Employment Benefits and Reasonable Notice

The principle behind reasonable notice is to award a former employee in monetary terms the amount of time the employer should have given the employee to look for a new job. This principle may also includes the benefits that the employee would have received during this time period if the employment had not been terminated.

Many employer’s now offer a group disability insurance plan as part of the benefits for services provided. These benefits are expected, absent clear language in the contract of employment to the contrary, to extend through the reasonable notice period. If the reasonable notice period is extended by the court beyond what the employer initially offered then the period of coverage extends to this same point in time.

If the employment contract gives the employee rights to bonuses, profit sharing, stock options and other forms of what is sometimes described as “fringe remuneration” this may be recovered as part of the damages of the reasonable notice period. The same principle applies to overtime.

If the contract of employment provided for the payment of professional dues by the employer the reasonable notice period may be seen to include these payments.

In determining what benefits can be pursued as part of reasonable notice, the fundamental question is, precisely what did the employee and employer agree to as the terms of the employment contract. Obviously the starting point for such an inquiry is the employment contract itself. Absent clear wording that indicates that even in the case of wrongful dismissal these benefits are lost courts have generally included these benefits as elements of remuneration for services provided and thus covered by the reasonable notice period.

Inducement

What happens when you have been lured away from a stable job by promises of long term and stable employment with the new employer and find yourself wrongfully dismissed? This factor may be taken into account when determining how much reasonable notice you are owed by the employer. Inducement may also be taken into account when you have wound up your own business to take a position with the employer.

This factor can lead to a significant amount of reasonable notice being awarded to the employee. For instance, there have been cases where although the length of service with the new employer was only a year, the fact that the employee was induced away from stable employment led the court to award a reasonable notice period of 12+ months. In another situation the employee had given up a consulting business only to find that they were dismissed by the employer after 19 months of employment. In this case the courts awarded a reasonable notice period of 12 months.

Even if there has been no direct inducement by the employer, if the conduct of the employer leads the employee to the reasonable conclusion that they would have secure and long term employment courts this may be taken this may be into account when determining the reasonable notice period.

Constructive Dismissal

One day you walk into work and find that your job responsibilities have been changed or you are notified by management that your position is going to be changed. Furthermore the new job responsibilities are less than your previous position. Maybe now you no longer supervise other employees or what was once a job with significant client contact is now of a more administrative nature. If you feel that you have effectively been demoted unilaterally by the employer you could have an action for constructive dismissal. That being said, this is one of the most problematic areas of employment law for one simple reason. In order to claim constructive dismissal you must reject the employer’s actions by severing the employment contract and then pursue damages for payment in lieu of reasonable notice. For obvious reasons such a course of action should not be undertaken lightly and it would be a good idea to discuss your situation with a lawyer to determine, at law, whether the change in job responsibilities is serious enough to be seen as a breach of the contract of employment and thus amount to constructive dismissal.

A problematic area of constructive dismissal is its relationship to your duty to mitigate your damages (please see the “Mitigating Your Losses” posting if you do not understand what this means). If an employer offers you job which amounts to a demotion should you mitigate your damages by accepting the offer? Courts are hesitant to include such a situation within your duty to mitigate since the employment relationship is seen to have been irreparably damaged by the employer’s actions.

Some examples of situations that courts have found to amount to constructive dismissal are, a significant change in job responsibilities; a geographic transfer; change in hours of work; a reduction in the hours of work; a change in salary; a change in remuneration from salary to commissions; an abusive employer and a demotion.

Finally, not all the above examples will apply in every situation. You must consult your employment contract to determine in what ways the employer can unilaterally alter your employment conditions. For instance, if part of the employment agreement contemplates geographic transfers then there would be no action for constructive dismissal if the employer were to act in such a fashion. To reject the direction to transfer would be considered to be insubordination and would be cause for dismissal.

Wrongful Dismissal

When an employee acts in a manner, for instance insubordination or theft of company property, that repudiates the contract of employment the employer has the right to terminate the employment. In such a situation, because the employee is seen to have rejected the terms of the employment contract, no reasonable notice is owed the employee.

