Closing a business that employs staff requires more than a final paycheck. The employer must plan termination notices, calculate indemnities and vacation pay, produce records of employment, and meet accelerated tax deadlines.

The process must start early: a late notice can lead to significant compensation.

Summary: A closure with employees requires a communication plan, compliance with notice periods and indemnities, final pay, records of employment, tax slips, final remittances, and the closing of payroll and CNESST files. Deadlines must be integrated into the timeline before announcing the cessation.

Before laying off, check if the business will be sold

If a sale is still possible, do not automatically assume that all jobs must end. According to the CNESST, when the business changes ownership and operations continue, the employment relationship of the staff generally continues as if there had been no change.

The seller and buyer should therefore determine their responsibilities before announcing layoffs.

To compare options, consult Should You Close or Sell Your Business?

Step 1: Prepare a complete list of employees

Create a table including, for each person:

• hire date and continuous service;

• salary and usual schedule;

• accrued vacation;

• commissions, bonuses, or expenses to be paid;

• employment contract or collective agreement;

• employee benefits and pension plan;

• anticipated employment end date;

• company-owned equipment.

Also check for protected situations and absences due to illness, work-related accidents, or parental leave. Legal advice is prudent when a case has a peculiarity.

Step 2: Provide individual notice of termination

In Quebec, the employer must generally provide written notice before dismissing an employee or laying them off for six months or more. The minimum period depends on continuous service:

Certain exceptions exist, notably for fixed-term contracts, completed specific tasks, or serious misconduct.

If the notice is absent or insufficient, the employee is generally entitled to compensation corresponding to the usual salary they would have received during the missing portion.

What should the notice contain?

The employment end date is mandatory. It is useful to add:

• that it is a layoff related to the closure;

• the terms of final pay and indemnities;

• the end of insurance and employee benefits;

• the return of equipment;

• the person to contact for administrative questions.

The notice of termination is not the record of employment. These are two distinct documents.

Step 3: Check collective dismissal rules

Collective dismissal generally occurs when the employer terminates the employment of 10 or more people in the same establishment over a period of two consecutive months, or lays them off for six months or more.

Notice must then be sent to the responsible ministry and communicated to employees:

Collective notice is in addition to the individual notice analysis. When both indemnities could apply, they are not cumulative: the employee generally receives the higher one.

Quickly validate this step with legal counsel.

Step 4: Calculate final pay

Final pay may include:

• regular salary;

• overtime;

• vacation pay;

• due holidays or leaves;

• commissions or bonuses payable;

• expense reimbursements;

• compensatory notice indemnity;

• any indemnity provided for in the contract or collective agreement.

A contractual indemnity does not automatically replace that provided by labour standards.

Plan for these liquidities before distributing cash to owners.

Step 5: Produce records of employment

The record of employment allows the employee to apply for employment insurance.

For electronic records and weekly, bi-weekly, or semi-monthly pay, the deadline is generally five calendar days after the end of the pay period in which the interruption occurs. Different rules exist for monthly pay, thirteen periods per year, or paper records.

The record can be submitted through RE Web or by the payroll provider.

Step 6: Make final remittances and slips

When a business completely ceases operations in Quebec, the last remittance of source deductions and employer contributions is generally required no later than the seventh day following the cessation.

Slips RL-1 and summary RL-1 must generally be submitted within 30 days of the cessation. Federally, T4 slips and the final summary must also be produced within 30 days of the end of activities.

The business must then request the closing of its payroll accounts with Revenu Québec and the Canada Revenue Agency, then update its file with the CNESST.

Checklist for closing with employees

• Confirm if jobs will be transferred and list seniority

• Calculate individual notices

• Check if collective dismissal rules apply

• Provide written notices within deadlines

• Calculate final pay, vacation, and indemnities

• Produce records of employment

• Remit final deductions and contributions

• Produce T4, RL-1 slips, and summaries

• Close payroll accounts and update the CNESST file

Plan employee obligations first

Employee-related deadlines can determine the realistic closing date. Before announcing anything, establish the number of affected employees, their seniority, and the cost of indemnities.

To coordinate employee obligations with other procedures, consult the guide How to close a business in Quebec and the article How to close GST, QST, and source deduction accounts?.

If a sale remains possible, the continuity of jobs can also represent value for the seller, buyer, and team.

Sources

• CNESST, Notice of Termination and Indemnity

• CNESST, Collective Dismissal

• CNESST, Sale, Merger or Acquisition of a Business

• Service Canada, Employers: How to Complete the Record of Employment

• Revenu Québec, Guide to RL-1 Slip

This article provides general information. Contracts, collective agreements, and particular circumstances may modify employer obligations.