GoodLife layoffs present lessons for HR

GoodLife was in the spotlight recently after news broke that the fitness chain had laid off nearly 500 workers, by email, while simultaneously promoting a webinar about career options.

However, the situation does provide takeaways for HR when it comes to how to properly handle mass layoffs, particularly in the age of social media when potential errors are amplified.

Voluntary resignation?

One of the biggest errors, if the rumours are true, is that staff were advised that if they didn’t respond to the severance email, they would be deemed to have voluntarily resigned, says Fiona Martyn, an associate at Samfiru Tumarkin in Toronto.

“That is obviously illegal. It's an inappropriate approach to take: an employee can't resign from their employment unless they're voluntarily choosing to do so and it's clear and it's an unequivocal intention to resign — they can't be forced to make that decision," she says.

“GoodLife can't terminate these employees with an email and then subsequently take the legal position that they've resigned if they don't respond to the company's email.”

The law is very clear that in order to have a resignation by an employee, you need a clear and unequivocal resignation, says Stephanie Henry, an associate at Bennett Jones in Calgary.

As an example, a worker may in the heat of the moment and then come back the next day saying they were upset and they didn’t mean it, she says.

“Depending on the circumstances, the law does accommodate for that.”

There’s also the concept of abandonment, where an employee abandons their job, says Henry.

“When you're trying to establish abandonment, you're necessarily relying on circumstantial evidence to show that the circumstances objectively show that the employee no longer intended to be bound by the employment contract. So maybe the employee moved across the country and they stopped showing up to work — that's obviously a very clear example.”

A Nova Scotia worker didn’t abandon her job when she failed to provide medical information supporting her long-term absence, but her employer had just cause to dismiss her because of that failure.

Providing adequate severance pay

Another possible mistake involves inadequate severance pay, which is common practice with employers, says Martyn.

When an employee is terminated, their entitlement is determined by three things: employment standards, the employment contract and common law. And in the case of GoodLife, it’s possible the company paid out the minimum entitlements under the Employment Standards Act when some people were entitled to a more generous severance package depending on the terms of their contract, she says.

“In those cases, it would be considered a wrongful dismissal.”

To the extent that there are employment contracts in place that contract out of the common law, then that might not be relevant, says Henry.

“The employment contracts might have termination clauses that limit an employee's entitlements upon termination. And so if that's in place, then it's not necessarily true that severance at common law [is at play]… that's the reason why employment contracts with enforceable termination clauses are really, really important.”

A common mistake that employers make is either they don't get employees to sign off on employment contracts, limiting their termination entitlements, or they don't make sure that their contracts are updated, says Martyn.

“The case law on these termination clauses, the validity and enforceability of these termination clauses, are changing all the time… something that an employee might have signed off on 10 years ago [may] have been enforceable but because of the changes that have happened over time, at the date of the termination, it might no longer be a valid clause.”

In terms of common law reasonable notice, judges look at other factors such as a person’s age, their position, their sector and how long it will take to find a new job, she says.

“Those are all factors that the employment standards legislation doesn't take into consideration.”

There is no shortage of confusion and misconceptions when it comes to “severance pay”, says one Toronto lawyer.

Does a mass email make sense?

GoodLife faced much criticism online because of its decision to email the nearly 500 people about their termination.

But each provincial jurisdiction has statutory requirements about what has to happen for group termination, says Henry.

“Oftentimes, the legislation requires that the notice be given to the employee in writing and also to the government, depending on the jurisdiction. And so even if you are wanting to have those meetings in person — which as you know is practically and logistically very difficult, especially right now — you still need to be able to deliver that written notice.”

Logistically speaking, it’s also efficient to notify people by email, she says, “especially if you want to ensure coordinated communication so that everybody gets it at the same time, as opposed to doing it piecemeal via mail or piecemeal in person… it can be very, very challenging.”

Terminating so many people puts employers “in a tough position,” says Martyn.

“I know lots of people were offended that they've been with the company for 10, 15, 20 years and they were terminated via email. That's not technically a breach of any law, it's just poor practice.”

As an alternative, a Zoom call might have been better, or in-person meetings with longer-service employees, she says.

“Is it a breach of the law, would a judge make them pay further damages as a result? No, unlikely not. But it's bad press for sure.”

Canadian HR Reporter recently spoke with an HR expert and a lawyer on some of the dos and don’ts around mass layoffs.

Rehiring previous employees

GoodLife also faced criticism for advertising a career webinar at the same time as the layoffs. But could that tempt some laid-off employees to apply to their former employer?

While it’s possible, that also means the clock starts at zero, says Martyn.

“If they've been with the company for 15 years and then they're terminated… if they're rehired, they're treated as the clock restarts. There's no recognition of their previous length of service.”

If laid-off employees decide to apply with the same employer, the employer will want to be careful that the past employment relationship has been terminated, and appropriate entitlements have been made, says Henry, “and when [the employees] start new employment, that it's a fresh contract of employment, so that the employer doesn't have liability for the past years of service in respect of the new employment relationship.”

Supporting terminated workers

Many companies offer departing employees outplacement services to help them with their job search. While this helps with employer branding, it also makes fiscal sense, says Martyn.

“The employer is off the hook for damages, to a certain extent, depending on how quickly the employee finds a new job,” she says. “It minimizes the risk of liability for wrongful dismissal.”

There are obviously costs for an employer in offering outplacement support to ex-employees, but they can help the employee mitigate their damages, says Henry.

“[If] they go out there and they find a new job at a comparable wage rate, then the employer might say, ‘OK, you're mitigating your damages so the amount of severance that I owe you over the reasonable notice period is reduced by the amount that you're earning in your new employment,’” she says.

“Now, in order to take advantage of that, the employer needs to pay severance on a periodic basis through the reasonable notice period as opposed to providing an all at a lump sum.”

Properly measured, outplacement will produce a great deal of data, and there are four key indicators for assessing the effectiveness of outplacement programs, says one expert.