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Posts tagged: termination

An update on mitigation: What happens when a wrongful dismissal case gets to court while the employee is still unemployed?

By , April 3, 2017 8:42 am

The Basics

A wrongful dismissal occurs when an employer does not provide enough notice of termination. An employee can claim damages equal to the remuneration the employee would have earned during the applicable notice period. During the notice period, an employee is subject to the “duty to mitigate,” which means they must look for alternative employment. Notice periods can be as long as 24 months, and even longer in exceptional circumstances. Increasingly, wrongful dismissal cases are getting to court before the reasonable notice period has expired. In these cases, the employee is still subject to the duty to mitigate for the balance of the notice period. In a recent case, the Superior Court of Justice had to answer the question of how the issue of future mitigation should be recognised in the calculation of damages given the fact that the period of reasonable notice had not yet expired.

Patterson v IBM Canada Ltd, 2017 ONSC 1264

In Patterson v IBM Canada Ltd., the hearing took place in February 2017, just over eight months after the Mr. Patterson’s employment was terminated. The judge found that the reasonable notice period in Mr. Patterson’s case was 18 months.

Mr. Patterson claimed that, given his job search history thus far, his prospects of finding alternative employment were low, and he should therefore receive the full 18 months’ pay. IBM suggested the court should discount any award of damages by 10% to reflect the possibility of future mitigation, i.e. that Mr. Patterson may obtain employment during the remainder of the notice period.

The judge noted that the courts have used several approaches in these cases, the two main ones being the “trust and accounting” approach (where the plaintiff is required to account to the defendant for future income if any is earned during the notice period) and the contingency approach (which is the approach IBM was suggesting).

In this case, the judge preferred the contingency approach, and reduced Mr. Patterson’s damages accordingly. The judge found that if the trust and accounting approach were to be applied, Mr. Patterson would have no incentive to continue in his job search. Furthermore, the contingency approach avoids the possibility of future legal entanglements between the parties.

Lessons to be Learned

There is no consensus on which approach an Ontario judge will follow when a wrongful dismissal case is decided before the end of the reasonable notice period. If you are planning on dismissing a long-term employee, it is important to consult with a lawyer to discuss whether a severance package with a built-in contingency approach can be offered, rather than leaving that decision to a judge after spending significant legal costs. The lawyer can also explain the extent of the employee’s obligation to mitigate (look for work) throughout the litigation process.

“The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.”

Preparing an Employee Severance Package: Five Reasons to Hire A Lawyer

By , March 31, 2017 1:29 pm
  1. A lawyer can explain your obligations under the Employment Standards Act. Did you know there are employees who are not entitled to vacation pay, overtime pay, termination pay and severance pay under this law? For employees who do not work a regular work week did you know there is a formula to determine how to calculate termination pay?
  1. An employer can explain your obligations to provide reasonable notice of termination at common law. If the employee has not signed an employment contract with an enforceable termination clause then a lawyer can provide you with an idea of what is “reasonable” notice of termination in the circumstances. An lawyer can also inform you whether you are legally required to pay an employee who has received a bonus during the notice period.
  1. An employer can explain whether you are exposed to non-wrongful dismissal damages. For example, if the employee is disabled or has recently returned from sick leave or a pregnancy leave the employer may be exposed to damages under human rights legislation.
  1. A lawyer can suggest the best way to structure termination payments. Sometimes a lump sum payment is the best option and sometimes periodic payments are a better option. Another issue to carefully consider is which benefits to continue and for how long? Did you know that some insurers will not continue some employee benefit coverages after an employee is terminated?
  1. A lawyer can suggest ways to minimize the out of pocket costs associated with a termination. This includes steps you can take to help the employee find alternative employment which generally reduces an employer’s monetary exposure. For example, in what circumstances is it a good idea to offer the terminated employee a reference or outplacement counselling?

 

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him directly at 416 317-9894 or at doug@macleodlawfirm.ca

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

 

 

Are terminated employees entitled to their unpaid bonuses?

By , January 30, 2017 4:18 pm

We have previously written about when employees have been found to be entitled to receive their bonus at the time of termination.

To recap, when an employee is terminated without cause, they are entitled to receive notice or pay in lieu of notice. Wrongful dismissal damages are intended to place the terminated employee in the same financial position they would have been in had such notice been given. When the court is calculating wrongful dismissal damages, it will typically include all of the compensation and benefits that the employee would have earned during the notice period. However, whether a bonus the employee would have received should be included in such an award is a complicated question that depends partly on whether it has become an integral part of the employee’s salary.

Bain v UBS Securities Canada Inc.

In this case, Mr. Bain, a 14-year employee, earned a base salary of $385,000 plus  bonus.

