If you have to fire an employee, be sure to do it right

Casino Rama chose to gamble with Susan Smith. It lost. Badly.

Ms. Smith, 35 years old, had worked as a security officer at the casino near Orillia, Ont., for only two years. She was likely content to just do her job — verifying that patrons were of legal age and that they didn’t create disturbances after a poor night at the slots. She surely never thought that she would generate much interest from her employer. But that changed when she chose to wager against the casino. Her battle changed the impact that employment contracts have on Canadian employees.

Ms. Smith had signed such a contract stating that, in the event she was terminated without cause, she would only be entitled to the minimum under the Employment Standards Act. In her case, that was only two weeks pay. On the face of it, this was perhaps not unreasonable, given her position, age and short service. As far as the casino was concerned, once she signed that contract, that was all it could ever be required to pay her, whatever happened. Even if Ms. Smith won her case, as the law was, a judge could not award her more.

But she did get more. A lot more. This was because of the manner in which Casino Rama dealt with her. The road to Ms. Smith’s success began four months before her firing. At that time, she was diagnosed with serious health problems and granted a leave of absence. With her doctor’s support, she obtained three further extensions and short-term disability benefits.

Despite continuing symptoms, Ms. Smith returned on a modified work schedule after a four-month absence. After only an hour, she fell ill and had to leave her station. She advised her supervisor and, on the following day, reported to him that she was still unable to work. But the company’s policy required that she contact not her supervisor, but the human resources department, and advise it. She failed to do so. Instead, she contacted the benefits carrier directly, advised it of her inability to work but left her company completely out of the communication loop. This was in direct contravention of company policy. The casino responded, on that day, by terminating Ms. Smith for failing to follow procedure.

Why did they act so precipitously? The company’s officers thought she was malingering and “working the system.” They considered her a “slacker” and were convinced she had manufactured her symptoms. Indeed, the testimony at the trial was that her supervisor expressed great satisfaction on learning of the decision to fire her, exclaiming “We’ve got her.”

Such euphoria was short-lived.

The court found that, at worst, despite her failure to follow company procedure, she was only absent without authorization for one day. That did not justify her termination. She was a good employee. While medically able, she performed her duties well. Her absence was supported by medical opinions. There was no evidence she had “worked the system.” The court agreed that, given these incontrovertible facts, she had been wrongfully dismissed and that Casino Rama had rushed to judgment. The court felt she should have been issued a warning given these circumstances. This is not surprising. Judges are increasingly recommending only warnings for what they consider to be minor or technical violations of policy.

Prior to trial, Casino Rama rightly abandoned the argument that it had cause to terminate Ms. Smith and paid her the two weeks pay required by her employment contract. But it was this contract that created the real issue in this case. The casino argued that the only legally permissable interpretation was that Ms. Smith could recover only the two weeks that she had signed and agreed to. The casino likely felt it had protected its interest by having this agreement executed. In my experience, many companies are lulled into a false sense of security simply because they take steps to have employment contracts executed with all of their employees. I constantly impress upon my own clients that, while there may be a contract, the conduct of its personnel, especially its human resources staff, can effectively destroy all of the benefits the contract otherwise provides. This is because of the potential penalty of “Wallace damages,” which the Casino likely never considered. Wallace damages can be awarded to any employee who has been dismissed in bad faith or unfairly.

The judge in Ms. Smith’s case found that, given the egregious conduct of the casino’s officials, the contract would not be upheld and ordered the proper notice period to be three months’ pay plus interest. The judge did not even deduct Ms. Smith’s disability income from those three months.

Ms. Smith scored a windfall. She received three months plus disability benefits despite her relatively short term employment of two years. I can imagine what would have happened if Smith had been a longer-term employee.

There are clear lessons to employers, lessons which I reiterate to my own clients:

1. There are many employees who attempt to take advantage of disability and other benefits. By all means fire them. But do it right! Before doing so, conduct a thorough review of the facts. Do not jump to the conclusion that they are “working the system.” Prove it.

2. Seek an independent medical examination if you are of the opinion that your employee is feigning illness. Do so even if the employee provides a medical opinion from her or his own medical practitioner. Never act based on assumptions that are not backed up by objective medical evidence.

3. Do not act rashly in the event that there is a technical or minor violation of company policy. Context is always important. Judges are loathe to punish employees for minor violations, especially if that punishment is the loss of their employment.

4. As much as a company may have a superficially air-tight employment contract limiting pay in lieu of notice, its conduct at the time of termination, including providing unfair reasons for termination or attempting to create a case where none exists, may well negate the benefit of that contract. To this end, educate your human resources personnel about the dangers of bad faith or unfair conduct.

5. Seek legal help to conduct annual reviews of standard employment contracts. The law is fast-moving and contracts must be updated so the law does not get ahead of them.

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If you, or someone you care about, is dealing with employment law issues in the Toronto, Ontario Region, contact Lang Michener LLP.

This article is taken from an interview with Howard A. Levitt,Employment Lawyer at Lang Michener LLP, a Toronto, Ontario Employment Law Firm. Note that laws vary from province to province. Please consult with a lawyer in your own area to be sure of the laws and specific issues in your own jurisdiction.