When does it make sense to fire without cause?

February 27, 2012 Adam Gorley Employee Relations, Employment/Labour Standards, Human Resources, Recruiting and Hiring, Union Relations

Image: www.torontosun.com

You might have heard news about Toronto’s recent and ongoing negotiations with its unionized inside and outside workers. Some aren’t happy with the outcome of the outside workers’ contract. Paramedics specifically don’t like that the deal has prevented them from obtaining essential service status. But at least the sides negotiated and reached a compromise, if only at the last minute and under great pressure.

Another Toronto labour dispute played out less felicitously. That was the firing of the head of the Toronto Transit Commission, Gary Webster. A somewhat controversial figure—many debate his legacy and achievements—Webster had been with the TTC for 37 years and had one year remaining on his contract as general manager. He earned approximately $280,000 at the time of his termination. The TTC, composed of nine Toronto city councillors, voted to fire Webster immediately, without cause, as per a clause in his contract. It is estimated that buying out his contract will cost the city $500,000.

Some argue that it is worth the cost to release Webster so the TTC can “move forward.” Others decry the move as pointless and wasteful at a time when money is in short supply. Moreover, the city could have obtained some value for its money by simply not renewing the contract next year.

The commission’s decision was so abrupt that the deciding city councillors failed even to realize that their chosen interim GM is legally prohibited from taking on the role due to visa issues.

I mention all of this as both a caution and a bit of advice.

There are no doubt times when buying an employee out of her or his contract will offer better value than keeping the person in place. In such cases, it will be invaluable to have a “without cause” provision in the employee’s contract to limit the employer’s liability, specifically working notice and severance pay. Of course, these must at least match the statutory and common-law minimums, and likely offer more, but such clauses should prevent drawn-out legal battles. It is important, nonetheless, to treat your employees fairly throughout a termination. A firing without cause based on a reasonable and enforceable employment contract provision may still turn sour and lead to animosity and accusations of wrongful dismissal. I don’t expect that to happen in the case of Gary Webster, but it has happened in the past and will happen again.

In any case, an employer should consider very seriously the decision to fire an employee without cause. Could the employee still provide value to the end of her or his contract? Can the company afford the extra costs associated with terminating and replacing an employee? Is there a person within the company who can replace the employee? Does the employee have expertise or skills that are necessary and/or cannot easily be replaced? Is the employer prepared for a legal battle if it becomes necessary?

Another lesson we can take from this case is that succession planning and corporate immigration are complex and long-term issues, and employers that don’t understand this fact are doomed to find themselves in the TTC’s position: with no one ready to move into an important recently vacated position, or perhaps ready but unable due to visa complications.

Have you been following this case? What are your thoughts?

Adam Gorley
First Reference Internal Controls, Human Resources and Compliance Editor

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Adam Gorley

Editor at First Reference Inc.

Adam Gorley is a copywriter, editor and researcher at First Reference. He contributes regularly to First Reference Talks, Inside Internal Controls and other First Reference publications. He writes about general HR issues, accessibility, privacy, technology in the workplace, accommodation, violence and harassment, internal controls and more. Read more