Although at the beginning of his employment his bonus was paid by cash, payment changed so that his bonus was paid partly by cash and partly by shares in UBS.

Mr. Bain lost his job when it became redundant. He was paid his entitlements under the Employment Standards Act but was not paid his bonus for 2012 or for the three months that he worked in 2013.

After concluding that Mr. Bain was entitled to receive 18 months’ reasonable notice, the judge turned to the question of whether Mr. Bain should receive his bonus for 2012 and the three months he worked in 2013. The judge decided that the bonus was an integral part of Mr. Bain’s remuneration: he received it, albeit in different amounts, every year; he had always been awarded a bonus in his 14 years of employment and it was a significant component of his income. In fact, Mr. Bain had negotiated a minimum bonus as a term of his employment contract when he decided to join UBS.

The judge noted that UBS had a detailed compensation scheme in place and had the stated goal of transparency and fairness in the granting of bonuses. The fact that the bonus was solely in the discretion of management did not relieve UBS from its obligation to follow a process that was fair and reasonable, using objective criteria applied consistently among employees. The judge also noted that Mr. Bain’s 2012 evaluation contained many “exceeded objectives” assessments, and that his numbers were higher for 2012 than for 2011. The judge looked at evidence from other managers and the bonuses they received, which ranged from $402,300 to over $2 million.

UBS attempted to argue that a new compensation plan was introduced in 2011 that stipulated employees had to be employed with UBS to be paid their bonus. The judge could not conclude that Mr. Bain had accepted this fundamental change to his entitlement to a bonus, or that the new limitations were brought to his attention. The judge concluded that to accept UBS’ argument would mean that Mr. Bain became disentitled to a bonus because of the unilateral actions of UBS, over which Mr. Bain had no control. The judge concluded that Mr. Bain should receive his bonus for 2012, the three months he worked in 2013 and the bonus he would have earned over his 18 month notice period.

Lessons to be learned:

  1. In some circumstances, an employee may be entitled to the bonus they would have earned had they not been dismissed, which includes the bonus they would have earned during their notice period.
  2. An employer may limit an employee’s right to receive bonus payments upon termination, in certain circumstances.
  3. An employer must ensure that this limit is brought to the attention of the employee and forms a part of the employment contract.

The material and information provided on this blog and this website are for general information only and should not, in any respect, be relied on as legal advice or opinion. The authors make no claims, promises or guarantees about the accuracy, completeness, or adequacy of any information linked or referred to or contained herein. No person should act or refrain from acting in reliance on any information found on this website or blog, without first retaining counsel and obtaining appropriate professional advice from a lawyer duly licensed to practice law in the relevant jurisdiction. These materials do not constitute legal advice and do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

Fixed Term Employment Contracts Still A Bad Idea

By , January 11, 2017 3:07 pm

We’ve written before on how fixed term employment contracts are not a good idea. A recent decision from the Ontario Superior Court of Justice confirms the law on this point so far, and serves as yet another lesson to employers considering offering such a contract to temporary employees.

Ballim v Bausch & Lomb Canada Inc.

In October 2015, Ms. Menezes spoke to Ms. Ballim about possible employment with Bausch & Lomb (“the Company”) to replace her as she was going on maternity leave. Ms. Ballim was interested in the opportunity and attended two interviews, the latter being with Mr. Moniz.

In November 2015, Mr. Moniz sent an email to Ms. Ballim with the subject matter “Offer.” The email stated it was a one-year contract, and attached an employment agreement that Ms. Ballim was to sign.

The employment agreement provided that Ms. Ballim’s employment was on a contract basis, that her employment would be commencing on November 18, 2015 and that she would receive payment of $2,230.77 bi-weekly in 26 installments equating to an annual base salary of $58,000. Ms. Ballim executed the employment agreement and began work immediately.

Approximately one month after commencing her employment, Ms. Ballim asked for an unpaid leave of absence to travel to South Africa on compassionate grounds. Ms. Ballim’s request was approved, she was to return to work on February 18, 2016 at the latest. In reality, Ms. Ballim did not return until February 22, 2016. Upon her return, Ms. Ballim was informed that her employment was being terminated.

Because Ms. Ballim had been employed for three months, the Company took the position that she was only entitled to one week notice of termination under the Employment Standards Act. On a gratuitous basis, it provided her with an additional week.

Ms. Ballim obtained new employment in May 2016 and earned a salary of $72,000.

Ms. Ballim brought a motion for summary judgment arguing that she had a fixed term contract of one year. If she was successful, she would be entitled to recover all damages for the unexpired term of the contract. The Company argued that the plaintiff was hired for an indefinite term and that as such, she was only entitled to reasonable notice.

Was the Contract a Fixed Term Contract?

