Don’t gamble on statutory minimums.
November 14, 2011
Employers obligated to make fired employees “whole”
A recently decided Ontario Superior Court decision has reiterated the need for employers to take great care when dismissing employees without cause. As the judge noted, in the absence of a voluntary resignation or serious misconduct on the part of an employee, Canadian employers must dismiss their employees with proper notice or pay in lieu thereof. In the latter case, wrote the judge, employers must “make the employee whole” for the common law period of reasonable notice.
Although the foregoing statement of the law is not startling in of itself, what happened in the case before the court should serve as a cautionary tale for employers. The employee in question was dismissed without cause. He was 55 years of age and had worked for the company for nearly 24 years. When terminated, the employer gave him the statutory minimum compensation of eight weeks, together with benefits for the same period.
We commonly tell our clients that the statutory minimums are just that. One must look into all the circumstances in order to determine what is the “common law period of reasonable notice.” Inevitably, it is more than the statutory minimum.
In the case before the Ontario Superior Court, the employer contested the length of the notice period, its former employee’s mitigation efforts, and his entitlement to benefit coverage during the notice period.
Unfortunately, the former employee was diagnosed and treated for cancer in the months following his termination. Because the employer had only provided him with eight weeks’ disability coverage upon his dismissal and because his new employer did not offer any disability coverage as part of its compensation package, an issue the court had to decide was what was required to make the employee whole in respect of his disability. The court noted that if it were to place the former employee into the position he would have been had the employer provided him with working notice, he would have received his regular cash employment compensation, plus all benefit coverages for the entirety of the 22-month notice period the court found applied. As the judge put it:
“[The employer] consciously chose not to make alternative arrangements to provide its loyal, long-service employee with replacement disability coverage. Rather, it chose to go the “bare minimum” route. It provided only the statutory minimums in pay and benefits and then gambled that he would get another job and stay well. When it lost that gamble, it chose to litigate this matter for over five years. When confronted with its potential significant exposure, it raised the argument that [the employee] failed to mitigate his potential damages by purchasing a replacement disability policy.
I reject that argument.”
The employer was ordered to pay disability benefits up to the date on which the employee would turn 65.
Not only did the employer lose its gamble “in respect of the employee staying well”, the court found the employer’s treatment of its former employee “cavalier, harsh, malicious, reckless, outrageous and high-handed” and awarded an extra $15,000.00 in damages relating to its “hardball approach”.
In short, employers should reconsider whether paying an employee terminated without cause the “bare minimum” is worth the gamble. The Ontario Superior Court of Justice would say not.
STEVEN Z. RABER, LL.B., F.I.P.I.C., is a lawyer, registered trademark agent, and trained mediator, and may be reached by direct telephone at (204) 957-8304, by direct facsimile at (204) 954-0304, or by email at
stevenraber@fillmoreriley.com
This article is provided as information, is general in nature, and does not constitute legal advice.
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