Cutting your losses (On Law)

Sometimes it’s better to offer poor performers a fistful of cash than to bother with progressive discipline

Sometimes progressive discipline isn’t progressive enough. Not in terms of forward thinking, but rather in overall speed.

While every organization should have a progressive discipline policy in place, and follow it to a tee in an effort to help low performers improve, there are some rare occasions where it will be more advantageous for an employer to cut its losses, hand the troublesome employee a fistful of cash and show him the door.

After all, employers have the right to end the employment relationship at any time. The catch, of course, is that they have to give the worker reasonable notice, either in terms of time or pay in lieu of notice. Unfortunately, there is no magic formula to determine exactly how much notice is appropriate.

During my school days, I asked one of my journalism professors how long a story I was working on should be. He responded by saying, “How long is a piece of string?” The answer, simply, is as long as it needs to be. The same logic applies in determining how much severance is enough to make the worker go away and not sue for wrongful dismissal. One worker might be happy with what the employer considers a lowball offer, and another might spurn an overly generous offer far beyond what he might be awarded if he sued. At one time a “one month for every year of service” rule had some traction, but that notion has been thoroughly dispelled and rejected by courts across the country.

Getting rid of a troublesome employee on the spot won’t be cheap, especially if the person has been with the company for awhile. Courts have awarded long-serving workers fired without cause upwards of two years’ pay in lieu of notice. That seems to be the upper limit of reasonable notice, and less senior employees with shorter lengths of service likely won’t be entitled to that much. In calculating reasonable notice, courts usually take into account the Bardal factors — the character of employment, length of service, age of the employee and availability of similar employment, among other things.

If HR is dealing with a worker it knows won’t improve, but feels compelled to go through the progressive discipline motions so it can prove just cause and avoid paying severance, it might be better off taking a one-time financial punch to get rid of the worker immediately. After all, the costs of keeping him around while progressive discipline runs its course could be onerous. When a company accounts for the time the worker’s manager has to spend with him, the lost productivity and the decreased morale as the noose tightens, it might be cheaper and less stressful to call it a day. Plus, it won’t waste any more time on an employee it knows can’t cut the mustard and can start training his replacement right away.

But it’s a tricky minefield to navigate. Getting rid of employees willy-nilly won’t contribute much to an employer-of-choice reputation and can make all workers nervous about job security. Many workers already get skittish when they see HR staff wandering around with envelopes in their hands, and repeatedly terminating employees without cause won’t help HR’s image. But following the progressive discipline route isn’t without its pitfalls either, especially if employers stumble along the way.

In 2004, Justice Randall Echlin of the Ontario Superior Court of Justice gently chided an employer for skipping steps in a progressive discipline policy in Daley v. Depco International Inc. Though the court ultimately ruled in favour of the employer, it raised a few warning flags. Justice Echlin said the HR manager at Depco occasionally skipped steps if she felt a particular transgression was especially egregious, something the company’s policy didn’t allow for.

But Justice Echlin was careful to say employers, particularly ones without unions, should not be criticized too much for taking the time and trouble to create progressive discipline policies.

“By clearly setting out employer expectations and creating a fair and clearly documented regime of discipline, fewer misunderstandings will occur,” said Justice Echlin.

Justice Echlin’s reasoning was recently cited with approval by another Ontario judge in Downham v. Lennox & Addington (County). The County of Lennox and Addington lost a wrongful dismissal suit after it fired a worker allegedly for cause, ignoring its progressive discipline policy in the process. The judge was critical of the county for being more concerned with building a case against the worker than in helping him. The court said it was an “aggravating factor” that the employer created such a policy, which shows it fully recognized its responsibilities to its employees, then failed to follow it.

“Employers should be encouraged to create such policies,” said Justice Donald Ferguson of the Ontario Superior Court of Justice. “I am not saying that employers who create such policies put themselves at greater risk by doing so. I am saying that the conduct of the employer here is egregious because it relies on the rules in the policy about employee conduct to justify its actions but completely fails to follow the rules in the policy about the employer’s handling of such alleged conduct.”

But in both Daley and Downham, the employers alleged cause in terminating the employment relationship, hoping to avoid paying any severance. If the employer abandons cause as a reason to terminate and antes up enough cash in a friendly parting of ways, the employee won’t have reason to sue because a court won’t award him anymore than what the employer has already given him. It’s an expensive, and slightly risky, route to go but sometimes it just might be the best option for everyone involved. But it should never be a general practice.

Todd Humber is editor of Canadian Employment Law Today, a sister publication to Canadian HR Reporter. For more information visit www.employmentlawtoday.com.

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