First Reference Talks

The importance of notice and manner of dismissal

Author: Christina Catenacci

Posted on Friday, January 22nd, 2010 at 14:24

I recently read an Alberta case where a financial consultant, a top performer, was terminated without notice. The court found he was wrongfully dismissed and terminated in an insensitive manner; this error in judgment cost the employer $2.2 million in damages.

The employer in question recruited the employee from a competitor where he was also considered a top performer. While working with the employer, his book of business (an accumulated asset base of his clients who had accounts with the brokerage house) grew from about $75 million to about $150 million. Despite the employee’s great abilities and performance, the employer decided that the employee should be terminated for cause without reasonable notice.

The employee brought an action for wrongful dismissal against the employer asserting no just cause for the termination. The employer argued cause for the termination citing the employee’s failure to obtain approval for his private placements contrary to company policy.

The court disagreed with the employer’s argument and decided there was no cause for dismissal. It was clear that the employee was not the only employee of the firm who did not disclose private placements. Other financial advisors had the same private placements as the employees and faced no disciplined whatsoever. The company policy was unclear and inconsistently enforced, and the employee was actually in the process of complying with the policy when the termination took place.

As a result, the employee was entitled to termination pay in lieu of notice. The court considered several factors to determine the amount of notice:

• He was recruited by the employer from a secure position
• He was the star of the firm
• Similar employment was not available
• He was employed for seven years

The court awarded the employee a 12-month notice period.

However, the story does not end there; on top of a finding of failing to provide notice, the court also found that the employer’s actions in purporting to dismiss the employee for cause were both unfair and insensitive. The employee was awarded additional damages for the employer’s manner of dismissal. The court took into account that the employee was enticed by the employer to join the firm, the loss of his book of business and reputation were crucial for a financial advisor, and a sudden departure without reason raised suspicion and had a significant detrimental affect on his reputation in the industry.

Thus, the court awarded the employee $1,600,000 in damages for the manner of dismissal. In total, taking into account the extended notice period, the employer had to pay the employee $2.2 million.

What now? How does this case impact employers, and what practical steps can they take to avoid similar liabilities?

There are two types of termination notice to consider: statutory and common law. The first is defined by employment standards legislation as the minimum amount of time an employer must provide to an employee it plans to terminate depending on the length of time an employee works for a company. The second is a variable amount considered reasonable under the circumstances, determined by the court. The court will consider several factors to determine the length of a common law notice period such as the character of employment (employee’s responsibilities, duties and salary); the length of service of the employee; the age of the employee; the availability of similar employment; whether the employee was enticed away from an otherwise secure job to join the employer, among others.

It’s important to note that in wrongful dismissal suits, courts will award both types of notice and that common law awards are often much greater than the legal minimums. To avoid going to court and facing excessive damages, it is crucial for employers to provide proper notice of termination when there is no real cause for termination. An employer would not be able to prove just cause if, by action or inaction, it condoned the conduct. Employers must also remember to terminate in a manner that is respectful and sensitive taking into account the specific circumstances surrounding the termination.

Case: Soost vs. Merrill Lynch Canada Inc.

That is my rendition on the case… comments are welcomed!

Christina Catenacci,
First Reference Human Resources and Compliance Assistant Editor

Tags: Alberta, Alberta employment standards act, canadian employment law, common law notice, employment standards act, manner of dismissal, reasonable notice, respectful termination, sensitive termination, severance, statutory notice, termination notice, termination without cause, wrongful dismissal

This entry was posted on Friday, January 22nd, 2010 at 14:24 and is filed under Employment Standards, Human Resources. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.