Wrongful dismissal is the legal term when employment has been terminated without just cause. If the employer has wrongfully dismissed the employee the employer owes the departing employee payment in lieu of reasonable notice. Just because an employer insists that you have been terminated for cause does not mean it is so. Depending on the length of service, the impugned behaviour and other factors the principal of proportionality will be applied by the courts to determine whether the employer’s actions are an over reaction to the situation.

Second, if the employer has a discipline policy in place, subject to unique circumstances, the manner of dismissal is expected to be in line with these procedures. For instance, many employers have a progressive discipline scheme beginning with a verbal warning, followed by a written warning, followed by a written warning and suspension without pay and finally termination. It is usual for the employer to seek the employee sign documents for each step of the discipline regime in order to evidence that the employer has been following the policy. If you have been dismissed and this policy has not been followed you may have an action for wrongful dismissal and payment in lieu of reasonable notice.

If the employer dismisses an employee for incompetence, and this is not within the probationary period of the employee, courts will look very closely at the manner in which the employer went about dismissing such an employee. At the very least the employer is expected to make it clear to the employee that their job performance is not satisfactory as well as indicate what areas of performance are in need of improvement in order for the employee to remain in the employer’s services. Finally, if the employee does not improve the employer can not be seen to have acted in a manner that could be interpreted by the employee as condoning the behaviour for which she was later fired.

Reasonable Notice

A determination of the amount of reasonable notice owed by the employer to the employee is governed by several considerations, some are found in your contract of employment and some are common law rights which every employee enjoys. An employer can always dismiss an employee for cause and not owe reasonable notice but even if the employer insists there was just cause for dismissal there are a whole host of factors that need to be considered that could amount to you being wrongfully dismissed. For a consideration of these factors please see my posting discussing the basic principles of wrongful dismissal.

The first question to be asked is whether the contract is for a fixed term. This has several implications, the first is that once the time period evidenced in the contract has expired the employer has the right to terminate the relationship. On the other hand if your original contract of employment was for a fixed term but the employment relationship became one of indefinite employment the employer will owe you reasonable notice before terminating your employment. Also, if the contract is terminated before the end of the fixed period by the employer there may be an action for the balance owing on the remainder of the contract.

If you are indefinitely employed by the employer you will be owed reasonable notice if the employer wishes to sever the employment relationship. The first place you should look to in determining what your rights are is your contract of employment. Odds are the contract will contain a clause by which reasonable notice will be determined. Sometimes this clause states that the reasonable notice period will be determined by reference to the relevant provincial or federal employment statute, in the case of Nova Scotia the relevant statute is the Nova Scotia Labour Standards Code. Keep in mind that this is the bare minimum that the employer owes you, the common law, depending on a number of factors, which will be considered below, usually finds the reasonable notice period to be significantly more than the statutory minimum.

Sometimes it is said that as a rule of thumb the employee is owed a month of reasonable notice for every year worked. This is an overly simplistic application of the principles of reasonable notice which take into account a number of facts, the most salient being, the age of the employee; educational level; position within the organization; years of service for the employer; inducement to leave stable employment; and lack of other employment opportunities. This list is not closed, there are other factors which can be taken into account and you should consult a lawyer to adequately canvas all relevant considerations.

A discussion of reasonable notice would not be complete without taking into account what are sometimes described as Wallace damages. These damages are not punitive in nature but hold employers to account for the manner in which they treated the employee and the conditions under which the contract of employment was terminated. If the court finds that Wallace damages should be considered they will extend the notice period. The rationale behind them is that if the employer acts in a manner which affects the employee’s ability to seek alternate employment this will be factored into the reasonable notice period. Situations where the employee is humiliated by the employer, for instance where the employee is fired in front of other employees, directed to immediately clear out his or her work station, or the employer does not terminate the employment in a good faith manner have all been used by the courts to extend the period of reasonable notice.

Severance Agreements

The first thing to keep in mind is that if the employer offers you a severance agreement and applies pressure on you to sign the agreement there is a strong possibility that the agreement is void due to the manner in which the agreement was achieved. In the law of contracts parties to a contract must bind themselves without undue pressure being exerted on either of the parties. In an employment relationship that undue pressure is almost invariably applied by the employer. A court must be confident that any agreement that you entered into was done of your own volition. This means that the release from all legal claims against the employer, a common element of such agreements, although signed by you would not be binding. The end result being that an action for wrongful dismissal is still possible.

