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Handling terminations in tough times |
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| Proper handling avoids costly legal problems |
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Written by Christine Thomlinson
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Whether you’re a big company like GM or somewhere in between, here’s what employers need to think about before taking “tough action” in today’s current economic climate.
 More and more companies today seem to be facing the same economic challenges as those recnetly announced by General Motors in Detroit. Realizing that it could no longer “sit back and wait for U.S. market conditions to improve,” GM recently announced that it will be cutting its Canadian white-collar salary budget by 20 per cent. Rick Wagoner, GM’s chairman and CEO, is quoted as saying that “we need to continue to be proactive and even take some very tough actions to ensure our survival and our success.”
If, like GM, your company is facing some tough decisions in the near future that may impact your employees, we have set out below a number of legal considerations. Many of the “tough actions” companies like GM are considering can have serious employment law consequences if not executed effectively.
1. Take great care when altering terms of employment, such as salary reductions or benefits changes. This can be an effective cost-savings measure, but often these cannot be implemented immediately and need very specific documentation to minimize legal liability. Be sure to seek the assistance of legal counsel specializing in employment law when trying to put such measures in place.
2. Be mindful of the impact a staff reduction will have on existing employees. If the volume of work is redistributed amongst remaining employees and results in a significant change to their working conditions,
this can bring with it legal liability for constructive dismissal. It can also cause overwork and stress, leading to more employee disability claims and/or harassment complaints, all of which bring with them consequent
costs.
3. Consider a change to the structure of severance packages. For example, more companies are looking at working notice in lieu of severance. This might not save dollars off the bottom line, but if it delays the hiring of a replacement, and employers have faith that the relationship can continue amicably through a notice period, this might be an effective cost-saving measure. Alternatively, more employers are moving away from lumpsum severance payments, favouring instead the continuation of an employee’s salary for some period of time until an employee finds a new job.
4. Do not try to avoid severance obligations by taking unfair advantage of an employee. Some employers will try to “build a case for just cause,” or try to characterize behaviour on the part of an employee as a resignation, in order to avoid a severance obligation. Not only are such actions likely to fail, they bring with them the possibility of additional damages where it is clear that the employer has tried to play “hardball” and the employee has suffered some additional loss as a result.
5. Understand the statutory framework if a large group of employees is being dismissed. Each province has specific legislative provisions and/or regulations that govern “mass terminations.” (The number of employee terminations that trigger these provisions differs by province.) This can include minimum-threshold notice or severance payments, as well as compliance with administrative processes established by the applicable provincial ministry of labour. Employers should understand the regulatory environment and be prepared to execute the terminations legally.
Many of the business objectives that the above actions aim to address can be achieved through proper planning and sound employment law advice. Employers would be wise to seek out trusted employment law counsel if they anticipate having to take the same types of “tough actions” that are currently facing GM.
Christine Thomlinson, BA, LLB, is a founding partner of Rubin Thomlinson LLP, a boutique law firm specializing in employment law and human rights issues. Christine is a trusted advisor to senior human resources professionals and is the co-author of Human Resources Guide to Workplace Investigations and For Better or for Worse: A Practical Guide to Canadian Employment Law. Contact Christine via e-mail at
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or visit www.rubinthomlinson.com.
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