Harder after 1997 to fire an employee
In speaking last week to TEC Canada, a forum for Canadian CEOs, I was asked for my top 10 list of dismissal don’ts and dos. Here are the don’ts, to be followed in my next column, on April 20, by the dos.
1. DON’T PLAY HARDBALL Before 1997, it was relatively easy for an employer to rid itself of an employee — cheaply. In addition to whatever grounds the employer wished to rely upon, I could often find others. A quick review of the employee’s expenses (consecutively numbered invoices submitted months apart from the same restaurant), resume (over 90% of applicants, according to a Stanford University study, misrepresent their qualifications), and telephone charges (overseas personal calls at the company’s expense) would, as often as not, uncover fraud or theft.
The 1997 Supreme Court of Canada decision in Wallace changed the rules of the game. If an employer treats its dismissed employees unfairly or in bad faith, it can now be sued for additional damages. Moreover, those damages will not be reduced (unlike wrongful dismissal damages) if the employee secures alternate employment.
Employers are now held to much higher standards. More worrisome, unlike wrongful dismissal awards, Wallace damages are unregulated, unpredictable and virtually unlimited. The advice to employers is be nice, play fair, but don’t play hardball.
2. DON’T MAKE FRIVOLOUS ALLEGATIONS OF CAUSE OR COUNTERCLAIMS The Supreme Court of Canada awarded Mr. Wallace additional damages because his employer, United Grain Growers, made frivolous allegations of cause, presumably to dissuade him from proceeding. It then abandoned those allegations at the door of trial. Employers often assert cause to intimidate employees into accepting a lower severance or dropping their claim entirely. Post Wallace, allegations of cause should not be levelled unless they are well-grounded.
Employers should be equally wary about making counterclaims against their employees. Historically, Canadian employers rarely counterclaimed. But if the employer suffers damages from an employee’s serious misconduct, such as theft or even negligence, it should sue. Such a counterclaim might also convince the employee not to continue the case.
3. NO NEW TERMS Employees are often asked to sign employment contracts on their first day of work. Such contracts are unenforceable. Once an employee accepts a job, even orally, it does not matter what is subsequently agreed to. The only enforceable terms are those which the employee is initially offered and accepts.
When Allan Hobbs was offered a sales job by TDI, he signed an agreement covering everything except commissions. That detail, the agreement stated, would be dealt with in a separate contract, which he received and signed several days later. After he left, he sued, claiming this second contract was unenforceable. The Ontario Court of Appeal recently agreed. If employers wish to bind existing employees to non-competition or other new terms of employment, they must prove the employee both obtained some new benefit and was not pressured into agreeing to the change.
4. DON’T LIMIT SEVERANCE TO THE MINIMUM STATUTORY ENTITLEMENT A contract or release providing for only the minimum statutory severance the employee is entitled to, may be unenforceable, according to Justice Echlin of the Ontario Superior Court in the recent Canac Kitchens case. To ensure that your employment contracts and releases survive judicial scrutiny, offer a little more.
5. DON’T MAKE MOTHERHOOD STATEMENTS — THEY MAY COME BACK TO HAUNT YOU Most employee handbooks promise to treat each employee with respect and dignity. But harassment and dignity are subjective. Such motherhood statements could be used as the basis of a lawsuit for harassment. Therefore, prepare your handbook with a rear-eye view as to how it could be used against you, and have it legally reviewed.
6. Insist on reciprocity of disclosure: If asked to provide references to companies in your industry, seek commitments for the same level of disclosure when you call them.
If you, or someone you care about, is dealing with employment law issues in the Toronto, Ontario Region, contact Lang Michener LLP.