Careful record keeping can cut legal fees
No matter what the state of the economy, good employees are always hard to find. Often, those candidates are already securely employed elsewhere. When an employer is trying to convince that candidate to jump ship and join their team, they need to be careful about what they say and what they fail to disclose.
Bob gets hired as the controller for a large corporation after having been wined and dined. He leaves his 15 years of secure employment with a competitor and accepts the invitation. What Bob doesn’t know is that a new Chief Executive Officer has just been appointed. As part of proving her worth, she has decided to significantly restructure the finance department and cut 20% of the jobs. Bob’s is one of them. Within two (2) months of starting, he is out of work. Bob brings a wrongful dismissal suit against the employer and claims that his severance package should be based not only on his two (2) months of service but the 15 years of secure employment he left behind based on the employer’s promises and failure to disclose the restructuring plans.
Bob has a difficult case to make. He has to prove the people who hired him made untrue, inaccurate, or misleading statements negligently and that he relied on those representations to his determinant. The failure by the interviewers to disclose important information can also support Bob’s case.
The problem is, how does Bob prove that the people who hired him knew there were plans afoot to restructure the finance department. Chances are, in fact, that they did not know that the new CEO would make that decision. If they did, why would they waste their time interviewing somebody for a job that is going to be eliminated in a few months? That leaves Bob relying on proving that while he was being wined and dined, representatives of the company promised him secure and long term employment. Unfortunately, Bob is going to have to prove on balanced probabilities that specific words were said that would make a reasonable person conclude that this was secure employment. If their interviewer gives evidence that the words Bob alleges like “we foresee this as a long term relationship” were not said, the Judge has to guess who is telling the truth. Judges do their best but sometimes they guess wrong. Sometimes the Judge’s assessment of credibility means the employer pays a significant severance package and legal costs and sometimes it means that an employee loses the case entirely and has to cover some of the employer’s legal costs. It can become a very risky and expensive business. Even if the employer ends of winning the case, the business disruption and legal expense can be significant.
There is a simple way for employer’s to avoid these problems. Especially when you are hiring somebody who is already securely employed, before the final offer is made, create a hiring letter, call it a contract if you want, that sets out exactly what the employee will be entitled to if their employment is terminated. If Bob is smart, he will ask for guarantee of at least three (3) months and perhaps six (6) months’ pay in lieu of notice if he is terminated without just cause at any time in the future and that amount may increase over time with his seniority. Employers shouldn’t bock at such a request. Anyone leaving secure employment and putting their family’s financial security at risk will want to have some assurance that if things don’t work out, they will have some sort of cushion to fall back on while they look for new employment.
Realistically, if the employee is desperate to leave their old employment, the employer might not even have to offer the three (3) month severance package guarantee. The important thing is, one way or the other that what the employee will be entitled to is set down in writing. If it is, litigation over who said what to whom and what wasn’t disclosed will rarely occur.
How many people do you know that wish they had taken the time to sign a prenuptial agreement? As many as there may be, I bet it is not nearly as many as wish, whether they were the employer or the employee, that they had taken a little time to sign a contract.
As published in the Hamilton Spectator, July 13, 2011
Ed Canning practices labour and employment law with Ross & McBride LLP, in Hamilton, representing both employers and employees. You can email him at email@example.com
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