Wrongful Dismall And Changes To The Rules Of Court

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On January 1, 2010, changes will take affect for the Ontario Small Claims Courts, which will make employee litigation for wrongful dismissal more appealing to disgruntled employees. This webinar was presented to alert employers to these changes and provide actions they can take to protect their businesses.

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  • We are a privately held Canadian company with more than 25 years of experience in the field of Human Resources.   Our primary service is providing HR consulting to small and mid-size business throughout Canada. Serving the Human Resource needs of our clients through times of economic prosperity or decline, we know how crucial it is to a company’s bottom line to manage costs and mitigate risks.
  • Today, Steve and Pam, will be speaking about the upcoming Changes to the Rules of Court which could significantly increase the likelihood of Wrongful Dismissal Claims for employers. Today they will give you: An overview of the key changes A discussion about how these changes could impact Employers Practical advice on what you can do to protect yourself from these types of claims You should be aware that although Pam and Steve will be referring to some legal procedures to help provide context for our discussion today, this webinar is not intended to be a legal exercise – our goal is to provide listeners with a pragmatic overview about how these changes to the legal system will affect employers and what they can do from an hr perspective to mitigate their risk.
  • It is likely that you have come across articles in recent years, regarding the inability of the average person to receive justice in Canada; regardless of the merits of their case - this is likely due to the fact that most individual’s are scared off by the tremendous expense and risks associated with actually pursuing legal action. This reality is no less a factor in an employee’s decision to pursue a wrongful dismissal claim. In fact, it wouldn’t be a stretch to say that up until now many employers have likely avoided a claim or two given that most employees would be reluctant to commit the time and funds necessary to carry out a wrongful dismissal action, regardless of how strong their case was. The upcoming changes to the Rules of Court, effective January 1, 2010, have sparked quite a bit of chatter amongst legal professionals - they believe that these changes will create a ripple effect on employment lawsuits – and in turn, will ultimately lead to an increase in claims for wrongful dismissal. From an employer’s perspective greater care will have to be exercised when terminating or laying off employees in the future. You will see that because of the nature of the upcoming changes, this will apply not only to senior executives but also to the lowest levels of the organization.
  • Since an individual can fight their case in small claims court without a lawyer which reduces their cost in combination with procedural rules that are relatively uncomplicated – one can see that this is a desirable route for a disgruntled employee to take if they want to argue a case for wrongful dismissal with minimal cost and effort– now that the damages limit has increased from $10K to $25K, those claims above $10K that would have previously been fought at a higher level of court with a lawyer, can now be fought directly by the claimant themselves, in small claims court. Further to this point, many lower paid workers would see their maximum settlements fall in this damage range and if successful, could now see damages of up to 25K.
  • Beyond claims fought at the small claims court level, the next level of claims presently includes those that are less than $50K -for these claims a mandatory rule called the “Simplified Procedures” rule applies. The rule was introduced in 1996, and its purpose was to eliminate a claimant’s fears that the costs (and risks) were too high to pursue a claim of this “modest” level. Arguably, before the rule was introduced most of these modest level claims would never be pursued because the legal costs, time and effort associated with pursuing the claim, would far outweigh any compensation or benefit the claimant would receive. By eliminating certain procedural steps the Simplified Procedure rule “leveled the playing field” so to speak, and ensured that the amount of time, effort and money a claimant puts forth is directly proportionate to the benefits of winning their claim.
  • Effective January 1 st , this “Simplified Procedure” rule will now apply on a mandatory basis to all claims up to $100K (doubling the previous 50K cutoff). Now much larger claims can be pursued under the simplified procedure rule and in turn, will likely cover the majority of wrongful dismissal claims. Of course there will still be costs for an employee to pursue a claim of this nature (more so than Small Claims or definitely more than pursuing no action at all) but if an employee knows their claim will be processed in a quicker, time efficient and less costly fashion it will surely influence a terminated or laid off employee’s decision to pursue “their day in court”.
