Employers: 6 Common Firing Mistakes… and How to Avoid Them
I hope you’re easing into 2021 like a knife through butter. Because cutting it in 2020 was tough, both at work and on the home front. Everyone is just trying to look at this year to turn over a new page.
For employers, in-house counsel, and human resource professionals, that includes being forced to deal with shifting rules, evolving legal risks, assessing case law developments and ensuring compliance – not to mention evaluating contracts, clauses and workplace policies – just to keep up.
And then there is the handling of dismissals, whether they arise from restructuring, performance or any other reason. Obtaining legal advice regarding dismissals is even more important now against the changing landscape of employment laws. In my experience, no employer enjoys having to dismiss an employee for any reason, nor do most employers intentionally set out to do so in a wrongful manner. They would rather hire than fire. And while dismissing employees (also called “termination of employment” or “firing”) is not as certain as death and taxes, unfortunately, there are few employers who will escape having to confront it at some point.
I have been helping Ontario employers of non-unionized workplaces deal with hiring, terminating, and day-to-day employment law issues for over 25 years, and in some cases, was on speed dial in last half of 2020 to help my employer clients navigate change, compliance and COVID.
No matter the circumstances, I have found that there are certain mistaken behaviours arising out of the dismissal process, some of which are even well intentioned, that can lead an employer to incur far more in severance and legal expenses, as well as wasted time, unnecessary risk and potential damage to reputation. Here are six of them – and how to avoid them:
1. Not consulting with an employment lawyer prior to dismissal. While many medium and large employers have access to in-house counsel and HR professionals, or external lawyers when they must consider dismissing an employee, many smaller employers and non-profits do not.
As well, many employers believe that they do not need the advice of an employment lawyer, or that they cannot afford it. However, foregoing proper legal advice before dismissing an employee (or doing something that can be construed as constructive dismissal – more on that below), can lead to costly errors thereby greatly increasing eventual legal costs unnecessarily, as well as the amounts owed to employees. In fact, the most important mistake to avoid is not obtaining proper legal advice because an experienced employment lawyer can help you avoid the mistakes that follow.
2. Assuming the termination language in the contract is valid (assuming there is a contract).
The amount of notice or severance may be fixed by a “termination clause” in the employee’s contract. However, that does not mean that the clause is legally enforceable, or that the entire contract is enforceable – especially if the contract was prepared years before, or it was not prepared by your own employment lawyer. Termination clauses, and the contracts themselves, are often attacked by employee-side lawyers in court, and the courts are often sympathetic to their arguments depending on the language and the surrounding facts. As well, the law is frequently changing – as one example I wrote about in an earlier blog about termination clauses. Only an experienced employment lawyer will be able to tell you if you likely owe more notice or severance to your employee than the contract provides for due to a legal system known as the common law. By foregoing legal advice and just assuming that the contractual language is valid, an employer could be in for a rude awakening. In fact, some employers may have later regretted dismissing an employee when they later learn how much severance they owed, as opposed to the amount they believed they owed under a contract.
This does not mean that employment contracts aren’t a good idea for many employers, but they need to be properly drafted by employment lawyers exclusively for their client, they should be fair, the employer needs (and must follow) clear instructions on how to present them to employees, and they need to be regularly replaced (or at least reviewed) due to frequent changes to the law. Also, no employment contract is “iron-clad” despite how well it is drafted, and how current it is.
3. Only offering statutory minimums. Even if there is no enforceable contract limiting an employee to their provincial statutory minimum entitlements to termination pay and severance upon termination (such as Ontario’s Employment Standards Act, 2000 (“ESA”)) many employers simply, and wrongly, assume that this all they need to provide are the statutory minimums because they do not know about the higher common law entitlements. This can lead to unnecessary (and expensive) legal action being taken by an employee as a result. Worse, some employers will only pay statutory minimums if the employee first signs a release. Not only is this unlawful and can expose the employer to penalties and other costs, but the release is probably invalid.
4. Terminating ‘for cause’ without cause. Most terminations of employment, or dismissals, are on a ‘without (just) cause’ basis, meaning that the employer has a legal obligation to the employee to provide some amount of notice or pay in lieu, and possibly other amounts, as a result. However, under the common law, a termination for just cause (or ‘for cause’) means that the employee engaged in serious misconduct such that the employer is relieved of this obligation, although there still may be obligations under the ESA as it does not recognize the concept of just cause. While successful ‘for cause’ terminations (essentially, where the court agrees with the employer in the event the employee sues for wrongful dismissal, or where the employee does not take legal action) are not impossible, they are rare in today’s legal climate. The ground is always shifting though. In most cases, poor performance doesn’t justify a for-cause termination, but we are only beginning to determine whether violating workplace COVID-19 policies—or expressing odious political views—does. Employers must proceed with extreme caution before attempting to dismiss for cause, or else the employer could face severe consequences in terms of money, wasted time, and other trouble. Seeking legal guidance first is essential.
5. Letting personal feelings about an employee dictate choices. Employers must put aside personal feelings about an employee when it comes to decisions to fire, whether to do so for or without cause, and how much should be paid to the employee at the time of termination – or later if the employer takes legal action and there is an opportunity to settle. In fact, employers have a duty to employees of good faith and fair dealing. Lawyers can and should help employers make good faith, business decisions that consider only the legally (or other) relevant factors in handling a dismissal scenario. This doesn’t mean that an employer cannot take a “principled” approach, but it should be done with a cool head, and a consideration for the law and the significant impact their decisions can have on both themselves and the employee.
6. Temporarily laying off an employee, or changing key employment terms, without a contractual right to do so. Sometimes, an employer may dismiss an employee without even knowing it. This is known as “constructive dismissal”. For example, if there is no enforceable employment contract in play allowing for a temporary layoff, or a reduction in compensation, a suspension, or a change in compensation or duties, then unilaterally proceeding with any of the above could result in a constructive dismissal. This, in turn, can lead to affected employees claiming a significant severance payment. Layoffs are further complicated by changes to temporary layoff legislation resulting from COVID-19 (see my earlier blog on this topic). Therefore, obtaining legal advice and having proper contracts in place are essential to avoid being met with a surprise constructive dismissal claim.
Terminating employees these days is fraught with change. This list contains just some of many potential pitfalls confronting employers. Hopefully, the tips I’ve outlined here to help prevent firing mistakes can help your organization act prudently.
I would welcome the opportunity to assist you on this and other requirements like contracts (new or rewrites), workplace policies (to ensure they are compliant with legislative changes and current occupational health and safety laws), COVID-19 policies and others such as remote/work from home, privacy, overtime, technology use, business expense, visitors in the workplace, leave of absence and many more to name a few.
This blog is for educational purposes only and is not intended as legal or other professional advice.
