Important Termination Concerns
A. DISABILITY BENEFITS NIGHTMARE SCENARIO
AND HUMAN RIGHTS ISSUES
1. INTRODUCTION
The “disabled employee” poses a number of challenges for employers who wish to terminate the employment of such employee.
It was not that long ago that the disabled employee was, for all intents and purposes, a non issue – employers would merely terminate the employment of an employee upon first sign of a disability.
Knowledge of human right legislation was not widespread and employees rarely challenged such terminations in the Courts or with the Human Rights Commission.
The Ontario Human Rights Code reflects the manner in which society expects employers to respond to and treat disabled employees.
2. TERMINATION OF EMPLOYMENT
(A) Provision of Reasonable Notice
As described elsewhere in these materials, an employer has an implied obligation at law to provide an employee with reasonable notice of termination of employment or pay in lieu of notice absent just cause for termination.
The duration of reasonable notice varies with the facts of each case. The factors include:
(a) The character of the employment;
(b) The length of the employee’s service;
(c) The age of the employee; and
(d) The availability of similar employment, having regard to the experience, training and qualifications of the employee.
The period of reasonable notice must meet the minimum standard contained in the Employment Standards Act.
Where there is just cause for termination, the employer is allowed to dismiss the employee summarily without reasonable notice on the basis that the employee has breached his or her fundamental obligations to the employer permitting immediate termination of the contract of employment.
These concepts are relatively straight forward, however, significant difficulties arise when the concepts are applied to the disabled employee.
(B) Permanent Disability
A temporary physical illness or injury does not normally constitute just cause for dismissal. A temporary though prolonged illness or injury also does not usually constitute just cause for dismissal. Reasonable notice of termination is necessary in these circumstances.
In certain instances, however, an employee who becomes permanently incapable of performing his or her job function may be dismissed without reasonable notice.
The right to end the employment relationship in these circumstances is based on a legal principle of “frustration of contract” rather than that of “just cause”.
A contract, including an employment contract, becomes frustrated if it becomes impossible to perform through no fault of either party.
At that point, the contract is terminated without liability falling upon the parties.
It must be remembered, however, that a contract of employment is not frustrated simply because satisfaction of the contractual obligations has grown more onerous and difficult.
The contract must have become impossible of performance due to circumstances beyond anyone’s control.
Since not all illnesses are significant enough to frustrate an employment contract, employers must be careful not to leap to the often desired conclusion that a particular illness has caused/created a frustration of contract.
To determine whether a particular illness or situation has frustrated an employment contract, an examination of the following factors is required:
(a) The nature of the illness;
(b) The expected length of the illness;
(c) The prospect of recovery; and
(d) The length of service of the employee.
These factors must be assessed objectively, that is, frustration of the contract will depend upon the actual existence of the illness and its expected duration rather than upon speculation or beliefs of the parties.
Implicit in the test of frustration is that both permanent and temporary illnesses have the potential to frustrate employment contracts. The Courts have generally held, however, that temporary illnesses will not usually frustrate an employment contract.
A temporary but prolonged illness of an indeterminate length might frustrate an employment contract if the employee holds an important position within the company/organization and it is important that his/her position be filled by the employer.
The Courts have also held that the right to receive sick leave or disability benefits may limit the applicability of the doctrine of frustration of contract.
In other words, Courts have concluded in some instances that a frustration of contract cannot occur in law during a period in which the employee is receiving disability benefits or sick pay. The basis of that conclusion is that the contract of employment cannot be frustrated while the employee utilizes benefits that extend for a period of time that the employer anticipated would be necessary to protect its employees.
(C) Temporary Disabilities
As indicated above, a temporary disability will not normally frustrate the employment relationship.
Accordingly, an employer who wishes to terminate an employee with a temporary disability must provide “reasonable notice” or pay in lieu of notice.
The critical issue in this context is how the employer provides “reasonable” notice to someone who, by definition, is at that time disabled and likely incapable of looking for and securing alternate employment.
Caselaw indicates that the disability of an employee will be a factor in assessing reasonable notice since the disability will affect the employee’s ability to secure alternate employment.
If an employee is totally disabled and receiving either short term or long term disability benefits, it is extremely unwise for an employer to terminate the contract of employment.
Caselaw indicates that actual notice given to an employee will be, in effect, “suspended” for the period of disability incurred by the employee during the notice period.
A totally disabled employee is truly incapable of obtaining alternate employment and may have many different claims against the employer should employment be terminated during the period of disability.
It is better to await the employee’s return to active employment prior to termination.
Although termination immediately following a return from disability leave raises the spectre of a Human Rights complaint, at least common law reasonable notice can be provided which will be effective in the circumstances.
It is important for the employer to carefully consider the nature of the termination package which will be provided to an employee who has been disabled and who has returned to work.
Often, a severance package will be exclusive of short term and long term disability coverage once continuation for the minimum notice period required by the Employment Standards Act has been satisfied.
This exclusion may be the result of an obligation contained in the contract between the insurer and the employer. Such an exclusion is fairly typical in disability policies as between insurers and employers.
