By Howard Levitt
The temptation to save on severance costs by improperly alleging cause was too alluring for Toronto-based Ergo Industrial Seating Systems. Yielding to that temptation proved to be a costly sin.
Tom Morrison, who was responsible for Ergo’s sales in Eastern Ontario, Western Quebec and the federal government, viewed himself as a top sales representative for Ergo. He generally met or exceeded his sales targets and had never received any indication of dissatisfaction with his performance during his eight years of employment with the company.
A change in management, however, changed everything for Morrison. His new boss came to the conclusion he was not a good fit. She knew someone interested in his job who could focus on the health-care segment of the business which, she considered to be underserviced.
Such situations are commonplace and, had Ergo given Morrison an appropriate severance package, the story would have ended there. Instead, the company opted to provide him a mere month of working notice of termination. Without even the courtesy of a face-to-face meeting, Ergo called him to advise of its decision. In a follow up letter, the company alluded to the possibility of just cause being advanced.
This was the start of an aggressive strategy. The minimum Employment Standards termination pay was delayed for more than three years. As well, his Record of Employment for Employment Insurance was not issued in a timely way.
When Morrison sued, allegations of cause and wrongdoing materialized: The company accused him of, among other things, poor performance, failing to market the health-care sector and abusing the demo account.
In the absence of any meaningful evidence to support these allegations, the defence unravelled. Indeed, it eventually admitted Morrison was one of Ergo’s top performers.
The allegations of cause were dropped before trial, but it was too late. Justice P. E. Rogers of the Ontario Superior Court of Justice found Ergo did not believe it had cause. Rather, the accusations had been levelled solely to further its pugnacious negotiation stance against Morrison. And these tactics were deliberately pursued in the face of the employer’s knowledge of Morrison’s precarious financial state.
Outraged over the company’s conduct, the judge awarded Morrison a year’s pay plus his legal fees, as well as $50,000 in punitive damages. The message was clear — the courts would not tolerate an employer advancing allegations of just cause without reasonable basis, nor would it tolerate actions in bad faith.
Here’s how employers can avoid such an outcome:
- Comply with Employment Standards Assure the payment of all minimum statutory amounts under the applicable employment standards statutes. Do not use these payments as leverage;
- Issue the Record of Employment without delay File the document with Service Canada within five days of the interruption of earnings.
- Avoid misrepresenting the reasons Be candid with the employee about the reasons for dismissal. Ergo could have simply informed Morrison that it was looking for a different skill set, rather that alluding to and then openly alleging cause.
- Analyze the reasons for dismissal Before making a decision to terminate, step back and consider whether you actually have cause. The urge to demonize a mediocre performer is often overwhelming. The courts, however, will invariably visit the absence of progressive documentation of poor performance and warnings on the employer, not the employee.
- Heed counsel’s advice Ergo was forewarned by its lawyers against alleging cause in this case. That compounded its inability to demonstrate that it reasonably believed it had cause.
- Timing is everything An employer who believes it has just cause must move with alacrity. Any delay, such as to find and land a replacement, reinforces a court’s suspicion allegations of cause are pretextual.