performance-related misconduct, except in the most serious circumstances. Alberta’s own Employment Standards Toolkit recommends employers issue written warning letters describing the discipline that will follow if the problem continues, before relying on that history to support a just-cause termination.

Why most performance terminations are legally “without cause”

Because the just-cause bar is high, most employers terminate for performance as a “without cause” dismissal, meaning statutory notice or pay in lieu is provided even though the reason given is poor performance. This distinction matters because the two provinces set the exemption differently.

In Ontario, the ESA guide states that “poor work conduct that is accidental or unintentional is generally not considered wilful,” so the statutory exemption from notice/pay is narrow and rarely applies to ordinary underperformance. The ESA Policy and Interpretation Manual illustrates this with a case where an employee was found to have common-law just cause for incompetence but was still not “guilty of wilful neglect of duty,” meaning she was still owed statutory termination pay despite the just-cause finding at common law. The statutory and common-law standards are separate tests, and an employer can win one and lose the other.

In Alberta, the government’s own guidance describes most terminations, including those for “lack of fit,” as terminations “without cause,” which require statutory notice or termination pay under the Employment Standards Code. Only serious misconduct, not ordinary underperformance, supports a true just-cause termination with no notice obligation.

Extra protections for federally regulated employees

If the employee works for a federally regulated employer (banks, airlines, telecoms, and similar), additional protection exists beyond notice pay. Under section 240 of the Canada Labour Code, a non-managerial employee with 12 or more consecutive months of continuous service, who is not covered by a collective agreement, can file an unjust dismissal complaint within 90 days of dismissal, regardless of the reason the employer gives, including poor performance. An adjudicator hearing that complaint must decide whether the dismissal was unjust and, under section 242(3), can order remedies including reinstatement.

What the terminated employee (or employer) can do next

• Request the stated reason in writing. In Ontario and Alberta, the employer’s documented reason and any prior warnings become the central evidence in a dispute over whether notice or pay was properly calculated.
• Check whether statutory notice or pay was provided. If the termination was for performance and not proven wilful misconduct (Ontario) or serious misconduct (Alberta), statutory notice or termination pay is still owed regardless of how the termination is characterized.
• Federally regulated employees can file a complaint under the Canada Labour Code unjust dismissal process within the 90-day window if they have the required service and are not unionized.
• Unionized employees typically grieve through their collective agreement rather than through these processes; that route is outside this article’s scope.

Note: this pack does not cover unionized grievance procedures or performance issues connected to disability or other human rights grounds, both of which involve different tests and should be checked separately.