  • In a nutshell, these additional procedural changes are all designed to support a speedier and more cost effective claims procedure – and on the whole, each of these changes, support the notion of improving access to justice for all.
  • Steve’s preamble – 2 paragraphs
  • So, given this new information, as an employer, what can you do to minimize impact? We will speak to a number of methods to minimize your risk from an HR perspective, and a good place to start is to look the employment contracts, specifically the area that details how employment can end – think of the contract as a kind of “pre-nup”. The employee receives something of value (or “consideration”) in exchange for signing the contract. Generally, when the contract is signed before the first day of employment, the “consideration” is the job itself. If the contract is signed after an employee has already started work, no matter how short their tenure, new consideration or value must be provided for the contract to be enforceable. This is particularly true if a change is made to an important term and condition of employment. One area to consider is to include a termination clause. You may question as to why you would consider this. Well, aside from your legal obligations surrounding notice, or pay in lieu of notice period under provincial employment standards, there is exposure to giving much longer notice periods under “common-law”. Termination monies paid out over and above the minimum requirements are known as common law payments and are based around a number of factors that could affect an employee’s likelihood of securing new employment. These can include: consideration for employee’s age, length of service, and also recruiting method. In order to avoid this exposure and possible legal action through the court system, it is often in the employer’s best interest to have a valid and enforceable termination clause, which will reduce liability and common law presumption of reasonable notice. Here are some specific suggestions, but please remember to have your new contracts reviewed by an expert in the field. 1 – For new employees, as I have already mentioned, consider including a termination clause in new employment contracts. 2 – For existing employees, you should review the employment contracts to ensure that any existing termination clauses are still relevant and appropriate for the position they hold. We would recommend revising existing contracts where an opportunity exists but keep in mind it very much depends on the situation or business environment. 3- Terminating employees - ensure that when terminating employees “without cause” who do not have an existing termination clause that you calculate a fair and reasonable termination or severance package - and ask for a signed Full and Final Release.
  • Remember, Employment contracts form the basis of your relationship with the employee from beginning to end. Ensure that you draft the contract including the termination clause appropriately to the circumstances of each situation. Ensure contracts provide at least as much notice and/or severance as required by minimum provincial standards, this is a common mistake made by employers and can end up costing you far more than is necessary if you are challenged legally.,( e.g. if your termination clause indicates you will provide employee 3 week’s notice or pay in lieu upon termination without cause, and the employee has 4 years of service, in Ontario, they are entitled to 4 weeks of notice or pay in lieu by law – therefore your termination does not meet even the minimum standard) Ensure that the termination clause is clear and unambiguous. Where a clause can be interpreted in two different ways, the courts would likely agree to an interpretation least favorable to the employer. Ensure that the employee is given sufficient time to obtain independent legal advice, whether or not they chose to do so. Include verbiage advising that you will rely on the probationary term.   While it does sound a contradiction to discuss such a clause at the time of hire, the best way to avoid future litigation is to craft a termination clause that is the product of actual negotiations between an employee and employer.
  • Remember that the first 90 days of employment are considered “probationary” under provincial employment standards. With the exception of areas protected by legislation (e.g., human rights, WSIB), employment may be terminated without notice, or payment in lieu of notice for any reason within that timeframe. It is important to review the new employee’s performance at this early stage and make the decision to retain or terminate. Too often employers know relatively early on that an employee is not a good fit. Despite this, they allow the probationary period to pass, only to terminate that employee sometime in the first year. Some employers have asked if it is appropriate to “extend” the probationary period for new employees who have yet to demonstrate their suitability at the 90-day mark. Keep in mind that extending the probationary period does not constitute an extension of the timeframe in which you may terminate without notice or payment in lieu. You need to be aware that once the 90 days of employment have passed, the employee is entitled notice or pay in lieu. A critical point to remember is that in the absence of verbiage in the contract stipulating that the employer will rely on the probationary term, a “greater benefit” is created, and the courts will treat the terminated employee like any other.
