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Should Employers Be Punished For Giving Employees Far Less Notice Than is “Reasonable”?

There’s a recent wrongful dismissal case out of B.C. called Pritchard v. The Stuffed Animal House that is worth noting for a couple of reasons.  The basic facts were this: Pritchard was a 16 year sales employee who was dismissed.  The reason given was lack of work (a permanent layoff, in other words), and Pritchard was provided with a glowing letter of reference and 16 weeks’ pay in lieu of reasonable notice.  However, Prtichard thought 16 weeks was less than ‘reasonable’ notice, so she sued for wrongful dismissal, claiming 14 months’ notice.

In the statement of defence, the employer asserted in fact it has cause to dismiss Pritchard, and therefore she was not entitled to any notice.  The new grounds for cause, the employer asserted, involved wrongdoing only discovered by the employer after the dismissal.  Sounds like the lawsuit prompted the employer to make like a pig, and go digging for dirt.  The details of the alleged dirt discovered don’t matter, because the court rejects them all, and finds that there was no cause.

Note though that the court does find that an employer is within it’s legal right to raise new grounds for cause when facts are learned after the dismissal:

[13]           It is clear that the law permits an employer to rely upon misconduct that it discovers after an employee has been dismissed to justify a summary dismissal and defend a claim for wrongful dismissal (Blomgren v. Jingle Pot Pub Ltd., 1999 BCCA 9 (CanLII), 1999 BCCA 9).

But it still needs to prove that cause, and here the employer was unable to do so.  The court ordered 12 month’s notice to be paid (minus the 16 weeks’ already given).

The thing I find most interesting in this case  is that the employer told the court at the trial that it believed “reasonable notice” was between 6 to 8 months.  Here’s what the court says:

The plaintiff submits that a notice period in the range of 10 to 14 months would be appropriate and seeks an award at the upper end of that range, while the defendant submits that a notice period of 6 to 8 months would be more appropriate.

If the employer believed that the contract required it to pay between 6 and 8 months’ reasonable notice, then why did it only offer her 16 weeks’ notice at the time of termination?

Why does the employee have to go through the expense and stress of a lawsuit to get what she is contractually entitled to in the first place, I wonder?  Or, put it another way:  why does the employer prefer to pay lawyers tens of thousands of dollars in fees rather than just pay the employee the 6-8 month’s notice they believe she is contractually entitled to?  Had they done so, this case likely would not have gone to court at all.

Is it wrong and unethical to knowingly provide substantially less notice than you believe is actually required by the contract?  I have asked this question before, when I noted a newspaper article by a prominent employment lawyer advising employers to pay less notice than required by the contract. Here is what I wrote back then:

In this article, Levitt noted:  ”Generally, if an employee is provided 80% of what a court would award, it makes little economic sense to sue”.  Therefore, according to Levitt, employers should “offer severance at the low end of the range or just below.”

I asked then whether this wasn’t advising employers to knowingly breach a contract, which is shady advice from any  lawyer, if not worse.  What do you think of an HR strategy that involves a deliberate decision to breach the employment contract (by giving “just below” the amount of reasonable notice required by the contract)?

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6 Responses to Should Employers Be Punished For Giving Employees Far Less Notice Than is “Reasonable”?

  1. anon Reply

    March 4, 2010 at 5:14 pm

    It’s unfortunate that in employment and especially labour relations there is such an “us vs. them” attitude between employers and employees. But realistically that quote from Levitt is illustrative of why this is so as it oozes class conflict. It’s also self-defeating: acting with a policy of low-balling employees on severance or acting in bad faith (which is what that is) is exactly the kind of thing which opens the doors to union organizers at worst, and extremely poor morale and productivity at best.

  2. PH Reply

    March 6, 2010 at 12:41 pm

    I don’t believe that anything useful would be accomplished by punishing employers for offering less than an employee would receive in court for their implied right to reasonable notice of termination. Two points in particular concern me about this idea.

    First, we already have a mechanism in the common law for punishing employers for bad faith in termination, in the form of Wallace/Honda/Aggravated/Moral damages. The Supreme Court has now made it clear that this mechanism is not to be used lightly.

    Reasonable people (and reasonable judges) may disagree on what constitutes reasonable notice in a particular set of circumstances. Punishing an employer for mistaking 16 weeks as reasonable at the time of termination, and later (perhaps after receiving legal advice) deciding that 6-8 months would actually be reasonable seems to me to be setting the bar for aggravated/etc. damages far too low.

    Many employers are not sophisticated operations with in-house legal departments or ready access to counsel. It has to be recognized that the structure of employment law in this country sends a mixed message to employers who are attempting to determine their obligations for themselves. If an employer looks to the Employment Standards Act for its obligations before consulting a lawyer, should it later be punished by the courts?

    Second, the employer isn’t the employee’s fiduciary, they are two parties to a contract. Because the implied right to reasonable notice is enforced through the courts, the offer of notice at termination can be understood as a settlement offer. The law of costs already exists to compensate the winning party for expenses incurred in litigation to enforce its rights.

    In Ontario at least, we already have mechanisms in the Rules of Civil Procedure for encouraging a party to make a reasonable settlement offer, in the form of Rule 49. Rule 49 attaches costs consequences to a failure on the part of one party to accept an offer of settlement better than the result they achieved at trial. In what other contractual context would we even be considering other means of punishing a party for making the lowest offer in satisfaction of an implied term in a contract that they thought they could?

    Let’s be clear about what we’re trying to accomplish here – if it’s correcting a balance of power issue in interpreting implied terms, maybe the right course is through access to justice measures, not by punishing employers.

  3. Dan Michaluk Reply

    March 6, 2010 at 12:57 pm

    It does seem strange that an employer would take a position on the record that’s inconsistent with its payment, but is suspect it was because the notice position was made in the alternative to a cause position. As for “lowballing,” in my view there’s a natural dance that occurs given our what is reasonable is debatable, and the dance is not per se an indication of bad faith or unreasonableness on either party. Termination clauses are the solution, and are almost always a good idea. Thank you David! Dan

  4. Mike Ferrier Reply

    March 8, 2010 at 2:43 pm

    The lowballing strategy probably banks on the low likelihood of an employee actually taking them to court. If 10 employees are lowballed and 1/10 goes to court, the company could be saving money in the long term.

  5. Manny Reply

    March 18, 2010 at 1:39 pm

    In my opinion, court should look at these cases and make guilty employer pay for their mistake. They should make a statement or example out of them so that employer will think twice before doing somethhing like this. I agreed with Mike Ferrier’s comment that if only 1 out of 10 complains than employers are still winning. Court should take aggressive steps to stop this kind of practice. These kind of actions creat walls between employer and employees.

  6. Daniel Lublin Reply

    April 17, 2010 at 11:44 am

    The employer was permitted to pay less than what was reasonable because the law permitted it. In fact, the courts condone this approach each time they allow an employer to rely on a “termination clause” which is an inherently unfair application of the law.

    If reasonable notice is by its name “reasonable”, then why do the courts or legislators allow termination clauses in contracts that inevitably provide the employee with something less than the common law, which is therefore, less than what was “reasonable”.

    I don’t think employers should be punished for taking advantage of a loophole or paying only the amount that they had to, and not more. I believe the people who set the minimum at a standard so far below what is fair are the ones that need to reconsider their approach.

    Daniel A. Lublin

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