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SEMINARS | 2011
Goodbye and Good Luck: How to Terminate
Employment with Class, Care and Caution
Presented by: Melanie Polowin
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Legal Framework
1. Employment Standards (minimum)
2. common/civil law “reasonable notice” rules (the
legal default position)
3. written contractual terms (if any, and if
enforceable)
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Legal Framework
Common/civil law “reasonable notice” rules:
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apply when:
• there are no contractual terms
• there are gaps in the written terms, or
• for some reason the written terms are not enforceable
–
require employer to provide a “reasonable” period of advance notice of termination or
else provide compensation in lieu (or some combination)
–
require that compensation in lieu include all of the compensation elements and benefits
employee would have received if he/she had stayed until reasonable notice expired
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includes but normally exceeds – significantly – Employment Standards minimums
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Legal Framework
Employment Standards
– Canada Labour Code (“CLC”) if federally regulated industry
– otherwise, those of province where employee primarily works
Enforceable contractual terms
– well-written, clear
– properly signed up
– no post-sign-up “lapse” events
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Iacobucci, J. , in Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701:
"The vulnerability of employees is underscored by the level of importance which
our society attaches to employment. As Dickson C.J. noted in Reference Re Public
Service Employee Relations Act (Alta.), 1987 CanLII 88 (S.C.C.), [1987] 1 S.C.R. 313, at p.
368:
Work is one of the most fundamental aspects in a person's life, providing the
individual with a means of financial support and, as importantly, a contributory role in
society. A person's employment is an essential component of his or her sense of identity,
self-worth and emotional well-being.
Thus, for most people, work is one of the defining features of their
lives. Accordingly, any change in a person's employment status is bound to have farreaching repercussions. …
The point at which the employment relationship ruptures is the time when the
employee is most vulnerable and hence, most in need of protection. In recognition of this
need, the law ought to encourage conduct that minimizes the damage and dislocation
(both economic and personal) that result from dismissal. "
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Part I: Details, Details, Details
What information do you need to properly plan and
execute?
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Details, Details, Details
1. to assess Employment Standards
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–
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termination date
vacation (accrual during statutory notice period)
benefit plan rules (requesting/confirming coverage during statutory notice
period)
•
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other compensation/perks (consider accrual during statutory notice period)
earnings: if any variable component
•
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note rules for calculating statutory notice and statutory severance
ALL service dates, successive or not, regardless of status
•
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note ESA “deemed” continuation rules
note bridging rules
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Details, Details, Details
2.
to assess common/civil law “reasonable notice”
–
Bardal relevant factors
•
•
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–
–
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age, service, position are the primary factors
but ALL relevant factors must be considered
“red flag” and timing issues
each and every compensation element (cash, non-cash, perks, plans,
benefits, reimbursements…anything of value)
individualized evaluation
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Details, Details, Details
2.
to assess common/civil law “reasonable notice” (cont’d)
What else is at stake?
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cash bonuses/incentives/commissions – (un)clear payout, forfeiture and “tail” rules?
LTIPs/STIPs/stock options/employee stock purchase plan - (un)clear vesting, forfeiture
and exercise rules?
deferred profit sharing plan - ditto
pension plan (employer match?) - ditto
group RRSP (employer match?) -ditto
group benefits - who pays? what can continue? what does employer have to do to
request/confirm continuation?
group home and auto benefits - ditto
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Details, Details, Details
2.
to assess common/civil law “reasonable notice” (cont’d)
What else is at stake?
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car allowance or other regular allowances – consider ESA rules
tuition/relocation reimbursement – (un)clear repayment or forfeiture rules?
club or membership dues – consider timing, pro rating
company-supplied automobile, cell, Blackberry, laptop, etc. – consider
return/personal info issues
home office reimbursement/equipment - ditto
work visa/immigration status issues – consider timing/effect of termination
Other items or issues that (could) have value?
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Details, Details, Details
3.
to assess written contractual terms
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original hiring documents as signed
later amendments/updates
promotions/transfers/significant changes in role
sign-up process (seen vs. signed vs. start date)
gaps in clarity and coverage
again, “red flag” and timing issues
governing terms/documents for all compensation elements
•
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(un)clear provisions governing the effect of different termination scenarios?