  • Typically, a revision of contract requires that the employee receive something of value in exchange for signing the contract. Should you choose to revise an existing contract, there are two ways to vary the agreement: Provide unilateral notice of the change to be effective at some point in the future; Reasonable notice can be considered equal to the length of notice that the employee would receive upon termination of employment without cause. Provided this appropriate notice is given, such action does not constitute constructive dismissal. (e.g., In Ontario, a 3 year employee would require a minimum of 3 weeks notice of the change – a 12 year employee would require at least 20 weeks notice change (the amount of weeks being a combination of notice and severance as per employment standards) Providing something of value to the employee; In this case you as the employer offer the employee a benefit in exchange for the new terms and condition of employment. Some common examples include a salary increase, promotion, lump sum payment or enhanced group benefits. Others are: enhanced vacation entitlement and or improved bonus plans where the employee has a higher earning potential. In addition to providing something of value to the employee the best practice is to also: Provide a second option of termination: By doing so, the employee is given the choice of the new contract with the revised conditions, or to consider termination of employment with fair and reasonable notice and severance.
  • The first thing you need to do is to revisit the original employment agreement to make yourself aware of any existing termination clause. If no such clause exists ensure the termination settlement you do provide is fair, reasonable, and takes into account the same common law factors I mentioned earlier, such as age, length of service, etc. Sometimes given the nature of the termination and common law factors present, employers opt to provide an employee more than minimum notice and severance required by law. If this is the case, it is critical that the employer ensure the employee signs a Full and Final release in exchange for the additional consideration. This signed document will ensure that you are not exposed to risk of further action by the departing employee with a challenge to the terms, and/or claims of constructive dismissal. Once the release is signed, although the agreement may be less that than what the employee would be entitled to under common-law, Courts will be hesitant to find the agreement void. Provided that the amount of the settlement is still acceptable, and there is no duress in signing the offer, courts will generally uphold the agreement. You should ensure that the employee has the opportunity to seek independent advice, whether they choose to or not. This will strengthen the case that as an employer you attempted to ensure the employee understood their possible legal options. Omitting the Full and Final Release can potentially leave your organization open to legal action from the employee and allow the situation to drag on unnecessarily.
  • Some employers may hold the opinion that to request the employee sign a Full and Final release upon termination of employment would create bad feeling and could actually provoke the employee into legal action. Experience has taught us that employees are just as likely to seek legal recourse after a termination even when release documentation is not used. Please bear in mind the examples of notice or severance I have given relate to employment standards in Ontario, there may be differences between provinces.
  • If you are terminating an employee for performance it is critical to have followed a consistent performance management process. Therefore, given the upcoming changes we’ve discussed and the new climate of employment litigation that these changes could create, it is highly advisable to strengthen your performance improvement and documentation processes – and most importantly, train your managers and supervisors on that process – above all, the best practice is to show clear, unambiguous documentation of performance issues and then ensure your employee signs off that they received a copy of the performance improvement or discipline letter – your documentation should include the following: A specific explanation of your performance concerns (use examples to demonstrate your point) Then outline the expected standard of performance in these areas and, Next, identify what the employee should do differently in order to meet the expectations -where feasible, create measurable performance goals to help you assess the employee’s progress in a fair and objective manner
  • Be sure to set a timeframe for improvement and follow up meetings with employee to review their progress Lastly, it is important to state in the documentation that if improvement is not made, the employee could be subject to further discipline up to and including termination – employees should receive fair warning and a reasonable opportunity to improve their performance, before being terminated   I also wanted to share a few additional general tips for you to consider: Ensure consistency of discipline and performance management practices – be wary of firing or disciplining an employee, when the same behavior is condoned by managers and supervisors in other departments. Be aware of what other personal factors might be contributing to an employee’s performance problems– particularly if the employee’s performance has met standards for the last 10 years and then suddenly there is a major shift, consider what other factors might be present that are out of the employee’s control , i.e. marital problems, addiction, financial issues, sudden illness – these things can throw anyone off their game and employers need to demonstrate some compassion in these situations and if appropriate or legally required, provide that employee “reasonable” accommodation.
