Mishandling a layoff

Mishandling a Layoff Can Be a Costly Mistake for Employers

Special to The Globe and Mail

Eyebrows were raised recently when Elon Musk issued an ultimatum to Twitter employees that they either commit to working long hours at high intensity or leave with a few months’ severance. These workers were only given a few days to respond. This raises the question of how should employers behave when letting go workers and what penalties exist for doing so unfairly?

The Supreme Court of Canada has declared there is a legal duty for employers to behave in “good faith” at the time of termination. Broadly put, employers must not be unduly insensitive or unreasonable.

What does the duty of good faith require and what happens if an employer crosses the line?

Tactical allegations

Some employers will strategically exaggerate misconduct or underperformance and use it as a bargaining chip in severance negotiations. However, if an employer’s allegations are viewed as strategic, it has the potential to backfire. In a decision recently issued by the British Columbia Supreme Court, an employee of China Southern Airlines was terminated for alleged incompetence. In response to a lawsuit, the airline expanded its allegations, suddenly claiming the worker was guilty of fraud, theft, dishonesty and sexual harassment. None of these allegations were even remotely believable according to the judge, and it was determined the airline used these claims as a pretext to fire the worker and try to avoid paying him severance. The judge concluded that, by attacking the worker’s character and reputation, he suffered from humiliation, depression and betrayal. The worker was awarded an additional $50,000 for his mental distress and $100,000 in punitive damages because the airline knowingly advanced false allegations of misconduct in order to defend its case.

Non-compliance with employment standards legislation

In another recent case, an Ontario court determined Hudson’s Bay Co. violated its duty of good faith after it delayed providing an employee with his statutory termination pay for several months after his dismissal, despite his lawyer’s requests. The judge determined that HBC’s overall conduct fell below the appropriate threshold as it was deemed to be “untruthful, insensitive and unduly misleading.” As such, HBC was required to pay $55,000 in damages in addition to the employee’s severance. Employees are unconditionally entitled to everything set out in employment statutes. Withholding those payments and terms should never be used as leverage.

Completing a record of employment incorrectly

Employers are required to provide a form to dismissed employees called a record of employment, which is used to kick-start an application for Employment Insurance. If employers delay the process or complete the record incorrectly, this can have the effect of postponing or prejudicing the worker’s right to claim compensation. Such behaviour can be treated as bad faith.

Poor form during the termination meeting

To the extent possible, termination meetings should be conducted in private and employers should avoid humiliating dismissed employees in front of their peers – whether by conference call or marching them out of the office. This can be treated as bad faith, especially if the employer’s behaviour incorrectly shapes public perception of why the worker was dismissed.

Reasons for termination

Does the reason for a dismissal need to be explained, in writing or at the termination meeting? The duty of good faith requires that employers be candid during the termination process but this duty only extends so far. If the termination is because of restructuring, lack of work, a poor fit or even underperformance then simply saying the termination is “without cause” is generally compliant. If the dismissal is for serious misconduct, then this should be explained and in as much detail as is necessary so the worker can identify the reasons and why the employer believes they are serious.

Pressure tactics

Threatening workers with unreasonable ultimatums or demanding they make important decisions about their employment or rights under threat of termination will generally be viewed as bad faith.

Misuse of deadlines

When it comes to any actual severance offer, workers should be given a written letter confirming the terms of separation and a reasonable amount of time to review their options with a lawyer. I recommend this be no less than five days’ time. If an employer is seen as using such a deadline to inappropriately pressure a worker to accept a less-than-fair offer, this too can be seen as bad faith.


Employers are not legally required to provide references to dismissed employees or to agree to speak favourably if asked by a prospective employer. However, in at least one Ontario case, the judge found that refusing to provide a reference to a very deserving employee amounted to bad faith.

The biggest human-resources gambles often arise at the time of termination. Employers debate whether to allege misconduct and how much severance to provide. However, the manner in which workers are treated during this process is often overlooked. Workers are deemed to be vulnerable at the time of termination. Therefore, employers must not do anything to make terminations more difficult for these workers than it already needs to be. If a line is crossed, courts have made clear that workers may be entitled to compensation in excess of ordinary severance.

Daniel A. Lublin is a founding partner of Whitten & Lublin, Employment & Labour Lawyers. Do you have a question about workplace law? You can e-mail him here.