DISMISSED EMPLOYEE WAS TOO SMART

Accepting severance offer could have avoided costly legal proceedings, writes Howard Levitt.

Sometimes, employees can be too smart by half.

I had a recent case in which I acted for an employer who fired a short-term employee for incompetence. It had to decide whether to allege cause.

There are three possible outcomes when an employer alleges cause: First, a court may decide that the employer was aware that its prospects of success were so limited that the allegations of cause was made in bad faith and awards additional damages to the employee as a result.

Second, the court finds that the employer believed that cause existed for the dismissal but its proof didn’t quite make that mark. In that circumstance, the employee will recover severance at the top end of the range. So again, the employer is worse off.

Or, the employer proves cause and no severance is payable.

In this case, because the employee’s severance entitlement was not high and she had a young family the employer did not wish to impact, it decided not to allege cause and made a severance offer accordingly. But those who have lived on this Earth more than a few years know that no good deed goes unpunished.

Rather than accepting the severance or arguing that it was insufficient at law, the employee pushed the matter.

In a Statement of Defence, she alleged the employer had been a predatory abuser, its executives racist, that it had breached various statutes in firing her and that she was fired in retaliation for asserting various claims. The employer denied the allegations.

Were these serious and provocative allegations made to intimidate the employer into offering more severance or just to create a legal basis for having the employer pay a portion of the severance as tax-free general damages? We will never know.

What this employee, and perhaps her lawyer, forgot is that employers are people, too, and do not take well to being accused of racism, let alone splashing that on the public record. Instead of offering more, this employer was outraged.

If the employee had considered it, she would have or should have realized that her allegations forced the employer to delineate all of the reasons that actually lead to the firing, thereby placing the details of the employee’s incompetence on the public record.

As the case wove on, much time and legal fees were spent, all of which would have been irrelevant and unnecessary had the employee not overreached.

The case settled, as most do, but at a higher cost to both parties. So what is the lesson? Understand the impact of your demand letters and Statement of Claims. Consider what the response is likely to be to your allegations and what impact that will have on litigation. Appreciate what legal costs might flow from different approaches to litigation and compare those to whatever advantage might be obtained.