Many severance agreements provide for time to consult a lawyer in order to determine whether your employment rights have been adequately met by the specifics of the offer. Sometimes an employer will also, as part of the agreement, provide remuneration for the legal costs associated with having the agreement looked at by a lawyer. At the very least you should ask for time to consider the employer’s offer.

If you have signed such an agreement under pressure or without adequate information as to your legal rights and suspect that the specifics of the agreement do not amount to the damages you feel you are owed for reasonable notice you should consult a lawyer.

Mitigating Your Losses

At law, once an employee is dismissed, even if this is done in a wrongful manner, the employee is still expected to mitigate his or her financial losses from the severance of employment. An employment relationship is a contractual one. Even if the employee has been wrongfully dismissed he or she is under a duty to reduce the financial loss as much as possible. In terms of Employment Law this means mitigating your losses by looking for another job as soon as is practical. Obviously you are not expected to start job hunting on the day that your employment is ended but to start sooner than later is always a good idea.

If you have lost your job and are pursuing an action against your employer for wrongful dismissal keep a list of all employer’s that you have applied to as well as a journal of job interviews and a file containing all correspondence from prospective employers. This will show the court that you have been attempting to mitigate your damages in good faith. It may also serve as evidence of the difficulty of finding alternative employment in your field of employment and can have an impact on a court’s determination of the length of reasonable notice you are owed by the employer. If you commence an action against the employer odds are the employer will seek to determine what attempts you have made to improve your employment condition. To keep an ordered and meticulous file of all attempts will prevent the employer from arguing that you have not attempted to mitigate your financial losses.

Independent Contractors

Reasonable notice is a common law right owed to employees. There is no right to reasonable notice if you are an independent contractor. For this reason it is important to determine precisely what your employment relationship with the employer amounts to at law. If you are an independent contractor then the principles of commercial contract law apply. Common professions that are usually seen by the court as independent contractors are real estate agents and building sub contractors. In order to determine whether an individual is an employee the courts have applied a control test. The principle behind the test is simple. The more control the employer has over the individual the more likely, even if the contract states otherwise, the individual is an employee and thus has a right to reasonable notice. To put in another way, the control factors are examined to determine whether you are an entrepreneur, running your own business or whether you are employed as part of the employer’s business enterprise.

The factors to be considered are not set, there is always the possibility of new considerations but at the present some of the more common considerations are, the degree of control that the employer has over your work; the employer determining the method by which the services are performed; the worker being expected to work set hours; the employer determining when the services are to be performed; whether or not you are subject to company policies and discipline; the obligation of the worker to attend employer meetings; the inability to offer your services to other employers; the supply of the employer of the tools necessary to carry out the job responsibilities and the imposition of a dress code by the employer.

On the other hand there are factors to be taken into account that would indicate that you are not an employee but an entrepreneur and thus an independent contractor. The fundamental question being whose business is it? If you are carrying on a business in your own interests and that business provides the possibility of profit or loss odds are you would be considered to be an independent contractor.

Finally it should be kept in mind that that the wording of the contract will not determine what the relationship, at law, amounts to. Courts will look at what actually transpired between the employer and worker in order determine whether there is an employer-employee relationship.

Employer Policies and Procedures

In addition to the contract of employment the employer may have polices and procedures in place to give substance to some of the clauses within the employment contract. It is up to the employer to make sure that you are aware of the substance of these policies and will often seek that after reviewing the policies that you sign a document as evidence that the polices have been brought to your attention and you agree to follow them. Make sure that you read the policies closely before agreeing to them. At a later date if you are disciplined or terminated for breaching a policy of which you are not aware it will be very difficult to challenge the employer’s actions if you have signed such an agreement.

One of the most common policies that you will find in virtually any employment situation concerns human rights. Under both federal and provincial human rights legislation the employer can be held vicariously liable for human rights violations within the workplace, for this reason many employer’s have a zero tolerance policy in place for behaviour amounting to sexual or racial harassment. The policy may give the employer the right to terminate employment in the first instance of harassment. Such policies often include investigatory provisions which the employer will follow to determine exactly what happened. You should also be aware of such policies since if the harassment is directed at you and the employer does not follow the policy you may be able to pursue legal remedy.