  • The reason the employee handbook is important to our discussion today is that in addition to the employee’s contract, the handbook serves as a key piece of evidence for purposes of determining the actual terms and conditions of employment. Here are some best practices relating to the handbook: Ensure the handbook is comprehensive and outlines all policies and procedures related to terms and conditions of employment It is critical to ensure compliance with current legislation and revise accordingly The handbook should be consistent with the practice that actually occurs in the organization – think of it as “practice what you preach”. Train your managers and supervisors on the handbook to avoid inconsistent practices. Have all new employees sign off that they have received an employee handbook, have reviewed it and agree to the policies contained within. Don’t forget when the handbook is revised ensure employees sign off on these revisions as well. Employees should have ongoing access to the employee handbook, i.e. their own copy or it can be available on company intranet- as long as this is easily accessible to all employees.
  • One of the most impactful things an employer can do when laying off or terminating an employee is to treat that employee with dignity and respect, even as they are being walked to the door and no matter what the circumstances of the termination– this sounds simple but it is remarkable how many terminations go awry because too little thought is given to preparing for the termination in an employer’s rush just to “be done with it”. An employer that is seen to be acting in “good faith” and in a manner that preserves the terminated employee’s dignity, will be in a far better position to avoid paying excessive damages or even better, avoid a claim in the first place. The natural reaction for an employee who is terminated, no matter what the reason, is first shock and then anger. Don’t wave the red flag in front of the bull and end up provoking an employee into action. Best Practices: -keep the termination and the reasons for it as confidential as possible – only those on a “need to know” basis should be aware of what is happening leading up to the termination -terminate in private – we often recommend in an open office environment to hold a meeting with other staff while the manager conducts the termination in another area of the office – allows the employee to avoid cleaning out their desk with others watching and then being “paraded” out of the office -carefully craft a communication message to other staff once the termination is complete – don’t leave it up to the rumour mill to get the message out– advise individuals that the employee will no longer be with the company without divulging reasons for the termination (remember the departing employee will still be in touch with other staff in your organization well after they have gone) -avoid terminations on a Friday, particularly on the eve of a long weekend or too close to the holidays, before an employee’s vacation, on their birthday, etc.- want to avoid the appearance of being insensitive -consider the timing of the termination in relation to the employee’s personal circumstances, i.e. spouse has recently left them, death in the family, recent job loss of spouse – this may not be enough reason to avoid the termination entirely but at least consider the timing before proceeding -don’t purposely antagonize the employee – what I mean by this, is when you terminate an employee you may be tempted to withhold an earned bonus or vacation pay , or cut off benefits immediately instead of extending through the notice period as the law indicates – usually these actions feel justified because of all the turmoil the employee may have caused prior to their termination – however you should keep in mind that if these are things that the employee is legally or reasonably entitled to, you are running the risk of provoking an employee and providing more evidence to their lawyer that you are acting in bad faith - if you don’t have a legally defendable response for why you withheld these things, you should re-consider withholding them at all or else risk antagonizing the situation further -put forward some “good faith” gestures in the termination package, i.e. offering a letter of reference and outplacement – these can go a long way to making the employee feel that you treated them with fairness and compassion for their situation - in a large layoff, contact “like” organizations, not competitors, but others you know in similar industries with similar skill requirements, that might have employment opportunities for your laid off workers – anything you can do to minimize your employee’s loss from being terminated is a good thing and will work in your favour should you have a claim
  • The changes to the rules of court have simplified the claims process for higher-level cases, increased damage levels and as a result this will speed up the process and lower legal costs. These changes have taken a giant step towards guaranteeing “access to justice for all”.
  • Now more than ever, employers need to shore up their HR practices to ensure they are in the best position possible to avoid or mitigate the risk of legal action.