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Details, Details, Details
Relevance is a very broad concept.
See our checklist.
Then…check yourself, before you wreck yourself.
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Part II: Common Pitfalls
How do you avoid increased costs and risks from
weak allegations of “cause”, poor planning and
carelessness?
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#1
Employment Standards technicalities
A. Calculating length of service/bridging of service requires awareness of
all prior periods of service in any capacity/status.
B. When “contractors” become employees, err on the side of inclusion for
Employment Standards purposes.
C. Inactive service is still service.
D. Aggregate all periods of service, regardless of gap when assessing
Ontario Employment Standards Act, 2000 (“ESA”) severance
entitlements, including the ESA notice period.
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#1
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Employment Standards technicalities (cont’d)
E.
Vacation accrues during full statutory notice period.
F.
Benefit continuation during full statutory notice period is explicitly
required and “deemed” under ESA; implicitly required under CLC.
G.
If employee has overtime/incentives/commissions or variable
earnings, special rules apply to calculating statutory pay in lieu and
statutory severance.
H.
If working notice is > ESA notice, the ESA portion kicks in toward the
end…not at the beginning.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#2
Premature/weak/unfounded “cause” allegations
Terminating for cause is the capital punishment of employment law.
Be VERY sure.
And be able to prove it.
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#2 Premature/weak/unfounded “cause” allegations (cont’d)
To safely rely on “cause” you will need to prove:
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(1)
reasonable grounds exist demonstrated by evidence, and
(2)
where required, proper process was followed:
–
notify employee of the issues/evidence in sufficient detail
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give employee reasonable opportunity to:
»
explain
»
correct, if correctible
»
hang him/herself
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consider proportionality – punishment must fit the crime
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summarize grounds in the termination letter
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document (ROE, etc.) and treat the termination as a cause termination
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
Côté, J. in Soost v. Merrill Lynch Canada Inc., 2010 ABCA 251
“The Honda case says that when dismissing an employee, an employer has a duty
not to use methods which are unduly unfair or insensitive (paras. 57-60). I stress
that the unfairness or insensitivity must be in the methods used, not in the mere
fact of dismissal. One thinks of examples; one is a boss who tells all the fellow
employees, or the employee’s spouse and children, that the dismissed employee is
stupid or incompetent. It is hard to think of circumstances where there would be
any need to do that. Another example might be dismissing the employee within a
day or two of a daughter’s wedding, or of the death of a parent. Another example
would be insincerely alleging to others embarrassing or demeaning (but
unfounded) reasons for the dismissal (whether or not they would be just cause if
true), when the employer does not honestly believe those grounds exist.
Mere sloppy conduct by the employer does not suffice for such extra damages; it
takes something akin to intent, malice, or blatant disregard for the employee…”
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
Côté, J. in Soost v. Merrill Lynch Canada Inc., 2010 ABCA 251
“It is notorious that what is just cause to dismiss in a given case is often very
difficult to say. It is hard to predict trial results. Many trial decisions on “wrongful
dismissal” (like this one) find the employee guilty of misconduct or poor
performance. However, most of those also find that it was not quite bad enough for
summary dismissal; or that more warnings or constructive suggestions should
have been given; or that there was some sort of apparent condonation. (Whether
such near cause can reduce damages directly or indirectly was not argued on this
appeal.) In few cases can any solicitor advise an employer that it has ironclad
grounds for dismissing a certain employee without notice.
…
Honest belief, especially with arguable grounds, bars Honda damages for alleging
cause …..”
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#3
Snatching victory from the jaws of defeat
Examples:
•
Requiring a Release as a condition of paying out ESA entitlements.
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Requiring or allowing same-day or rushed/forced signature of a Release.
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Misinforming employees about entitlements.
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Creating or allowing delays/errors in final payments, ROEs, group benefits
conversion information, and other routine items employee needs from you.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#3
Snatching victory from the jaws of defeat (cont’d)
•
Actively or passively (internally or externally) implying dishonesty, incompetence
or otherwise harmful allegations
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consider proof vs. truth
•
consider need vs. risk
•
exercise control
•
Refusing to give (or torpedoing) employment confirmations/references.
