Workforce reductions are inevitable, especially in such a volatile economy. And now a recent case in Ontario is casting a shadow on how judges view an employer’s reasonable notice obligations to a departing employee.
The courts recently awarded damages to the tune of several million dollars and showed a strong preference for the “complete compensation” model when determining an employee’s entitlement. Only clear company policy and practice, in addition to consistent contractual wording shores up the potential for Ontario judges to favour employees seeking damages. The absence of such contractual wording has seen employers held responsible for providing employees with the complete compensation they could have earned during their reasonable notice period.
In one such case, Bain v. UBS Securities (Canada), the judge found that the 45-year-old department manager who was let go due to company downsizing, was more senior within the company than the company deigned. Because Justice Wilson considered the man to be more senior, the company was therefore required to provide an additional 18 months reasonable notice. The court also found the timing of the termination to be questionable; timing which resulted in the claimant being denied accrued and earned bonuses.
Inconsistencies in procedure as well as documentation that contradicted the terms set out in the original employment contract lead to a decision in favour of the employee.
In its decision, the court awarded the plaintiff past bonuses, as well as a pro-rata amount earned up to the last day worked, and “added” an average bonus to his total award.
What This Means for Employers
To ensure you’re in the best possible position when it comes to reasonable notice:
- A clear and consistent policy and practice must align with any employment contract limitation. And any discrepancy or conflict between the contract, practice, and policy will negate any limitation or waiver imposed on the employee.
- Be consistent. If you regularly award annual bonuses that vary little from one year to the next, a court will likely award the bonus as part of the compensation award.
- An employee should be included in all compensation practices and policies until the effective date of their termination. Treating an employee different before their termination will likely impact the courts compensation award.
- Understand, recognize, and work to incorporate the increase in reasonable notice timeframes for middle-management, as well as middle-aged employees.
The departure of an employee is never easy, but with a little forward thinking it doesn’t have to leave you vulnerable, either.
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