What is Wrongful Dismissal?

In general, an employer is permitted to terminate employment without just cause, provided they give an employee reasonable notice or compensation instead of reasonable notice. An exception to this is if an employer has violated an employee’s human rights or violated certain parts of the Employment Standards Act (i.e. failure to reinstate an employee after pregnancy leave).


There is an implied term in every contract of employment that an employer will provide an employee with reasonable notice of termination. This presumption may be rebutted with a valid and enforceable termination clause (this will be expanded on below). Absent an enforceable and valid termination clause, an employer must provide an employee with reasonable advance notice of termination or payment in an amount equivalent to all salary and benefits that would have been earned by the employee during the reasonable notice period. The ‘wrongful’ in wrongful dismissal, refers to the failure of an employer to provide an employee with reasonable notice and does not refer to the dismissal itself.

The Employment Standards Act only provides minimum notice periods, which is different depending on the province.  An employee can be entitled to a notice period beyond the statutory minimum, depending on a number of factors which the courts will consider in determining the appropriate notice period. These factors include: length of employment; training and experience required to fill the position; responsibility attached to the position; availability of equivalent alternative employment; employee’s relevant education, training and experience; the employee’s age; and if there was inducement to leave another job. If an employer has acted unfairly or in bad faith at the time of termination, an employee may be entitled to an increase in the amount of notice they are entitled to.
 
Employers are increasingly looking to minimize their exposure to common law notice periods (i.e. notice periods that are awarded by the Courts depending on the factors listed above) by inserting a termination clause in their employment agreement with their employees. A termination clause is an unambiguous, statutorily compliant, clause that outlines the amount of notice an employer will provide an employee if they are terminated without cause. For example, the Ontario Court in its decision in the case of Lloyd v. Oracle Corp. Canada [2004] O.J. No. 1806 upheld a termination clause that read as follows: “Oracle may terminate your employment at any time, without cause, upon giving prior written notice in accordance with the Ontario Employment Standards Act, or any similar legislation which is in force in the province within which Oracle’s offer of employment is accepted”. The Court reasoned that the termination clause was sufficient to rebut the common law presumption of reasonable notice and the clause met the minimum requirements of the Employment Standards Act.
 
In the majority of instances when a termination clause is present, the termination clause will provide for a notice period that is less than what an employee would have received under the common law presumption of reasonable notice. It is for this reason that many employees seek to challenge the validity and enforceability of these clauses. Some arguments that are usually put forth to challenge these clauses include, misrepresentation, lack of consideration, duress and unconscionability. Employees also tend to challenge the specific content of these clauses. In this regard, the employee will argue that the clause is too vague and ambiguous or that it fails to comply with the minimum notice periods required by the applicable employment legislation in the province.
 
In the event an employer has not provided an employee with reasonable notice and/or severance in accordance with their minimum entitlements under the Employment Standards Act, the employee has the option of pursuing a claim under the Employment Standards Act or through the civil courts. An employee cannot elect to pursue a remedy under both. If an employee elects to pursue a remedy under the Employment Standards Act, any award will be limited to the maximum allowed under the Act. Alternatively, if the employee feels that they are entitled to a reasonable notice period beyond the statutory minimum, the employee would have to pursue a claim in the civil courts.
 
Example:

Kevin Keays was fired from a Honda assembly plant in Alliston, Ont., in March 2000. Three years earlier, he had been diagnosed with chronic fatigue syndrome, which led the 13-year employee to take time off work.

His employers at Honda recommended he apply for a program — run under the Ontario Human Rights Code — that would exempt him from being penalized for repeatedly missing work. Keays also saw a company doctor. After more workplace absences and a breakdown in his relationship with his employer, Honda Canada cancelled Keays' enrolment in the provincial program and ordered him to see another company doctor.

Keays, acting on his lawyer's advice, refused unless Honda officials first told him more about the purpose of the visit with the doctor. Honda fired Keays for insubordination.

The Ontario Superior Court ruled Keays was fired without cause and awarded him 24 months of salary in lieu of formal notice, and $500,000 in punitive damages for violating his human rights. It was the largest award of punitive damages in a Canadian employment case.

Honda, a rather large organization took a rather large risk and it was costly.  Can your small business afford to take a risk?

http://www.elevatedhr.com/

Wrongful Dismissals Could Mean the End of a Small Business

My major draw in supporting small businesses is the fact that they do not have the resources, the time, or the knowledge to deal with HR related issues.  That said - a small business has huge risks associated with their employees and most of the time they don't even know it!  Their employees are their greatest asset -- but also their greatest liability.

