Preventing Wrongful Dismissal claims

Agenda

• Employment “At will” • Termination: What is fair and legal • What is “Wrongful Dismissal” • Beware of Constructive Dismissal • Preventing Wrongful Dismissal claims: 1) ALWAYS consult an employment lawyer 2) Include a Termination Clause 3) Follow your own disciplinary policy 4) Use termination as a last resort 5) NEVER terminate “for cause” • Termination as a last resort • What to do if a claim is made

Employment “At Will”

• Legal environment in Canada for employment contract is one called: “Employment At Will” • In essence, the employment contract is “at the will of the employer” • Employers can terminate employment at any time, without any reason • Employers also have legal obligations to their employees, to prevent abuse of employees: – At the core of these obligations, your legal duty is to treat employees fairly and in good faith

1 Employment “At Will”

• Employers have legal obligations to their employees to prevent abuse such as: – Provide a safe work environment – Provide competent servants – Provide proper tools with which to perform their duties – To warn them of inherent dangers in their work process, particularly those that are not open and/or apparent – To make reasonable rules for the safe performance of said work – To provide reasonable notice that the employment will be terminated

Termination of Employment

• The law requires you to give an employee proper notice that their employment will end at a specific date • The law requires you to pay the employee during this notice period • You are not obligated to have the employee report to work during this notice period, but payments are required • You do not have any obligations to give the employee any reasons

2 Termination of Employment

• It is strongly recommended to NEVER give a reason for termination, because: – Not required by law – Reason or reasons can be used against you to allege discrimination – Provide a platform for the employee to debate with you why he/she should not be terminated – The moment of termination is emotionally charged. Any reasons, even those to minimize the impact, will lead to more conflict

What is “Wrongful Dismissal”

• All employment terms are considered by the courts as being employment “contracts” – These contracts can be written – These contracts can be verbal – In the absence of both above, they are implied • Wrongful Dismissal is a simple “breach of contract” claim, in this case an “employment contract” • The allegation is that the employee did not receive the contractually required notice of termination or the proper compensation in lieu of such notice

3 What is “Wrongful Dismissal”

• More often that not, in addition to Breach of Contract, other allegations will also be made against you • These additional allegations could be: – Discrimination – Termination took place after the employee reported a wrongdoing on the part of the employer – Failure to investigate allegations of poisoned work environment – The method of termination may causes either slander or emotional distress • Those multi-allegations claims are no longer “Wrongful Dismissal” claims but are referred to as “Employment Practices” claims

Beware of Constructive Dismissal

• A more subtle form of wrongful dismissal is a change in the terms of the employment contract • If the changes of the terms of the employment contract are: – Unilateral – Substantial, and – Unfavourable, so that the employee feel compelled to leave Then you would be deemed to have terminated the employment and would be required to provide proper notice or payment in lieu of such notice

4 Beware of Constructive Dismissal

• There are five (5) patterns of Constructive Dismissal: – Cutting compensation – Cutting hours of work – Increasing hours – Demotion – Increasing duties • Be aware that any one small change that is unilateral and unfavourable may not be ruled by the courts as constructive dismissal but may become so when combined with other unilateral and unfavourable change in employment terms

Beware of Constructive Dismissal

• There are five (5) patterns of Constructive Dismissal: – Cutting compensation • Barring any other change in employment terms, a good “rule of thumb” is: – A cut of 10% or less is not Constructive Dismissal – A cut of 20% or more is Constructive Dismissal • This includes change in the structure of conditional bonus

5 Beware of Constructive Dismissal

• There are five (5) patterns of Constructive Dismissal: – Cutting hours of work • A good “Rule of Thumb” may be: – A cut of at least five (5) hours per week, AND – Another unfavourable change • This “other” change is often making the remaining hours less predictable or paying less for those hours worked

Beware of Constructive Dismissal

• There are five (5) patterns of Constructive Dismissal: – Increasing hours; • It is not just the number of added hours but also when those hours are scheduled. Even modest increase in hours worked, when those hours are on weekends or early in the morning (when it was not in the past), can be considered Constructive Dismissal

6 Beware of Constructive Dismissal

• There are five (5) patterns of Constructive Dismissal: – Demotion • Employees can be asked to shift to different position. If a change in duty includes a change in stature or a change in authority and a change in work performed, then it could represent Constructive Dismissal • A demotion is not automatically grounds for Constructive Dismissal when used as part of disciplinary action, or if compensation remains the same. The greater the step down in pay, prestige or responsibility, the greater is the liability of Constructive Dismissal