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Common Pitfalls
#3 Snatching victory from the jaws of defeat (cont’d)
•
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Playing hardball.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Winkler, C.J.O., in Wronko v. Western Inventory Service Ltd., 2008 ONCA 327:
“The trial judge’s decision on the merits clearly influenced his limited costs award in favour of
Wronko. However, in his unreported decision on costs, the trial judge expressed serious concerns about
Western’s conduct in this litigation:
…the defendant virtually finessed the departure of the plaintiff from its ranks after making
unfounded and unfair allegations about the manner in which the plaintiff obtained his contract of
employment. The defendant continued its hardball tactics by dispatching its president to the trial
to challenge the vacation pay that had previously been calculated by the defendant’s
personnel. In my opinion, that conduct has no role in the relationship between employer and
employee, particularly as it pertains to the emotionally charged area of severance.
In Wallace v. United Grain Growers Ltd., [1997] 3. S.C.R. 701 at para. 95, Iacobucci J. wrote: “The point at
which the employment relationship ruptures is the time when the employee is most vulnerable and
hence, most in need of protection. In recognition of this need,the law ought to encourage conduct that
minimizes the damage and dislocation (both economic and personal) that result from dismissal.” These
legal protections are of little value to an employee who seeks to assert his rights in court, but is faced
with an employer who engages in“hardball tactics” in the course of litigation. To ensure that employees
have access to the justice system, the courts must renounce an employer’s use of such tactics. One way
to do this is through costs sanctions.” (emphasis added)
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Part III - Smart Execution
Tips and tactics to reduce risks and optimize
peaceful outcomes
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Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#1
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Remember the Golden Rule
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#2
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Be considerate
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Who
– 2 non-antagonistic participants on employer side
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What – set meeting; don’t fake purpose; get straight to the point
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Where – place, privacy
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When – time of day; time of week; employee special circumstances
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How
– process, professionalism and paperwork
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Why
– basic accurate reason (downsizing, lack of fit, change of needs, change of direction)
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#2
•
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Be considerate (cont’d)
Employees on (or about to go on) leave deserve special consideration.
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Notify in a timely way.
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However, consider deferring effective termination date until expiry of leave.
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Working notice cannot run concurrently with leave.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#2
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Be reasonable and fair (cont’d)
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Do the math right.
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Honour ESA obligations.
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Honour contractual obligations.
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If no contractual obligations, give > ESA up front without requiring a Release.
•
Consider not including any Release requirement unless/until employee tries to negotiate for
more.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#2
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Be reasonable and fair (cont’d)
•
Be reasonably forthcoming about clarifying calculations (no “because I said so”).
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Give employee reasonable time to consider/obtain advice.
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Agree to reasonable requests for extensions…never rush the employee.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#3
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Be savvy and strategic
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Never ignore a demand letter…and be timely in responding.
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Narrow the field of dispute and reduce the $$$ at stake. Consider pre-litigation mediation.
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Be the grown-up. If ESA is minimal and/or negotiations are prolonged, once the initial
payment is exhausted, consider making one or more additional interim “without prejudice”
payments to relieve hardship.
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Concede (and pay) where you have genuine common ground and no basis for dispute.
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Choose your battles wisely…do you really want to die on this hill, with this plaintiff and these
facts?
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
Smart Execution
#3
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Be savvy and strategic (cont’d)
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Never knowingly advance groundless or weak allegations of cause…it will backfire.
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Remember the principle of proportionality, and the need for a contextual approach to
assessing cause.
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If there is an honest, reasonably held belief that grounds exist to assert cause, consider a
“reserve cause” approach in appropriate cases.
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Clarify (or drop) cause allegations as early as possible.
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If after-acquired cause grounds are uncovered, disclose them right away.
Goodbye and Good Luck:
How to Terminate Employment with Class, Care and Caution
The Last Word
How your company behaves during and after the termination
will resonate (for good or for ill) for a long, long time…
at the personal level and the professional level…
within the company…the industry…and the legal arena.
Be classy.
Be careful.
Be cautious.
And remember the Golden Rule.
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Thank You
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