We are seeing a rash of terminations of mid- and upper-level employees who are being replaced by younger, less expensive ones
Given that Canada’s jobless rate hit a record low in March and employers are now scrambling to find anyone to fill open positions in virtually all sectors of the economy, one might justifiably think that terminations are no longer a major topic of conversation. Surely, employers are desperately hanging on to their existing employees just to keep warm bodies in seats and their businesses chugging along? Not so, it turns out.
Since the pandemic began, most employers have learned to find ways to save money. In what is doubtless a product of those efforts, we are seeing a rash of terminations of mid- and upper-level employees, despite the apparent shortage of available talent today. From an employer perspective, there is no better time to terminate than when the market is white hot and there are more jobs available than people to fill them. After all, legally, when terminated individuals are quickly re-employed, their claims are effectively reduced by the period of time they were reemployed. Even in early settlement negotiations, the job market is trotted out as a justification for much lower severance payouts. I certainly do so in acting for employers.
However, this isn’t the end of the story. In this effort to save costs, we are seeing companies use the current job market by increasingly targeting employees whose salaries are on the higher end of the compensation spectrum for their positions. Often these employees have been with the company for decades, working their way up through the company ranks, with salary increases and promotions over the years, which have effectively priced them out of the market. Employers are recognizing that these positions can easily be removed or replaced by combining portfolios to eliminate positions or replacing experienced employees with younger, less expensive ones. The seasoned employees are effectively finding themselves priced out of their current jobs.
In evaluating the rights and entitlements of these employees, we usually start by reviewing their employment agreements. Often these longstanding employees have either no contract at all or a brief letter of engagement which contains none of the detailed, negotiated termination provisions one would expect to see in today’s contracts.
Also, their positions may have changed so significantly during their time with the company that whatever contract does exist is no longer relevant to what they currently do. Even the more robust contracts rarely have termination provisions that survive the recent court decisions which have effectively turned severance entitlements from weeks into months by rendering language which tried to limiting severance amounts to Employment Standards Act (ESA) minimums invalid.
So despite employers’ claims that all that is owing are ESA minimums, frequently there are grounds to dispute this, including archaic ESA language, and employees are pushing back to demand full common law damages, amounts which are substantially higher — particularly for long-serving employees.
These employees also tend to be older and experienced as opposed to educated. Fortunately, the law recognizes factors such as age and length of tenure with the employer in calculating severance entitlements. The likelihood of finding comparable employment is another difficult area with these seasoned employees. Once they are let go from their current positions and start looking for new work, as they are required to do to mitigate their damages, they often find that they are not competitive for positions at the same level or salary as the position they were just terminated from because they do not meet the educational requirements. They may have high school, some college or an undergraduate degree but employers today are often looking for higher education levels. Ageism, higher educational expectations, and experience with only one employer can make these employees less competitive when it comes to looking for new jobs, and the process of finding new employment can be demeaning and demoralizing. Most likely these individuals will ultimately find new jobs. However, whether they are able to find comparable positions in terms of role and salary, even in today’s robust job market, remains to be seen.
In the meantime, employers and employees continue to duke it out over severance. While a booming job market is definitely a good time for employers to terminate for mitigation reasons, the analysis does not end there in terms of considering the unique challenges such individuals may face in seeking reemployment and evaluating what an appropriate severance offer should be.