Employers should be cautious, however, of excluding these benefits as there is case authority which indicates that a claim against the employer for the loss of these benefits may be successful if the employee once again becomes legitimately disabled during the notice period.
Although such a risk exists when any employee is terminated and provided with a termination package, the risk of such a claim is higher with respect to employees who have a predisposition towards or prior history of disability claims.
3. THE HUMAN RIGHTS CODE
(A) Statutory Provisions and the Concept of Accommodation
The Human Rights Code prohibits discrimination on the basis of handicap or disability.
The prohibition applies to all aspects of the employment relationship from recruitment through to termination.
The obligation to accommodate “handicapped” employees has been explicitly required of employers since 1987 by virtue of a specific section of the Code.
It was unclear for many years just how far an employer was required to go to accommodate the handicap of an employee in the workplace.
More recently, the Courts have defined more specifically the factors that must be taken into account in determining an employer’s obligation to accommodate the handicapped employee. Those factors include but are not limited to the following:
(a) Financial cost;
(b) Disruption of any collective agreement in place;
(c) Problems of morale of other employees;
(d) Interchangeability of workplace and facilities;
(e) Size of the employer’s operation; and
(f) Risk of injury and the identity of those who risk injury.
These factors must be considered and weighed so as to allow for a balancing of the factors against the right of the employee to be free from discrimination.
(B) Termination of Employment
It goes without saying the employers cannot terminate an employee simply because the employee is disabled.
In fact, however, many employers continue to do so, a practice which constitutes a clear case of discrimination on the basis of disability.
When an employer terminates the employment of a person with a “handicap” without cause, the employer should be certain that the termination is effected without any reference whatsoever to the disability of the employee.
If the disability is even one of the factors taken into account in making the decision to terminate, a violation of the Code will have occurred unless a specific exception contained in the Code establishes a defence for the employer.
Should the disability of the employee be a reason for the termination, before termination the employer should objectively assess the ability of the individual to ensure that he or she can no longer perform the essential duties of his or her position after all reasonable steps to accommodate have been considered.
The employer should establish a policy of recording all plans for accommodation considered for the individual. A record of the plans would serve as evidence of the employer’s good faith fulfilment of the duty to accommodate if human rights complaints should arise.
One situation that often arises relates to termination of a frequently absent employee.
Employers are becoming far more strict with respect to the degree of absenteeism they will accept from a particular employee.
Caselaw indicates that transitory illnesses such as influenza, colds and minor viruses do not attract the protection of the Code as they do not constitute a “handicap”.
Employers can still utilize the more traditional approaches to resolving absenteeism problems of employees who miss work due to these reasons.
If an illness which causes absenteeism goes beyond a transitory illness and is protected by the Code, employers must keep in mind the accommodation obligations and the risk of a successful Human Rights complaint should the Code obligations not be satisfied.
4. WORKERS’ COMPENSATION (WSIB) LEGISLATION
Workers’ Compensation (now Workplace Safety Insurance Board) legislation protects the jobs of workers who are injured in the workplace and who eventually become capable of returning to their pre-injury job or to modified work.
The legislation obliges an employer to offer to most employees an opportunity to return to their pre-injury employment. Failure to do so may result in penalties and increased accident cost consequences for employers.
5. SUMMARY
There are numerous considerations which must be taken into account when employers consider possible termination of a disabled employee.
Common Law and statutory protections exist for those employees and may lead to significant financial consequences to employers.
In most situations, specific legal advice should be sought and obtained.
B. LETTERS OF REFERENCE
It is extremely common that the terminated employee seeks a letter of reference from his/her employer whether the employment has been terminated for cause or not.
1. FAILURE TO PROVIDE REFERENCES
At common law, there appears to be no obligation on an employer to provide either a written or oral reference.
Unfortunately, however, that does not end the matter in that the terminated employee will still attempt to argue that there is either an express or implied term in the employment contract to the effect that the employer will provide specific and suitable references upon the termination of that contract.
There are numerous cases in which the Courts have held that employers have an obligation to provide a letter of reference/letter of recommendation to a terminated employee.
The Courts have found that the competitive position of the former employee and his/her ability to secure alternate employment may be compromised by the failure of the employer to provide a letter of reference.
There are numerous cases on record where former employees have pursued legal action against their employers for wrongful termination of employment where the Courts have found that the failure/refusal of the employer to provide a letter of reference compounded the culpability of the employer.
In those instances, the Courts have often increased the award of damages in favour of the employee.
The basis for such awards appears, in some instances, to lack solid rational justification in law, however, the Courts have made such findings nonetheless.
In some cases the Courts have attempted to make the employee whole through an award of general damages, in others through an award of “punitive, aggravated and exemplary” damages, and in others by increasing the “normal” period of reasonable notice.
Whatever the rationale, employers must be sensitive to the position of the Courts and must keep an open mind in respect of providing letters of reference.
Where an employee is being terminated without cause and reasonable notice is being provided, a suitable letter of reference should almost always be incorporated as part of a severance package.
Where an employee is being terminated with cause, the question is more difficult, however, even in these cases a “generic” letter of reference should be offered.