The judge found that the offer to Ms. Ballim consisted of both the email and employment agreement. This finding was important as it was the email that stated it was a one-year contract, not the employment agreement. The Company tried to argue that the contract was for an indefinite term as Ms. Menezes could have returned to work at any point in time.

The judge disagreed: the contract had a start date; Ms. Ballim was to be paid every two weeks in 26 installments, which was consistent with the accompanying email that expressly provided for a one-year duration. Although no precise end date was specified, it could be easily inferred to be one year from November 18, 2015.

Given this finding, the Company was required to pay Ms. Ballim to the end of the term. As per the Ontario Court of Appeal decision of Howard v Benson, these damages were not subject to mitigation. Therefore, she was entitled to damages from the breach of contract for the balance of 38.5 weeks.

Lessons to be Learned

  1. It is generally a bad idea to ask an employee to enter into a fixed term contract.
  2. If a fixed term contract must be used, it must include an (enforceable) early termination clause.
  3. The termination clause should also require the employee to mitigate their damages if the contract is terminated early.

“The material and information provided on this blog and this website are for general information only and should not, in any respect, be relied on as legal advice or opinion. The authors make no claims, promises or guarantees about the accuracy, completeness, or adequacy of any information linked or referred to or contained herein. No person should act or refrain from acting in reliance on any information found on this website or blog, without first retaining counsel and obtaining appropriate professional advice from a lawyer duly licensed to practice law in the relevant jurisdiction. These materials do not constitute legal advice and do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.”

The Cost of Terminating Older Employees Is Increasing

By , October 11, 2016 9:11 am

Since the elimination of mandatory retirement in Ontario, employers have been required to manage the costs associated with terminating older employees. The costs can be significant because many of these employees did not sign employment contracts with termination clauses; these employees are entitled to “reasonable” notice of termination which can be 24 months or longer.

Recent cases suggest that older employees are obtaining higher wrongful dismissal damage awards, and it appears that judges may not expect these terminated employees to look for alternative work as seriously as younger employees. This blog discusses one of these cases.

The Case: Ororio v. The Canadian Hearing Society

Ms. Ozorio was terminated after 30 years’ service as a result of a re-organization when she was 60 years old.

The judge appears to have taken the following facts into account when awarding Ms. Ozorio 24 months pay in lieu of notice of termination:

  • She was divorced and the primary caregiver for a sick son who needed medication, and she also cared for her elderly mother who lived with her,
  • The employer’s initial settlement offer was 12 months pay and 2 months’ benefit continuation whereas at trial the employer argued that the reasonable notice period was considerably more (i.e. in the 18 to 20-month range),
  • The employer only paid her the minimum termination pay and severance pay she was owed under the Employment Standards Act,
  • The employer did not offer a reference letter,
  • The employer did not offer outplacement counselling,

When discussing the rationale for awarding 24 months notice the judge noted “Generally, a longer notice period will be justified for older long term employees…”

Who Is An Older Employee?

The judge on this case referred to two other cases which noted that a 60-year employee or an employee in their 60s face “extremely stiff competition with much younger applicants for the same kind of employment”, and a 60-year-old employee did not face a good prospect of re-employment “competing with younger, more recently trained and less likely expensive talent”, respectively.

Are Older, Long Service, Non-Executive Employees Entitled to Lengthy Notice Periods?

The short answer is yes. The judge referred to several cases where other judges concluded that older and long term employees in non-executive positions were entitled to pay in lieu of 24 months’ notice.

Lessons to be learned:

  1. If you are terminating a long service employee who is 60 years old or more think long and hard before making a low ball, initial settlement offer.
  2. If you are terminating an employee without cause and performance is not an issue then offer to provide the employee a reference letter. It can help the employee find work more quickly and therefore reduce damages. And it looks bad. My guess is that some judges increase the notice period because it seems hard-hearted not to provide a no cost reference letter to someone who could benefit from it.
  3. If you are terminating an older, long-term employee with no work experience outside her service with your organization then seriously consider offering the employee outplacement counselling. It can – and often does – help the employee find work more quickly and therefore reduce damages. The facts in this case suggest the employee was a perfect candidate for outplace counselling.

For over 25 years, Doug MacLeod of the MacLeod Law Firm has been advising employers on all aspects of the employment relationship. If you have any questions, you can contact him at 416 317-9894 or at doug@macleodlawfirm.ca

The material and information in this blog and this website are for general information only. They should not be relied on as legal advice or opinion. The authors make no claims, promises, or guarantees about the accuracy, completeness, or adequacy of any information referred to in this blog or its links. No person should act or refrain from acting in reliance on any information found on this website or blog. Readers should obtain appropriate professional advice from a lawyer duly licensed in the relevant jurisdiction. These materials do not create a lawyer-client relationship between you and any of the authors or the MacLeod Law Firm.

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