Paying severance is often the least expensive alternative
Larger employers, having been in business long enough to get large and having had the unpleasant task of terminating employees they don’t like, understand that unless there is just cause for the termination, it has to provide an appropriate severance package. That package would be based on the employee’s age, level of responsibility and seniority.
Just cause is hard to prove. It does not mean you don’t like an employee or that you don’t think they try hard enough. Not having the skill set you desire is not just cause. Making some errors or judgment calls that are ill-founded is usually not just cause. Just cause is conduct that is incompatible with the employee’s duties and goes to the root of the employment relationship. It has to be found that the behaviour or action is so serious that it permanently fractures the employment relationship. It is a situation in which the employer cannot reasonably be expected to provide the employee with a second chance.
Smaller employers are new to that definition. Sometimes they terminate somebody they don’t like and then make the mistake of asking somebody who does not practice employment law all day long whether or not they have to pay the person. Sometimes they ask the right lawyer but they don’t listen to the advice.
Either way, on occasion, employers make the serious error of claiming just cause when there is none and start scraping the barrel and/or fabricating allegations to try to establish just cause and get out of a severance package.
That’s what happened to Daniel. He worked for only a few months as a vice president of finance for a small mining company in British Columbia.
The straw that broke the camel’s back and led to his termination was his complaint to the president, not for the first time, that the company owed him $30,000 as a result of stock option monies that Daniel claimed were promised. In frustration, Daniel said, “What do I have to do? Go to Small Claims Court? You are leaving me with no option but to get a lawyer involved.” The boss said, “You’re threatening the company with litigation. That’s ground for dismissal. You are fired.” People have a right to enforce their perceived entitlements through the legal process and threatening to resort to that process is never just cause for termination without a package.
When Daniel sued for wrongful dismissal, however, which by the way was only one month’s pay as a result of a contract Daniel had signed, the company defended. It claimed it had just cause.
The litigation went on for a number of years and Daniel ended up representing himself at trial. The employer called Daniel’s former assistant to give evidence at trial that Daniel was not doing much and was away from the office a lot of the time and neglecting his duties. At least the assistant was honest. He told Daniel in the courtroom, “I relished the idea of keeping an eye on you because I knew if you weren’t doing your job I could tell the president and get your job.” Of course, once the judge heard that, he appropriately did not believe anything the assistant said.
The employer claimed that Daniel complained to outside parties about his working conditions and criticized the management of the company. The problem was at trial and throughout the proceedings they could not come up with one conversation or one name. They had no evidence.
They claimed that Daniel did not sell as many shares as he should have but failure to reach targets is never just cause for termination.
The employer made multiple allegations which it could not prove. The ones it could prove were not things that could ever be serious enough to be considered just cause.
Daniel claimed punitive damages as a result of this behaviour by the defendant in the lawsuit. The judge held that the employer’s behaviour in falsely claiming just cause and making allegations it could not support was egregious and malicious and it continued through years of litigation.
Daniel was awarded one month’s pay in lieu of notice, $5,000, as well as $10,000 in general damages and $100,000 in punitive damages. I bet the employer wished it had just given Daniel his one month’s pay as required by his contract and left it at that.
Ed Canning is a partner practicing in the Labour & Employment Group at Ross & McBride LLP.
As published in The Hamilton Spectator, January 26, 2014