Mishandling terminations, especially for “lifers,” can be a costly error for Canadian employers.
Among the most vulnerable workers whose jobs are casualties of COVID-19 are the oldest and longest-serving, many of whom are closing in on retirement in the near future. Tom Russell was one of these employees.
Mr. Russell started working for The Brick in 1984 when he was just 21. In July, 2020, he, along with a number of other employees of the furniture and appliance retailer, were dismissed as part of a restructuring necessitated by the economic downturn associated with the pandemic.
Mr. Russell was provided with the type of severance package recently seen by many Canadians who were dismissed owing to the economic effects of the pandemic. The Brick offered him more than the minimum statutory entitlement set out in employment standards legislation, but still far less than a court would award him.
Employment standards legislation across the country provides workers with basic protections upon termination. Generally, each statute requires that employees receive a minimal amount of notice of termination or pay, usually in the range of several weeks or months, and the continuation of benefits for all or part of this time. However, this is just the starting point of a severance package. Courts can award many times more than the statutory amounts and often award up to two years’ severance for the longest tenured and older employees.
In this case, a court recently awarded Mr. Russell 24 months’ severance, or double what The Brick first offered, having regard to his lifelong employment and the difficulties he would presumably face attempting to find comparable work at his age. On this last point, the court inferred that Mr. Russell would have an ever more onerous task finding other work as a result of the recent job losses in the retail industry during the pandemic, a fact acknowledged by The Brick as the very basis for his termination.
This is where things got interesting. In addition to Mr. Russell’s award of severance pay, the court ordered The Brick to compensate him with $25,000 in additional damages for what it found was the bad faith behaviour that it had engaged in through the manner of his termination. Specifically, the letter of termination did not confirm that all of Mr. Russell’s benefits and vacation accrual would continue for the time period required by employment standards legislation, in this case for eight weeks beyond the date of termination.
More importantly, The Brick gave Russell only three days to accept its offer of termination and failed to clearly explain to him that, if he declined the offer, he would still immediately be provided with his statutory entitlements on an unconditional basis. This last point drew the ire of the judge, who implied it could lead to ex-employees feeling pressured to accept unfair offers of severance.
Dismissals are inherently difficult for workers but should not be made more difficult by employers who neglect to comply with basic standards of behaviour. In this case, the judge found The Brick lacked transparency and fair dealing and that this was no way to dismiss a lifelong and loyal employee.
After reviewing countless severance packages during my years in practice, there are a few features of this case that really stand out.
First, I estimate that more than half of all of the severance packages extended by employers do not completely adhere to employment standards legislation, in one way or another. The Brick’s failure to confirm it was continuing all of Russell’s benefits and vacation pay over the statutory notice period is a fairly common defect. In other cases, employers offer severance payments that fall below the statutory floor, either through failing to include commissions or profit-sharing payments within the relevant calculation or by clawing back the amount of severance payable if the individual finds another job.
An understanding of the nuances of the legislation is critical to ensuring that individuals receive an appropriate deal and this is one of the reasons why I strongly encourage that workers meet with a lawyer experienced in this area of law, rather than a novice or generalist, or trying to figure it out on their own.
Second, this may be the first case where a court has rebuked an employer for not expressly notifying an ex-employee what he or she would be paid even if not accepting its offer of severance. Most of the severance packages that I review can easily confuse workers and do not clearly articulate the statutory entitlements.
The risk that a court can award additional damages for mental distress in this scenario holds employers in Canada to a very high standard of transparency and suggests they need to be prepared to demonstrate that they negotiate with ex-employees strictly in good faith.
Daniel A. Lublin is founding partner of Whitten & Lublin, Employment & Labour Lawyers. Do you have a question about workplace law? You can e-mail him here.
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