When it comes to employee terminations, it’s important that employers fully understand their rights and responsibilities. Missteps in the termination process can lead to uncertainty and confusion, or worse, litigation and a big payout to the employee for wrongful termination. When it comes to termination without cause, employer exposure to liability can be protected by the simple inclusion of a notice provision in the employment contract.
While many believe that the minimum standards set out in the Employment Standards Act of British Columbia will apply unless otherwise stated, this is not the case. If you do not have a contract which clearly states that the employer will never pay more than the minimum standards set out in the Employment Standards Act of British Columbia, you run the risk of incurring large and unpredictable liabilities upon termination.
A recent employment law decision from the Supreme Court of British Columbia highlights the importance of having written agreements between employers and employees which address termination pay or “notice” of termination.
Greenlees v. Starline Windows Ltd., 2018 BCSC 1457
In this case, the employer (Starline) did have a written contract in place, however, the contract did not contain a notice provision, meaning that there was no reference to an agreed upon notice period. In his decision, Justice Gomery found that a 43 year old salesman, Mr. Greenlees, who had only been employed with Starline for six months, was entitled to six months of termination pay or “notice” upon his termination.
Starline had provided the employee with one week of notice when they terminated Mr. Greenlees (without cause), providing the minimum amount mandated by Section 63 of the Employment Standards Act of British Columbia (the “Act”) which includes:
After 3 months – 1 week
After 1 completed year – 2 weeks
After 3 completed years – 3 weeks
After 4 completed years – 4 weeks
After 5 completed years – 5 weeks
After 6 completed years – 6 weeks
After 7 completed years – 7 weeks
After 8 completed years – 8 weeks
(The Act does not require payments beyond 8 weeks for any of length of service greater than 8 years.)
Because Starline had no contractual provision limiting Mr. Greenless’ entitlement to the Act’s Section 63 notice, Mr. Greenless was entitled to claim notice pursuant to the ‘common law’, an approach that can result in very large and unpredictable amounts of notice being awarded to a terminated employee.
Extenuating Factors
Some of the standard factors the court will assess, when considering appropriate notice of termination include:
- the age of the employee;
- the ease with which they will be able to find new employment (both due to their credentials and due to the availability of comparable employment in the marketplace);
- their total length of service with the employer; and
- their level of responsibility.
Additionally, if the employee was induced away from secure previous employment, and then terminated very quickly by the new employer, the courts will often add significant penalties in notice payments.
Key Takeaways from Greenless:
1. Short term employees
The court affirmed the approach taken in previous cases that short term employees (employees who have worked less than a year), who are in their 30s and 40s, and whose function is important to the employer but not one of senior management, can expect a “starting point” of 2-3 months of notice (absent a contract that stipulates otherwise).
2. Availability of Work
The court gave significant weight to the fact that Mr. Greenless made reasonable efforts to find new reasonable employment and failed to secure a new position until 7 months post termination. The court noted that the employer did not provide a reference letter to Mr. Greenlees. Although the court made no direct finding with respect to the lack of a reference letter, one is left with the impression (since it is noted twice) that Starline’s failure to provide one was a contributing factor to the award made against them.
3. Reasonable Expectations and Inducement
Having induced an employee to leave their previous job for a new position on the basis of “…forecasts of income and favourable future prospects…” could result in the requirement for a longer notice period. (Greenlees, pg. 14, para 51) In other words, if you are induced to leave a secure job for a new position, and then are terminated without cause by that new company, a longer notice period might be considered.
In determining whether inducement was present, the court in Greenless stated that it would be important to assess the reasonable expectations of the parties during the discussions which led to the employment. In this case they were deemed reasonable, and therefore warranted increased notice of termination.
[51] In my opinion, the discussions between Mr. Greenlees and Mr. Parkinson gave rise to reasonable expectations on the part of Mr. Greenlees. His discussion with Mr. Parkinson was not focused on job security, as in Pollock. I have found, however, that forecasts of income and favorable future prospects were discussed. This is not a case in which the employer and prospective employee were equally eager at the outset. Mr. Greenlees had to be persuaded. He recognized that the forecasts were contingent, that they did not amount to promises or guarantees.
Nevertheless, they were material and important to Mr. Greenlees’ decision. By them, he was persuaded to take the job. I conclude that Mr. Parkinson’s statements to Mr. Greenlees carry some weight as inducements affecting the notice period.
[52] I should add that, while I believe there was inducement, this case is close to the line. While some increase in the notice period is justified by this consideration, I give it only modest weight.
4. The Bait and Switch
Mr. Greenless argued that the notice period should be extended because of a “bait and switch” by the employer which, it was argued, was egregious and a factor to be considered.
Starline allegedly promised Mr. Greenlees he would be working on new construction sales projects with Starline. However, after commencing work with Starline, Mr. Greenlees was placed on renovation construction projects (apparently known to be a lower commission income earner) and it was argued this did not enable him to earn up to the promised income of $100,000 annually.
While the court found that this issue had no merit as the case was presented on a contractual basis, not on a misrepresentations basis, one can only assume from these statements that the pleadings were deficient in not presenting a claim in bad faith, or a claim for negligent misrepresentation, and that an alternate approach to this argument may have extended the notice period further. In other words, had Greenless been able to argue that a ‘bait and switch’ had occurred, this would have extended the required notice period.
Ultimately, despite being employed for only six months, Mr. Greenlees asked the court for six months of notice and was awarded six months.
Summary
This is a costly outcome for what was a preventable situation. Had Starline written into the employment contract the amount of notice which would be provided upon termination, limiting it to maximum amounts of notice provide for in the Act, they could have limited their exposure to liability and provided increased certainty to the parties involved.
This case should be a cautionary tale for employers. Never assume that the minimum guidelines will be applicable when terminating an employee without cause. Instead, protect yourself with the inclusion of a provision for notice in all of your employment contracts.
Sarah Hentschel practices Workplace Law in our Litigation and Dispute Resolution Group.