  • Some key HR initiatives we have highlighted today include: Implementing an employment agreement that includes a termination clause Shoring up your Performance management practices Termination processes including Full & Final Releases Comprehensive Employee handbook As we have outlined in this webinar, the upcoming changes to the rules of court will surely increase the appeal for laid off and terminated employees to pursue a claim against your organization.  Don’t expose yourself to unnecessary risk that can easily be avoided by following the HR Best Practices we have recommended here today  – these truly are your best defense.
  • Wrongful Dismall And Changes To The Rules Of Court

    1. 1. Wrongful Dismissal and the Changes to “Rules of Court” Pam Mihailoff Stephen Flatman
    2. 2. About Pivotal <ul><li>Experience: 25+ years/ Private/ Canadian </li></ul><ul><li>Market Position: broadest range of HR solutions </li></ul><ul><ul><ul><ul><ul><li>Outsourced HR Management </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>HR Help Desk </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>HR Projects </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>O utsourced Payroll </li></ul></ul></ul></ul></ul>
    3. 3. Agenda <ul><li>An overview of the key changes to the Rules of Court, </li></ul><ul><li>How these changes could impact Employers (i.e. wrongful dismissal), </li></ul><ul><li>Practical advice on what you can do to protect yourself </li></ul>
    4. 4. Overview of the Key Changes <ul><li>What factors influence an employee’s decision to seek legal recourse after termination? </li></ul><ul><li>What is going to change? </li></ul>
    5. 5. Overview of the Key Changes <ul><li>The limit on damages in small claims court actions will be raised from $10,000 to $25,000 </li></ul>
    6. 6. How could this impact employers? <ul><li>No need for a lawyer in small claims court </li></ul><ul><li>Straightforward, quick and inexpensive process </li></ul><ul><li>Increased chance of wrongful dismissal claims </li></ul><ul><li>Increased legal costs to manage higher amount of claims </li></ul>
    7. 7. Overview of the key changes <ul><li>2. The simplified procedure rules expanded, on a mandatory basis, to include claims for damages up to 100K </li></ul>
    8. 8. Overview of the key changes <ul><li>What is the “Simplified Procedure” Rule? </li></ul><ul><li>established to reduce cost and risk of pursuing a “modest” sized claim </li></ul><ul><li>Up until now this rule has only applied on a mandatory basis to claims of up to 50K </li></ul>
    9. 9. How could this impact employers? <ul><li>Larger claims of up to 100K can be pursued under the “simplified procedure” </li></ul><ul><li>These changes have made it more appealing to proceed with legal action </li></ul>
    10. 10. Overview of the key changes <ul><li>3. A number of additional changes to the Simplified Procedures rule include: </li></ul><ul><ul><li>motions for summary judgment to facilitate quick resolutions </li></ul></ul><ul><ul><li>changes to the rules for discovery that outline time limits </li></ul></ul><ul><ul><li>deadlines for trial scheduling to minimize delays </li></ul></ul>
    11. 11. How could this impact employers? <ul><li>The additional procedural changes will improve the speed, cost effectiveness and simplification of the claims process </li></ul><ul><li>Ultimately, improves access to justice for all </li></ul>
    12. 12. Minimizing Impact <ul><li>As an employer, what can you do to minimize the impact? </li></ul>
    13. 13. Minimizing Impact <ul><li>Review and revise employment contract(s) </li></ul><ul><ul><li>New employees </li></ul></ul><ul><ul><li>Existing employees </li></ul></ul><ul><li>During Termination </li></ul><ul><li>Other HR Best Practices/Initiatives </li></ul>
    14. 14. Minimizing Impact – New Employees <ul><li>Ensure the clause is customized to individual hires </li></ul><ul><li>Provide notice at least equal to minimum standards </li></ul><ul><li>Be clear and unambiguous </li></ul><ul><li>Allow new hires to seek legal advice </li></ul>