Beware of Constructive Dismissal

• There are five (5) patterns of Constructive Dismissal: – Increasing duties • Sugarcoating an increase in workload as a “promotion” with a change in title but without an increase in compensation will lead to a charge of Constructive Dismissal • While you may see it as a reward, assigning an employee more responsibilities can be seen as Constructive Dismissal if the employee is not seeking those new responsibilities • Keeping the core responsibilities but reducing staff (or resources) available to perform the duties, can be seen as Constructive Dismissal

7 Beware of Constructive Dismissal

• A few final thoughts on Constructive Dismissal: – If employees know and agree in their employment contract that there will or may be changes to the contract at the time of hiring, it will be difficult for them to claim Constructive Dismissal – Include such a clause in your standard employment contract to give you the flexibility to make changes in your employee’s duties if funding conditions force you to make those changes – As mentioned earlier, you have a responsibility to treat your employees fairly and with good faith intentions. As much as you can, seek your employee’s input in the key decisions of a restructuring

Preventing Wrongful Dismissal Claims 1- ALWAYS consult an employment lawyer

• An employment lawyer is needed to ensure full compliance with the laws. Failure to do so WILL lead to a Wrongful Dismissal claim • The courts have established certain requirements for termination notification: – Must be specific, such as who and when – NEVER MENTIONED A REASON – Must be unequivocal. The notice must leave no doubt that the employee has been terminated and – Must be clearly communicated. It must be delivered to the employee and in such a way as to reasonably expect the employee to understand the notice was a termination notice

8 Preventing Wrongful Dismissal Claims 2- Include a Termination Clause

Having a standard Employment Contract that has been vetted by an Employment Lawyer is the first step of a proper process. • Include a clause stating that changes to the contract is possible; • Include a clause that states that in the event of termination, the notice period will be X number of days/weeks. As long as it meets or exceed the minimum allowable by law, your employment lawyer should agree

Preventing Wrongful Dismissal Claims 3- Follow your own Disciplinary Policy

• Keep detailed notes in an employee file • If you have a disciplinary policy, follow the policy to the letter • If you do not, the claims will focus on your mishandling of the termination procedure • Suspend the employee with pay to investigate any allegations before acting on allegations

9 Preventing Wrongful Dismissal Claims 4- Use Termination as a last resort

• You have a duty to treat your employees fairly and in good faith • Immediate termination is warranted ONLY if the action is particularly egregious or dangerous – i.e.: Violence in the workplace • If action is not egregious or dangerous you must: – Give employee the chance to explain – Give employee the chance to improve

Preventing Wrongful Dismissal Claims 5- NEVER Termination “for cause”

• “Just Cause” is an act or omission that irreparably undermines the employment relationship and the trust and confidence on which it is based: – Act of financial dishonesty – Gross negligence or disregard for safety – Inappropriate or offensive behavior – Insubordinate acts – Acts of disloyalty – Serious lies acts of deceptions – Utter and repeated failure to perform essential duties – Acts of bad faith – Deliberate attempts to oust or undermine management

10 Preventing Wrongful Dismissal Claims 5- NEVER Termination “for cause”

• You should NEVER terminate “for cause”, unless: – It involves violence in the workplace, or – Fraud has been established by police or forensic accountants. • We believe this because the Canadian courts view termination with cause as a harsh treatment of employees: – Remember your legal duty to treat employees fairly and in good faith

Preventing Wrongful Dismissal Claims 5- NEVER Termination “for cause”

• The courts have: – Ruled that poor performance was the employer’s fault – Set threshold for “serious” mistakes – Not every lie justify termination – Proof of misconduct can be hard to find – Disagreement with management is not necessarily insubordination – “Zero Tolerance” does not automatically equate to just cause

11 Termination as a Last Resort

• Call CRSIRP first: – We can help by providing the name of an employment lawyer to help you. • Seek advice from an employment lawyer: – Can advise you if termination is the best way to deal with the issue – Can advise you on the proper notice period – Can advise you on how to perform the termination • Let an employment lawyer draft the termination notice

What to do if an employment claim is made against you?

• Call us as soon as you think the former employee will sue you: – We can put our defence team in action as soon as possible and perhaps avoid a lawsuit entirely • There is limited coverage in your General Liability policy for employment claims: – We will pay lawyer’s fee to defend you in a wrongful dismissal or other employment lawsuit – Allegations of personal injury are covered – Amount due in lieu of termination is not covered • We have the duty to defend the claim on your behalf, to ease your burden

12