Small businesses rarely have employment agreements (other than those promises scratched across a napkin) but the risk of choosing not to have them could be costly for an employer. An employment agreement helps a small business to set out expectations as appropriate (reporting structure, salary, start date, probationary period),  it contains items that stops an employee from taking the knowledge learned to their competitors, outlines how the termination process will work and typically includes a job description that outlines minimum standards of work.  Once these are agreed to (signatures included) both the employer and the employee have a duty to act accordingly.  (I'm a huge proponent of employment agreements, and I can help you create yours without having to consult a lawyer!)

So now you've got this employee and he or she is not working out.  Let's say, you do in fact have an employment agreement where you have outlined the minimum termination package that is in line with the statute.  Unfortunately, even though you and the employee have agreed to this, there is no rule of thumb that this is an appropriate payout for a termination (but it does help!)  There are a few things you should keep in mind when terminating an employee and determining what you will pay them:

1.) Cause is almost impossible to prove.  So trying to pay anyone without notice is asking for trouble.  Unless those video cameras have caught the person red-handed stealing from your till and you can see their face beyond a shadow of a doubt, it's doubtful you have a case for cause.

2.) So considering there is going to be a payout, typically the best thing to do is never state why the employee is no longer wanted in the company.  The biggest danger is saying, "You're just not doing what I want. It's not working for me."  I Instead, when you are going to terminate someone, state, "Your services are no longer required."  A lack of performance, in the eyes of the law, is not a justifiable reason for termination without months and even years of demonstrating how this lack of performance hurts the business.  An employer must show a track record of support for the employee.

3.) So how much notice does an employer have to provide an employee when they no longer have a need for them? Unfortunately, there is no rule of thumb.  It just has to be "fair".  But if you're not fair - a judge could have a hay day in court with you, and a judgement against a small business could not only be costly, it could mean the end of the small business.  The items that determine a payout are as follows: the character of employment (what position was held), length of service, age of the employee and the type of work available in a similar position.  The higher position, the longer the service, the older the employee and a dreary job market makes a pay-out that much more. 

If you go online right now, you can type in Wrongful Dismissal cases.  I wouldn't want my name on that list, nor would I want to have to pay a lawyer, plus a settlement.  But if you need help when terminating an employee, Elevated HR Solutions can help.  Just contact me at michelleb@elevatedhr.com

The process can be brutal - but with careful planning and help, a small business can stay in control of both their business and their costs!

http://www.elevatedhr.com/

Employment Agreements - Do you need them?

One day over dinner, a friend and I were talking about his business. 

He had 3 three employees and he happened to mention that he was having problems with one of them.  The employee had been there well over a year, and while performance wasn't awful it also wasn't something you could characterize as good (or even average for that matter).  The culture of his business was starting to be affected (the other two employees couldn't stand to be in the same room as him) and clients would often say the sales process was great, but the installation tech on the other hand didn't seem to have any manners.  The work itself was good -- but all those other things that make a business great just didn't match up.

My first question was, "Why are you keeping him?"  He said, he thought he had no other choice.  He was certain that he would go to court if he let him go.  I replied by saying, "Don't you have a termination clause in your employment agreement?" His response was, "Employment agreements?"  "Oh boy!" I thought.

Employment Agreements in general not only protect you and your company, they also lay out expectations, so both you and your employees operate from the same position.  In addition to that, if your employee will have access to sensitive information such as your customer lists or methods of operation, you should consider having a written employment agreement before you hire the employee.


The employment agreement usually addresses many legal issues important in the employer-employee relationship including:

• Term of employment (is the employment for a fixed time period or is it for an indefinite time period?)
• Amount of compensation (salary / pay) and any included benefits such as automobile, vacation or health plan
• The duties, tasks and responsibilities expected of the employee
• Right to terminate the employee for cause if certain events occur (eg. theft)
• Right to terminate the employee without cause if certain events occur (eg. poor performance)
• Confidentiality of information to prevent employee from disclosing to others any confidential information after the employment ends
• Non-competition restrictions during and after employment with your company
• Non-solicitation restrictions to prevent the employee from attempting to solicit your customers/clients and other employees
• Clarification that the employer is the owner of the customer lists, contact information, customer records, business methods, copyrights, and patents (if any)
• Details of any office procedures and policies
• Any other issues specific to the employment situation

As long as your expectations are clear and well within the law, a termination would be possible (provided you give notice as per the contract).  In addition, this keeps any small business owner from being sued and they can move on to build the business they want to.

If you'd like more information on how to build employment agreements contact me at michelleb@elvatedhr.com

http://www.elevatedhr.com/