Take it Or Leave it Offer May Result in Increased Damage Entitlements
By Melynda Layton LLB
As Published in September 2003 Issue of Up-Date OHRPA Newsletter
At common law employers owe a duty of good faith and fair dealing when terminating employment. This requires, in the course of dismissal, employers be candid, reasonable, honest, and forthright with their employees. A breach of the duty of good faith will result in increased damages. Courts have found a breach of the duty of good faith and fair dealing where the employer is unduly insensitive or does something to impede the employees’ ability to secure other work. A recent decision of the British Columbia Supreme Court confirms a “take it or leave it” severance offer can also result in a longer notice period.
Doris Chabot was employed with William Roper Hulse Child & Family Services as a Program Director for over a year. Ms. Chabot’s short-term service was not without difficulty. Ms. Chabot expressed concerns about the conduct of the executive management team particularly her immediate supervisor. By letter Ms. Chabot advised her supervisor she found his behaviour threatening and intimidating.
Ms. Chabot’s letter was not formally acknowledged and as a result she filed a grievance alleging harassment. On the premise her complaint would be dealt with Ms. Chabot attended a meeting on January 19, 1998. During the meeting Ms. Chabot was summarily dismissed due to “irreconcilable philosophical differences”.
Despite its statement at termination of employment, the employer agreed it did not have cause to dismiss Ms. Chabot.
The employer presented Ms. Chabot with a letter offering her six and one-half weeks salary and an additional 15% as allowance for benefits. These monies, totalling $7,507.22, were made available upon signing a full and final release.
When Ms. Chabot refused to execute the release the employer issued a formal notice of termination and paid the sum of $1,004.31 in satisfaction of the Employment Standards Code minimum entitlements. Ms. Chabot commenced a wrongful dismissal action claiming payment in lieu of notice and increased damages on account of the employer’s breach of its obligation of good faith. The court found Ms. Chabot was misled by the employer as to the purpose of the meeting during which she was dismissed.
After dismissing Ms. Chabot the employer made no effort to prepare a letter of reference to assist her in seeking alternate employment. On the contrary the employer wrote a cryptic letter of explanation to the people she served indicating,
“… I would like to emphasize that this separation is based on philosophical differences. I could not see a resolution and determined that the relationship would only continue to have a negative impact on the agency…”
The court determined the employer’s actions negatively impacted Ms. Chabot’s ability to secure alternate employment.
Finally, Ms. Chabot was presented with the ultimatum; accept the employer’s assessment of reasonable notice through the execution of a release in order to obtain payment in lieu of notice. When Ms. Chabot refused to execute the release the employer responded by paying a fraction of what it assessed to be appropriate compensation.
In all the circumstances the court found Ms. Chabot was entitled to an extension of the notice period by reason of the employer’s overall insensitive and high-handed approach in effecting Ms. Chabot’s dismissal, including its failure to offer Ms. Chabot any assistance in seeking alternate employment and its “stand and deliver” attitude in offering payment in lieu of notice conditional on the execution of a release.
Chabot v. William Roper Hulse Child & Family Services suggests an employer’s failure to pay what it believes to be reasonable notice of termination may generate an entitlement to increased damages.
Although there are no hard and fast rules about how to terminate an employee’s employment the basic principles are as follows:
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Make it perfectly clear at the termination interview it is not the employee’s fault, if that is your position. Stress the wonderful skills you think they have and that they can offer to a new employer. Talk about the ways you can help them in their job search by providing verbal and written references, and express your confidence in them.
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Provide the terminated employee with a letter of reference to assist in securing alternate employment.
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Refrain from making any statements, either verbally or in writing, which will impede a former employee’s ability to secure alternate employment.
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Do not raise performance issues at the termination interview which you have never previously discussed with the employee.
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Only allege cause for termination if there actually is cause. Otherwise, the employee becomes infuriated and wants more money.
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In the event there is no contract addressing liability upon termination, offer more than the Employment Standards Act in exchange for a Full and Final Release.
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If the employee refuses to execute the Full and Final Release in exchange for the increase package pay all obligations under the Employment Standards Act.
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If you intend to argue your original offer was reasonable, pay the original offer. If you do not, you leave it open for the employee to allege increased damages on the basis of bad faith.
Careful planning at the inception of employment regarding obligations upon termination of employment will minimize risk of increased liability.
To ask a question or for further advice please contact Melynda at melynda.layton@careerlaw.ca or by telephone at 613-225-4400
