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Recent court cases provide cautionary tales to employers

Law's evolution pertaining to manner of termination has favoured employees: lawyer


Employers who run afoul of their duties of good faith when terminating staff are increasingly at risk for significant penalties. (promesaartstudio/Adobe Stock)

While Canadian employment law has long been notoriously employee-friendly, a series of new cases confirm that Canadian judges will not allow employers to use COVID-19 as an excuse to treat employees poorly. Indeed, the bar appears to have been raised even further.

Short of marriage, there are few relationships in Canadian society which attract the legal scrutiny of the employment relationship.

It has been nearly 30 years since the Supreme Court of Canada compared the fundamental nature of work to a person’s life and individual identity, and the corresponding duty to treat employees fairly in the manner of termination.

Since then, the common law has evolved to recognize the scope of acceptable conduct when terminating an employee.

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The evolution of the law pertaining to the manner of termination has been undoubtedly in favour of employees. As a result, employers who run afoul of their duties of good faith when terminating employees are increasingly at risk for significant penalties, in addition to severance pay.

Choose your words carefully

A brand-new decision from Ontario (Russell v. The Brick Warehouse LP, 2021 ONSC 4822) confirms that even seemingly innocent mistakes in the manner of termination can be costly.

In terminating a 57-year-old employee without cause, the employer wrote to the employee to make an offer to settle the termination and avoid any potential litigation. This is a common scenario where an employer offers a terminated employee payment in excess of the statutory minimum, in exchange for a release of all claims against the employer.

What was fatal to the employer in this case, however, was the language used in the termination letter and a series of inadvertent missteps that followed.

The court found that the mere failure to mention to the employee that he would receive his statutory entitlements, regardless of accepting the settlement offer, was dishonest.

This termination mistake cost the employer $25,000 for the manner in which the employee was terminated, in addition to 24 months of termination pay.

The court reasoned that an employee cannot be expected to know that they can reject a settlement offer and still demand their statutory entitlements. This approach reflects the court’s protective instincts towards employees.

Without expert advice, employers risk being penalized for poorly drafted termination letters and any innocent missteps that follow.

Post-termination (mis)conduct

An employer’s post-termination and litigation conduct can be another source of costly pitfalls, as one company recently learned in Fogelman v. IFG, 2021 ONSC 4042.

Following a dispute over whether an employer was permitted to lay off an employee on account of COVID-19, the employer engaged in a series of actions that lead to a judgment for punitive damages against the company.

This included:

  • the employer’s lawyer refused to accept service of the lawsuit during the pandemic
  • the employer took inconsistent positions during the litigation regarding whether the employee had an employment contract in place
  • the employer failed to pay the employee his termination entitlements, after he claimed constructive dismissal.

The last reason was particularly surprising given that the law in Ontario is not settled on whether a layoff due to COVID-19 amounts to a constructive dismissal at common law.

What is clear, however, is that employers who refuse to pay an employee their statutory entitlements risk being penalized with additional damages.

COVID-19 is not the time for long-shot arguments

Slater v. Halifax Herald Limited, 2021 NSSC 210, a recent case out of Nova Scotia suggests that courts are unlikely to be impressed with long-shot arguments that attempt to deprive employees of their entitlements upon termination.

In this decision, an employer initially relied upon the “doctrine of frustration” to lay off an employee of 39 years without notice or payment in lieu thereof.

The employer’s argument was essentially that COVID-19 was an unforeseeable event that made the employee’s contract impossible to perform, relieving the employer of its obligations to the employee upon termination.

While employment lawyers have debated whether this doctrine could actually apply to the current pandemic, no one has successfully argued it to date, including the employer in this case who dropped the argument the day before the hearing.

Needless to say, the judge was unimpressed. Without even addressing the merits of the argument of frustration, the judge lamented: “You just can’t treat people that way, even during a pandemic.” This captures the sentiment among many judges in response to COVID-19-related employment litigation.

Employers would be wise to heed these words carefully. It is now more important than ever to ensure terminations are conducted appropriately.

Contact an employment lawyer for expert legal advice and guidance before terminating an employee.

John Hyde is the managing partner at Hyde HR Law in Toronto. He advises management on all aspects of employment and labour law, including representation before administrative tribunals, collective agreement negotiation, arbitrations, wrongful dismissal defence and human rights.