(Reposted via Keyser Mason Ball, LLP – http://kmblaw.com/news62.html)
Most employers appreciate that terminations must be handled sensitively, carefully and with forethought. However, as employment counsel, we often see mistakes or missteps in the termination process by well-meaning employers. Sometimes these mistakes can be overcome with a generous separation package. In other cases, however, they can contribute to unnecessary, protracted and expensive litigation. As many of these missteps seem to repeat themselves, the following short refresher is offered on some “do’s” and “don’ts” of terminations.
DO….expect that a terminated employee will review the circumstances of the termination, and any separation package offered, with legal counsel.
Employers often tell us that a particular employee is not the type to challenge the fairness of a separation package, start a legal action, pay for litigation, etc. The fact is that employers should draft termination letters and prepare separation packages expecting that any terminated employee will seek the advice of legal counsel. Much has changed over the last two decades. In part, as the result of media focus, employees are now keenly aware that they have rights related to their employment, even if they do not always have a clear understanding of the nature and extent of these rights (see “privacy”). More importantly, access to legal counsel has never been easier. The Internet means that any employee can quickly find lawyers in their area who practice employment law. In turn, the Law Society of Upper Canada has now formalized rules allowing lawyers to negotiate contingency fee arrangements with clients, making litigation more affordable.
DO…consider consulting legal counsel before terminating an employee.
Unfortunately, employers often consult legal counsel only after the termination has taken place, words have been exchanged, a separation package has been offered, etc. In most cases, with some general information, employment counsel can quickly assess whether or not the employer is in a defensible position to argue cause (if that is a relevant consideration), and if not, the elements of a reasonable separation package.
DO…consider consulting legal counsel to review or draft the termination letter.
In my opinion, drafting a well-crafted and professional termination letter is absolutely essential. Many employers fail to appreciate that when an employee consults a lawyer, the employer’s termination letter may be the only document that the lawyer sees. Lawyers develop opinions and impressions about the employer, including impressions about sophistication and vulnerability, based in part upon what the termination letter says and how it is constructed. For example, we recently reviewed a termination letter given to a long-service female employee. The letter ended by wishing a different (male) employee well in his future endeavours. Clearly, the employer had used a precedent letter from a prior termination and failed to change all of the name references. Aside from angering the terminated employee, such gaffes provide legal counsel with opportunities to argue that the employer is disorganized, uncaring and unprofessional. Similarly, wrong facts, legal concepts unknown to law, spelling mistakes and poor grammar, all provide plaintiff lawyers with ammunition to discredit the employer and leverage negotiations. Whenever possible, I would recommend having legal counsel draft or review the termination letter in advance of conducting the termination.
DO….consider offering reimbursement for outplacement services, up to a maximum specified amount.
Generally speaking, when a terminated employee replaces his or her employment at company A with equivalent employment (and equivalent remuneration) at company B, at law the employee is considered to have fully mitigated any damages suffered through the loss of employment. In other words, the original employer is no longer liable to pay damages once the employee has obtained equivalent employment. Therefore, as part of a separation package, and particularly those prepared for long-service employees, it often makes excellent business sense to offer some level of reimbursement for outplacement services.
DON’T….ask an employee to sign a release to receive his or her minimum entitlements pursuant to the Employment Standards Act, 2000.
Entitlement to termination pay and, where applicable, severance pay, pursuant to the Employment Standards Act, 2000, is accrued through years of service for the employer. The employee’s right to these amounts crystallizes at the moment he or she receives notice of termination. Accordingly, an employee does not need to sign any form of release to be entitled to these statutory amounts. The circumstances where an employer may request a release, arise when the employer offers additional pay in lieu of notice or other benefits, over and above the employee’s statutory entitlements.
DON’T….ask an employee to sign a release in the termination meeting.
An employee losing his or her position is in a particularly vulnerable situation, and one that is likely to generate considerable sympathy with a Court. Employers often assume that if an employee agrees to a separation package offered in a termination meeting (as evidenced by the employee’s signature), the employer is protected from a wrongful dismissal action. In fact, it is more likely in my view, that seeking a release from an employee in a termination meeting will improve the employee’s case for being treated unfairly. Whenever a separation package is offered, provide the employee with at least 7 days to consider the separation package, before requiring the employee to return a signed release. In addition, consider advising the employee in the termination letter of his or her opportunity to consult legal counsel about any separation package that has been offered. If the package is fair, the employer will be able to defend its offer even if the employee retains legal counsel. On the contrary, if insufficient time is provided to the employee to consider the separation package and/or the opportunity to consult legal counsel is not identified, the employee’s acceptance of the package may be deemed uninformed and unenforceable.
DON’T…mix “cause” and “without cause” reasons to terminate in the termination letter.
When an employee is terminated for cause (e.g. theft, dishonesty, violence in the workplace), he or she is generally entitled to receive only accrued but unpaid wages, expenses etc. to the date of termination, and nothing more. There are certain situations where an employer may allege cause to terminate the employment relationship, but also pay to the employee his or her entitlements to termination pay and severance pay pursuant to the Employment Standards Act, 2000, however these situations are exceedingly rare. Accordingly, if the employer is terminating an employee without cause (e.g. restructuring), the termination letter should refrain from referencing performance issues, personality conflicts, attitude problems etc. as these issues are irrelevant. Where such issues are identified in the context of a termination “without cause”, this again provides plaintiff counsel with ammunition to allege that the employer was not forthright about the reasons for termination, or that it was unnecessarily hurtful toward the employee who has just lost his or her job.