The Rules for Wrongful Dismissal Claims are Changing

Over the past few years I’ve read many articles regarding the inability of the average person to receive justice in the Canadian Courts due to the tremendous expense and risks associated with actually pursuing legal action; regardless of the merits of the case.  This is no less a factor in the area of wrongful dismissal.

Most lawyers are reluctant to work on a “contingency basis” and since terminated employees are normally out of work and reluctant to commit the funds necessary to conduct a wrongful dismissal suit, many cases are not initiated, regardless of the facts. The increased potential for legal action against employers will likely change significantly as a result of the Provincial Government’s efforts at improving the average individual’s access to justice.

On Jan. 1, 2010, the most dramatic changes to the rules of court since 1985 will be implemented.  These rules will disable three of the most valuable weapons in employers’ litigation arsenal– costs, complexity and delay.  This is according to a recent article by Howard Levitt in the Financial Post.

From an employers’ perspective, greater care will have to be exercised when laying-off employees in the future.  This applies not only to senior executives but also to the lowest levels in the organization. This greater care is as a result of the following changes:

1.   Small Claims Court has always been the venue for resolving simpler, lower value legal claims where the complainant could represent themselves without a lawyer. The damage limits on Small Claims Court action are being increased from $10,000 to $25,000. This is a significant issue because if you terminate someone with Employment Standards Act minimums you cannot demand a release and thereby prevent the laid-off employee from suing for wrongful dismissal. Effectively, there is nothing to prevent a laid-off employee from suing the employer in Small Claims Court to try and improve their termination package at a very minimal cost. In fact, it only costs $75 to initiate a claim in Small Claims Court and while there may be some additional charges, they would not likely add up to more than a few hundred dollars.

When considering the question of amount of damages in light of common law settlements, many lower paid laid-off employees would see their maximum settlements fall in this damage range.  Thus making the Small Claims Court a venue favouring the laid-off employee as it is low cost and low risk.

2.    The second change involves an increase in the maximum claim for damages subject to the Simplified Procedure; first established in 1996 as a four year pilot project test simplified procedures for claims that are less $25,000.

Designed to overcome claimants concerns that the costs (and risks) were too high under normal procedures to pursue what are otherwise meritorious claims.  The Simplified Procedures were found to result in more cost-effective litigation outcomes. The claim maximum was increased to $50,000 and mandatory for all claims less than $50,000.  Effective January 1st, 2010, this maximum will increase to $100,000.

Thus larger claims will now be processed under this procedure and will cover the majority of wrongful dismissal claims that laid-off employees could launch. Due to these new procedures, these cases will be processed in a timely and judicious manner. There is of course, greater potential for expense when compared to no action or Small Claims Court, but for more senior employees, the risks and clearly defined time lines may make a suit more likely.

3.    A number of additional changes including: rules relating to motions for summary judgment for quick resolutions, rules for discovery and deadlines for trial scheduling.  These administrative changes are all designed to support speedier and more cost effective justice.

In summary, as Howard Levitt commented, these changes will have a dramatic effect on the most important tools in the employer’s arsenal in combating claims for wrongful dismissal. Specifically costs, while not eliminated entirely, the smaller claims can be initiated for a very modest amount; the complexity of the process and the costly requirement of legal representation are significantly limited for the majority of claims; and the potential for delay (and increased costs) is for the most part eliminated by proscribed time lines.

2010 will be an interesting year for employment law.