Debunking the myth: Short-term workers can be entitled to long-term severance, says Rudner

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The common myth that short-term employees only qualify for minimal severance is being regularly debunked by courts across Canada, according to Stuart Rudner.

“This is something that employment lawyers have been saying for a while now. Short-term employees, and particularly short-term employees in more senior roles, tend to get disproportionately longer notice periods,” said Rudner, an employment lawyer, mediator and founder of Rudner Law.

A recent Ontario Superior Court of Justice ruling involving a senior project manager at CF+D Custom Fireplace Design is a textbook example. That manager, who had been on the job for less than five months, was awarded five-and-a-half months’ notice.

“I’ll often hear employers say, ‘They’ve only been here for a couple of months or a year, so we only need to pay them a few weeks and that will be the end of it.’ That underlying assumption is wrong, as this case demonstrates, and there are a lot of other cases like it,” he said

The inducement factor

While the senior project manager in that case claimed he was induced to join CF+D Custom Fireplace Design from secure employment at Honeywell, the court rejected that argument — something that could have driven the notice period even higher, said Rudner.

There are no black-and-white rules around what constitutes inducement, he said.

“In order to successfully prove it, you’re going to have to show that you had secure employment and that you really had no intention of leaving it,” he said.

A court will look at the evidence, including whether the employee went through the formal application and interview process and whether there was a probationary period in the contract, said Rudner.

“Or, were you given special treatment and encouraged to apply? Did you skip the whole formal interview process and get the offer right away? The classic case is where the person says they’re not interested, but the company is persistent and keeps approaching them to the point where they finally give in and say they’re accepting the job,” he said.

One of the things that can really undermine an employee’s inducement claim is if the employer can prove they were actively looking for work, because the whole premise is that they would not have left their job if they weren’t induced to do so, said Rudner.

One month per year of service myth

Rudner said rulings like this one provide more fodder to dispel the “one month per year of service” rule of thumb for notice periods.

While tenure is a big part of the calculation, courts also take into account the employee’s age and the nature or character of their job, he said. If the worker is in the late stages of their career, in a fairly senior position that will be hard to replace, then the notice period will start to increase, he said.

Additional costs to consider

Rudner also stressed the financial costs of litigation in wrongful dismissal cases need to be taken into account, because they can often exceed the awarded severance.

For example, the project manager at the fireplace company was paid an annual salary of $90,000. Adding in his benefits and car allowance, and the total award was likely in the $50,000 range.

“To get that, they had to go through the entire litigation process — including three days of trial,” he said.

While the court didn’t specify a costs award, leaving it to the parties to resolve, there’s little doubt that the combined costs were way over $50,000, said Rudner.

“In fact, even one party’s costs may have been in the $50,000 range,” he said.  

“The combined costs of both parties often exceed the awarded severance, not to mention the time and resources spent,” he said.

The plaintiff in this case was seeking 12 months’ notice and the employer was offering two weeks, he said.

“They were yards and yards apart and part of that, I’m sure, was posturing,” he said. “But by insisting on adopting these really aggressive negotiating positions, it only serves to draw out the negotiation and litigation and makes it harder to settle.”

Some employers are willing to dig in and fight hard in an effort to discourage others from bringing similar cases, said Rudner.

“Sometimes a company will defend the case, even if it doesn’t make sense financially,” he said. “Everyone has to assess how much they’re willing to pay in order to find out if they’re right — especially in a case like this where it’s short service, there’s no termination clause, and it’s difficult to predict the outcome.”

Termination clauses

One of the best ways for employers to get certainty around the cost of termination is to have a valid and enforceable termination clause in all employment contracts, said Rudner.

“A lot of these problems can be avoided with a properly drafted contract, done in conjunction with your legal counsel,” he said. “Unfortunately, the majority of termination clauses are unenforceable; if a company wants to use those contracts properly, they need to make sure they are done right.”

For more information about Rudner Law’s Alternative Dispute Resolution, visit https://www.rudnerlaw.ca/alternative-dispute-resolution/. Stuart Rudner can be reached at 416-864-8500 (phone or text) or [email protected].

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