Such “generic” letters of reference should, at a minimum, detail the following:
(a) Length of service of the employee;
(b) Job position/job function of the employee at date of termination; and
(c) Brief description of the employee’s employment responsibilities.
It is also generally recommended that such a “generic” letter of reference also attempt to highlight and focus upon the positive qualities and abilities of the employee.
Employers must also be careful, however, about misleading prospective new employer about the employees in a way that causes a new employer to incur damage. This is a delicate balancing act which is even more difficult where cause has been alleged against the employee and litigation is a possibility.
Employers should generally establish a centralized system for providing references under the supervision of a designated person. That person should be trained in the issues that may arise when a reference is given or refused.
Again, this is a very tricky area which is not subject to specific scientific rules and guidelines which can be followed with precision. Most determinations are situational. Specific legal advice should be sought, particularly where a cause allegation is being made by the employer or where there is any indication that the employee might seek legal advice and might consider legal action in connection with the termination of employment.
C. HANDLING THIS TERMINATION PROPERLY
Mishandling the termination of an employee can have expensive, painful consequences.
In many situations, litigation may be unavoidable, however, employers who take proper precautions before initiating the termination process can minimize the financial and emotional costs of this difficult aspect of human resource management.
1. TIMING
There is probably no good time to advise an employee of a termination, however, some times are worse than others.
Employers should at least attempt to determine whether the employee is under other immediate pressure that would make the timing of the termination appear callous and insensitive.
If the matter is litigated and goes to Court, the choice of a difficult moment in the life of an employee to convey the decision to terminate could possibly result in an increased notice period if the employee is successful in the litigation.
2. THE TERMINATION LETTER
Typically, the employee should be told of the termination in person and given a letter outlining the decision.
Despite the potential for problems arising from a poorly-worded termination letter, there are several reasons for informing the employee of the termination decision in writing.
A forthright, specific and detailed letter setting forth the reasons for termination of employment will convey the message that the employer has given due consideration to this serious decision.
This is of particular importance where cause is alleged, as the provision in writing of well-formulated grounds for dismissal may serve to dissuade the employee from challenging the decision through litigation undertaken for the purposes of ascertaining the grounds being alleged.
The termination letter should set out the date of termination, settlement offer, information about benefits continuance, if any, list of statutory payments to be made, and any release document the employer wishes to have executed by the employee. The list will vary depending on the matters outstanding for resolution.
Employers should avoid a callous or insensitive tone in the termination letter, particularly where cause is not being alleged.
In one case, an employee with 35 years of service received his termination letter by taxi on a Friday evening. The letter contained no expression of gratitude for his years of service and offered no assistance in finding new employment.
The Court specifically referred to the termination letter as being “cold and perfunctory” in tone.
3. THE TERMINATION INTERVIEW
Sensitivity should also be shown in the conduct of the termination interview which should be held in a private setting and, where possible, after most other employees have left the premises.
The interview should be brief and to the point and, while it is acceptable to encourage the employee by commenting on his/her strengths or skills, the employer should be firm in stressing that the decision has been made and is irrevocable.
Anger or distress on the part of the employee should be anticipated and perhaps even expected.
The employer should not be drawn into a debate about the merits of a decision.
Two company representatives should be present at the interview.
A detailed record of the interview should be kept.
If the termination is immediate, the employer should avoid embarrassing the employee by being nearby while he or she removes personal items.
The employer should consider offering the employee the opportunity to return later on to complete this task if possible.
A positive note, if possible, should be struck in announcing the departure of an employee to other staff by focussing on the way in which the former employee’s responsibilities will be handled in the future.
An employer should avoid circulating negative views of the conduct or performance of a terminated employee as this could contribute to lengthening the notice period or damages for mental distress.
SCHEDULE “A” - THE TERMINATION LETTER
- Date and address correctly
- Method of delivery – hand delivered
- Purpose of the letter
- Reason for the termination
- Effective date of the termination
- The terms of the dismissal, if any
- What the employee is required to do, immediately or at a later date
- Wish the employee success in future endeavours
- Sign off appropriately
- List any attachments
- Ensure employee receives the original of the letter
SCHEDULE “B” – THE TERMINATION INTERVIEW/MEETING
- Meeting held behind closed doors
- Two company representatives should be present, with one being a witness (it is generally advisable not to have more than two company representatives present for fear of intimidating the employee)
- Get to the point quickly in business-like fashion
- Statements are made referring to the termination letter or prepared notes/script
- Avoid argument or lengthy explanation
- Ensure the employee understands the reason for the dismissal
- Keep the meeting short
- Handle the meeting in a professional manner
- Avoid apologies that only “add fuel to the fire”
- Do not engage in debate or argument
- Acknowledge the feelings of the employee and handle anger effectively
- Outline the details and options of the dismissal
- Obtain all company property, if any
- Take needed security precautions (this will depend upon the job duties/responsibilities of the employee)
- Depending on circumstances, the terminated employee could be invited to re-attend at the premises after hours to remove personal items if need be. For security purposes, the employee should be accompanied by a representative of the employer during any such re-attendance
- End the termination meeting/interview in a positive and humane fashion
- Give the employee the termination letter at the end of the meeting