Negotiating severance for termination without cause.
It's nice to be sought after, entreated, coveted. There is nothing quite like it for one’s self esteem. Unfortunately, as we age, it tends to happen less frequently, if at all. But for Paul, it happened to him at the age of 58.
Having worked in his industry for many years Paul began to receive aggressive recruitment calls from a contact he had with a competitor. It was only the fourth time an offer of employment was made that Paul bite. He resigned his old employment and started his new job. Twelve months later, he was terminated. He had left 10 years of secure employment behind to take a job that lasted a year. At the age of 59 he was now out of work.
Although the employer provided him with one month’s pay in lieu of notice, it seemed to him to be on the light side given the career he had left behind for this fickle employer. He sued for wrongful dismissal and succeeded. The judge took into account the 10 years he had left behind and awarded 12 month’s notice minus the one month he had already received. The judge also subtracted the money earned by Paul from a new job after 7 months of unemployment.
There are lessons in Paul’s scenario for both employers and employees.
Obviously Paul had leverage at the beginning of the relationship given how badly they wanted him. Unfortunately he did not use it to negotiate a contract that provided him with a minimum payout if he was terminated without just cause. I doubt he would have been able to negotiate a year’s minimum payout but 6 months would not have been unreasonable given that he was leaving behind 10 years of secure employment. Granted, he ended up with more from a judge but law suits like Paul’s are always risky and legal costs are involved.
For the employer, it should have made sure that as part of Paul accepting employment he signed a contract limiting his entitlement on termination to as little as could be negotiated. It too would have avoided legal costs, not to mention the pay in lieu of notice.
Employment contracts are very similar to prenuptial agreements. Nobody likes to think about the end of the relationship. It seems a bit nasty and sour to even bring it up. In the seduction phase of the relationship nobody wants to imagine anything but a long lasting and fruitful association.
I have been surprised on many occasions by employees that have quit secure employment and casually signed hiring letters with a probationary clause. That clause usually indicates that they can be let go in the first three months with no pay in lieu of notice whatsoever. If you were desperate to get out of your old job that’s one thing but if you are moving out to move up, a little more reflection is recommended. This recklessness is akin to ending your marriage because you just set up a first date through a Tinder match and you are sure it will go well. You never really know what a work environment is like until you have worked with and for people. The reverse is true for employers: you may do a great interview but turn out to be a dud. Neither party should get too caught up in the excitement of change.
Hope often fades and cohabitation can lead to conflict. In a marriage you might consult a marriage counsellor but there is no parallel role within the employment relationship. Unlike a marriage, one partner, the employer, has almost all the power.
I am sure that there are lots of situations I never hear about where an employee is induced to leave secure employment and they are glad they did it. The relationship is everything they dreamed of and lasts a long time. But just in case you end up in the other kind of relationship, think about a prenup … I mean employment contract.
Ed Canning practices labour and employment law with Ross & McBride LLP, in Hamilton, representing both employers and employees. Email him at email@example.com
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