One labor lawyer says employers often overlook the financial repercussions of firing an employee – here’s what to remember.
The decision to dismiss an employee is rarely made in haste but – according to one labor lawyer – employers often overlook some of the important financial aspects.
“All too often employers dismiss employees without fully appreciating the obligations and liabilities associated with their decision,” says Susan Crawford, of Crawford Chondon & Partners. Here are the five mistakes she says employers make most:
1.Only paying statutory minimums
“One of the most common misperceptions employers have is that statutory entitlements are the extent of their obligations owed to a dismissed employee,” reveals Crawford.
“The reality is that unless the employee signed an employment agreement when they started employment that clearly limited their entitlement at the point of termination to the statutory minimums, employees are entitled to common law reasonable notice.”
2. Not continuing benefits during the notice period
“With few exceptions, the common law reasonable notice period will include continuation of group benefits, pension contributions, car allowances, bonuses and profit sharing,” asserts Crawford.
“These obligations can significantly increase the costs of the dismissal and are often overlooked by employers when assessing the pros and cons of letting someone go,” she adds.
While it might sound unlikely, Crawford reminds employers that terminating a worker’s benefits could have huge legal implications should that employee die or become permanently disabled during the notice period.
“Employers who fail to continue group benefits essentially step into the role of insurer if entitlement to benefits is triggered during the notice period,” she explains.
3. Insisting that “cause” exists
No matter how certain you are that you’ve made the right decision, taking the position that legal cause exists to fire an employee is risky.
The employee will be severely affected by your decision – typically, they’ll lose employment insurance benefits, could have a harder time finding reemployment and may face financial challenged since because they didn’t get a severance package.
“For these reasons, courts will often come down hard on employers who take a cause position that cannot be defended at trial or before an adjudicator,” says Crawford – damages for mental distress and punitive damages will likely be awarded courts are often more generous with the notice period assessment.
4. Dismissing an employee on protected leave
Employers enter dangerous territory when terminating a worker on protected leave and, according to Crawford, should consider all other alternatives.
“Courts and tribunals will scrutinize these dismissals to ensure that no part of the decision to dismiss was based on the fact that the employee took the leave,” she explains – employers could even be forced to reinstate the employee with full back pay.
5. Not requiring an employee to sign a release
Many employers may think they’re protected if they pay out a severance package which exceeds an employee's statutory entitlements but it’s simply not true, says Crawford.
“Always get a full and final release from the employee,” she advises. That way, the employee cannot come back at a later date seeking additional compensation for the loss of group insurance coverage, pension contributions or other fringe benefits.
“A comprehensive release can even protect an employer from allegations of discrimination and/or harassment being made at a later date,” she adds.
Read Crawford’s full article here.
