National Post (National Edition)
On dismissal payout, know when to fold ’em
Holding out for more can backfire and result in less
In employment cases, as in life, it is important to know when to say yes. That came to mind last week in two cases in which I acted for employers where the employees were represented by two law firms specializing in employee-based employment law.
In the first, in British Columbia, our client had offered the employee $50,000 upon dismissal and, after an exchange of letters, increased its offer to $55,000. Two years and untold legal fees later, the employee agreed, at mediation, to accept only $15,000.
Why? After rejecting these initial offers, the employee started with a human rights claim arguing that she was laid off as a result of a disability (advanced MS) and that her disability did not impact her work performance.
Indeed, she claimed that she was superior to the employee who was retained. She then proceeded to file a short-term and a longterm disability claim, claiming that, even before she was terminated, she was entirely disabled from performing the functions of her manufacturing plant job and would remain disabled from performing any job for the balance of her years.
Needless to say, her human rights and LTD claims were diametrically opposed in theory since the former was premised on her ability to work and the latter on her inability. Taking a position in either of these two competing claims would damage her in the other. She was in a conundrum. I was able to leverage this inconsistency between the two claims, settling at a joint mediation on both the disability and human rights cases with a full release for only $15,000 — $40,000 less than she was offered two years earlier.
Worse for her, between the dismissal claim and the human rights claim, her legal fees must have been $30,000 or more. In short, she was approximately $70,000 worse off than if she had simply accepted the employer’s earlier offer. That lost amount was more than her annual earnings.
In the second case, in Ontario, a young woman earning $60,000 a year was terminated after two years in her first full-time employment. She made the mistake in her dismissal claim of making a series of outrageous allegations against her former employer. Despite having counsel who specialized in the area, she appeared to be under the illusion that she should be awarded punitive damages because she was fired without what she viewed to be a good reason. But, at examination for discovery, she had admitted that most employers, including her present one, BMO, also fired employees without particular misconduct being found.
She also complained about other aspects of her treatment, all of which, she admitted at examination for discovery, made practical sense from the employer’s standpoint. But her major mistake was suing in Superior Court rather than Small Claims Court, meaning that, even if she were successful but recovered less than the Small Claims Court limit of $25,000, she could not be awarded any costs.
As a two-year 24-year-old earning $60,000, she had no prospect of recovering more. My suggestions to her lawyer — even if she succeeded, she could not recover as much as her legal fees and would never receive any costs to offset those fees — fell on deaf ears.
She had been offered $11,000 when she was terminated ( just over two months’ pay), which was reasonable in the circumstances. The mediator pointed out that the further she continued with this action, the more monies she would lose since she could not recover costs, having sued in the wrong court. The mediator also pointed out that her inflammatory allegations would not do her any favours with the trial judge. As a result, she accepted $5,000, a full $6,000 less than she was offered at the time of her dismissal and, now that she had paid her lawyer $19,000 more, her case resulted in a net loss of $24,000 for this young worker clearly unable to afford it.
Obviously I am not privy to the legal advice either of these individuals received. Perhaps all these risks were pointed out to both. I hope, for those lawyers’ sake, that those risks were in writing.
Most employers make initial offers much lower than the employees’ entitlement. But some don’t, and it is important to recognize when that occurs or when a successive offer genuinely exceeds the risk of proceeding.
All too many employees, when dealing with experienced counsel on the other side, fail to recognize when the right answer is “Yes” and “Thank you.”
MOST EMPLOYERS MAKE INITIAL OFFERS MUCH LOWER THAN THE EMPLOYEES’ ENTITLEMENT. BUT SOME DON’T, AND IT IS IMPORTANT TO RECOGNIZE WHEN THAT OCCURS OR WHEN A SUCCESSIVE OFFER GENUINELY EXCEEDS THE RISK OF PROCEEDING. — HOWARD LEVITT