Another common policy is the procedures that an employer will follow, once the probationary period is over, to discipline and terminate an employee. The usual policies have a set of progressively more severe penalties as well as the type of notice given, usually from verbal to written warnings, which concludes with termination. Make sure you are aware of these since if your termination does not follow this procedure you may be able to pursue an action for wrongful dismissal.

In addition to human rights policies the employer may also have policies, amongst others, concerning health and safety procedures within the work place, a detailed medical absence policy, an full explanation of how vacation time and pay is administered, break and meal times, overtime compensation, acceptable use of employer property, internet and email policies, confidentiality obligations, conflict of interest guidelines, probation period guidelines, and pregnancy and parental leave policies.

Finally, the employer may reserve the right to not follow the outlined procedure stating within the policy that it is subject to change as well as reserving the right of management to not follow the policy where circumstances dictate a different approach to ameliorating the workplace problem.

The Contract of Employment

The following is a review of the types of basic provisions that are usually found in contracts of employment and things to consider when reviewing the specific clauses, in the future certain types of clauses will be considered more in depth. Depending on the complexity of the contract it is a good idea to have a lawyer review the agreement and clarify the legal implications of any clause you have questions about before signing it. Once you have reviewed and accepted the contract make sure that you place it in safe keeping to review when you have questions or in the unfortunate event that your employment is terminated.

Job description

Is it clear what my responsibilities are?
Does the employer have the right to modify the responsibilities of the position without my agreement?
Does the employer have the right to a lateral transfer?

The life of the contract

Is the term of the contract fixed or indefinite?

Probationary period

Is there a probationary period and if so how long is it?

Remuneration

How often is the salary for the position reviewed?
Are there automatic cost of living increases?
How often is the salary paid?

Commission Income

Is there a base salary?
How often are commissions paid?
What happens to unpaid commissions if employment is terminated?

Bonuses

Is the bonus determined by a formula or is it at the discretion of the employer?
When are bonuses paid?

Stock Option Plans

When do the stock options vest?
Is there a timeline by which the stocks are to be sold?
Does the contract give the employer the right to not honour stock options in the event of wrongful dismissal?

Benefits

What are the essentials of the employer’s pension plan?
Is there a pension plan for part time workers?
How long does the employment relationship have to be before the employee becomes a member of the pension plan?
What type of long term and short term disability insurance plan is in place?
Does the employer offer an employee savings plan?
Does the employer offer employee loans?
Does the employer pay professional dues and membership fees?
Is there a company credit card and expense accounts?

Sick Leave

Does it accumulate over time?
Is there a responsibility to provide the employer with a doctor’s note?

Vacation

Does it accumulate over time?
Can I take payment in lieu of vacation time?
Does the vacation period increase with length of service?

Termination of employment

How does the employer terminate the relationship with just cause?
Does the employer have the right to terminate without cause during the probation period?
Does the severance pay increase with length of service?
Does termination without clause include the employee’s rights under the Nova Scotia Labour Standards Code?
What type of notice is the employee to give if they wish to end the employment relationship?

Moving Costs

Does the employer remunerate the employee and family to move?
Does the employer remunerate the cost of moving the employee’s belongings?
Does the employer remunerate the cost of accommodations while the employee looks for a permanent residence?
Does the employer cover any of the expenses of selling and buying a new home?

Relocation

Does the employer have the unilateral right to relocate the employee, and if so, under what conditions?
What expenses are covered by the employer to relocate the employee?

Conflict of Interest

How is the behavior of the employee affected outside of work, for instance can the employee still operate a part time business offering the same services.

Confidentiality of Information

What are the responsibilities of the employee in regards to information they are party to due to working for the employer?

Non-competition

If the employee is terminated or leaves of his/her own accord are there temporal restrictions placed upon them as to when they can compete with the employer?
Are there geographic limitations?

Non-solicitation

What restrictions are placed on the employee in terms of contacting the employer’s clients if employment ends?

Legal Costs

Does the employer provide reimbursement for the legal costs of having the contract reviewed?
Does the employer provide reimbursement for the legal costs of having a severance agreement reviewed?