The Sticky Employment Wicket
In changing economic times, work places often have to be re-organized. This sometimes means that positions are eliminated with the consequence that the person filling that position is let go. When that person has been a long-time employee or is in an important position within the organization, the employer can get caught between the preverbal rock and a hard place.
Exit interviews are often difficult especially for long-term employees and yet the reason for the termination is to control finances. This often leads to poor decisions in terms of the amount of pay in lieu of notice offered to the departing employee. Of course the minimum terms under the Employment Standards Act must be followed but if the pay in lieu of notice is too low, the employee is unlikely to accept it and unlikely to be advised to accept it.
At times employers, in order to deal with the economics, make an offer of continued employment but at a reduced wage. If the reduction in wage is significant, it is unlikely to be accepted.
The current state of the case law is such that a long-term employee is going to be awarded a generous period of notice. Unless the pay in lieu of notice being offered is adequate, then the dismissal will be a wrongful dismissal. That amounts to a breach of the contract of employment. It triggers an obligation of the employer to pay but it also triggers the obligation of the departed employee to do his or her best to mitigate the damages arising from the termination.
This mitigation is where the offer of continued employment can assist employers. If the offer is too meagre and is not accepted, a court is likely to reject the offer as a failure to mitigate damages because such an offer would not likely be accepted if coming from a different employer. Therefore, if the employer wants to get something in return for the wages being paid, it can offer continued employment at a reduced wage but not a severely reduced wage. This can be incorporated into an agreement which would include a full and final release for termination which would allow the employee to continue working and would assist with the economic difficulties faced by the employer.
These kinds of things arise especially with older employees approaching retirement. In such a case, an employer can benefit from the employee’s experience by offering alternative work to bridge the employee to retirement at a somewhat lower salary level. This should not hurt an employer in making such an offer whether it is accepted or rejected. If accepted, the employer keeps a long service trained employee and if rejected, it can be argued by the employer that a reasonable alternative offer was made and the employee failed to mitigate his or her damages by refusing to accept the offer.
By thinking creatively, it can result in a win-win for both the employer and the employee.
Communications on this website are intended for information purposes only and do not constitute legal advice or an opinion on any issue. Readers are cautioned against making any decisions based on this material alone. The lawyers of Waterous Holden Amey Hitchon LLP would be pleased to provide additional details or advice about specific situations.