    15. 15. Minimizing Impact – New Employees <ul><li>Use the Probationary Period Appropriately </li></ul><ul><ul><li>Termination without notice or payment in lieu within 90 days </li></ul></ul><ul><ul><li>Be aware of Human Rights and WSIB obligation in this period </li></ul></ul><ul><ul><li>Conduct a Probationary Review </li></ul></ul><ul><ul><li>Extension of probationary period; be aware of obligations past 90 days </li></ul></ul>
    16. 16. Minimizing Impact – Existing Employees <ul><li>Provide Unilateral notice of change </li></ul><ul><li>OR </li></ul><ul><li>2. Provide something of value in exchange </li></ul><ul><li>AND </li></ul><ul><li>3. Provide secondary option (i.e. termination package) </li></ul>
    17. 17. Minimizing Impact – During Termination <ul><li>Review employment agreement to determine if termination clause exists </li></ul><ul><li>In absence, determine “fair and reasonable” settlement </li></ul><ul><li>In exchange for monies paid above the minimum, get a full and final release </li></ul>
    18. 18. Minimizing Impact – Full & Final Releases <ul><li>For settlements over and above minimum employment standards </li></ul><ul><li>Reduces likelihood of litigation </li></ul><ul><li>More likely to be upheld in court if challenged </li></ul><ul><li>Ensure employee has opportunity to seek independent advice (no duress) </li></ul><ul><li>Ensure your release is reviewed by an expert </li></ul>
    19. 19. Minimizing Impact – Other HR Best Practices <ul><li>Performance Management Best Practices </li></ul><ul><li>Be specific - use examples, </li></ul><ul><li>Outline the expected standard of performance, </li></ul><ul><li>Identify what should be done differently in order to meet the expectations </li></ul><ul><ul><li>include measurable goals where possible </li></ul></ul>
    20. 20. Minimizing Impact – Other HR Best Practices <ul><li>Performance Management Best Practices (con’t) </li></ul><ul><li>Set a timeframe and schedule follow-up meetings to review progress </li></ul><ul><li>Advise of consequences, if no improvement occurs </li></ul><ul><li>And Remember… </li></ul><ul><li>Be consistent with Discipline/Termination </li></ul><ul><li>Consider Personal Factors </li></ul>
    21. 21. Minimizing Impact – Other HR Best Practices <ul><li>Employee Handbook Best Practices </li></ul><ul><li>Comprehensive and compliant with current legislation </li></ul><ul><li>Consistent with management practices </li></ul><ul><ul><li>(practice what you preach) </li></ul></ul><ul><li>Train your managers and supervisors for consistency </li></ul><ul><li>Employee sign off </li></ul><ul><li>Accessible to all employees </li></ul>
    22. 22. Minimizing Impact – Other HR Best Practices <ul><li>Termination Best Practices </li></ul><ul><li>Keep it confidential </li></ul><ul><li>Terminate in private </li></ul><ul><li>Carefully communicate to others </li></ul><ul><li>Avoid appearing insensitive </li></ul><ul><li>Consider the timing of the termination </li></ul><ul><li>Don’t antagonize the employee into action </li></ul><ul><li>Act in “good faith” </li></ul>
    23. 23. IN SUMMARY – Key Points <ul><li>The impact of the changes </li></ul><ul><li>Easier and more cost effective access to the court system – “Justice to all” </li></ul>
    24. 24. IN SUMMARY – Key Points <ul><li>2. What does this mean for employers? </li></ul><ul><li>Potential increase in likelihood and occurrence of claims </li></ul>
    25. 25. IN SUMMARY – Key Points <ul><li>3. WHAT ARE THE KEY HR INITIATIVES AN EMPLOYER SHOULD CONSIDER TO MINIMIZE THEIR RISK </li></ul><ul><ul><li>Revisit employment agreements (Termination clause) </li></ul></ul><ul><ul><li>Implement performance management best practices </li></ul></ul><ul><ul><li>Full and Final Release documentation </li></ul></ul><ul><ul><li>Comprehensive employee handbook </li></ul></ul>
    26. 26. Questions www.pivotalsolutions.com [email_address] Twitter: @pivotalHRCanada

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