Tough Employment Decisions & The Real Costs: Critical Information For Determining The Real Costs

I recently read an article that discusses Suncor’s operations and some choices it has made to continue with certain capital programs. The article can be found here: http://seekingalpha.com/article/3335975-suncor-energy-revisited?ifp=0 and gives a strong nod to the Suncor management for making what, at first glance, appears to be a risky decision. The writer goes on to explain how it is an excellent, long term, calculated approach from Suncor. Now, to shift thinking, consider the current state of many corporations, particularly in Western Canada, that are affected by the downturn in oil prices. People’s long-term sentiment might be optimistic, but that doesn’t change the fact that cash flow is tight and some employees, unfortunately, will be terminated. But what could that really mean and what information is needed to follow Suncor's example and make a calculated, long term decision? Absent a very well drafted, current (and unlikely to exist or have ever been agreed to by an employee) employment contract, the Employment Standards Code minimum notice periods are just that: the bare minimum an employer can expect to have to pay out to most employees. More likely, the employee will be entitled to a notice period (or pay in lieu of notice) in accordance with the common law, which will probably be more, sometimes many multiples more than the Code, and the employer “company policy” probably means very little when faced with a terminated employee. If the employee does not get what he or she views as a “fair deal”, the employer could expect thousands to tens of thousands of legal fees to address the dispute with the employee when making their initial cost analysis. Stack the employer having to pay out on top of that, the actual cost of termination could be a surprise if the employer was relying on their “policy” of, say, three weeks’ notice pay for an employee and end up paying 25 weeks (in this instance, the decision to terminate could cost over 700% more than expected to the employer). If the employer is relying on cause for termination, while it is still possible in Alberta, it is very difficult to prove and documentation for the cause often comes up short of what is required. I leave the decision of what makes sense for the business up to the business, but I can make a few comments that can help in making that business decision on more accurate information:

  • While a policy might give a good starting point to explain the number offered to an employee, the policy should not be thought of as authority for the actual notice amount that will end up being owed to the employer - the cost for payment in lieu of notice is established by law, not by policy;

  • Hindsight is 20-20, but draft an employment contract with the question of what will happen if the relationship does not work out in mind - the parties don’t need to include every protection for one side or the other, but a short consultation with a lawyer will tell you what is covered and where an employee could have unintended entitlements;

  • Don’t expect that a poor performing employee will be entitled to any less notice by virtue of the poor performance - practically, clear and repeated documentation of poor performance is necessary to carry any weight and, even then, could only go to support the difficult-to-establish termination for cause;

  • A “last chance” agreement may not give the employer cause for termination, i.e.: a “last chance” agreement may not really be the “last chance”;

  • Separate claims relating to discrimination and human rights violations from an employee can further complicate and add to the costs of an employee termination - make sure that any final termination agreement includes everything you want it to, otherwise the corporation could be faced with another claim under a different theory of law;

  • If a corporation is restructuring and shuffling personnel into new or different positions, it could be open to a constructive dismissal claim - practically, getting the employee involved in the changes and entering a mutually agreeable new employment contract will likely achieve a more positive result with less termination notice pay exposure.

Sandquist Law & Construction Project Consulting can offer many services related to both drafting and negotiating employment contracts and policies, assisting in quantifying termination notice payment exposure and litigation/dispute resolution related to terminations.


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