Easing the pain of termination

While legally not required, outplacement services can reduce employer’s liability

While there is no legal obligation for an employer to provide outplacement services to a terminated employee, providing such services can have positive benefits for both an employer and employee.

The primary consideration for any organization is whether, on a cost-benefit analysis, offering outplacement services at the time of termination makes business sense. Frequently, this analysis focuses on an employee’s position and salary. However, employers should not narrowly restrict the analysis — the personal circumstances of the employee should also be reviewed.

Conceptually, the termination of an administrative assistant with three months’ service may not initially justify the cost of outplacement services (compared to the termination of an executive after 20 years of service). If, however, the administrative assistant has a history of depression known to the employer and has little or no support network, the employer may reach a different conclusion. Similarly, if an executive leaving a company is highly regarded and has her choice of new positions or intends to pursue part-time employment, outplacement may not be necessary.

More generally, an employer may feel by offering outplacement services the employment relationship will end on a positive note, thereby increasing the chances any severance package can be resolved at a lesser cost and without protracted and costly negotiations.

From a business perspective, there may be broader reasons for providing outplacement services, ranging from a company’s desire to be viewed as an employer of choice to remaining and future employees, to public relations concerns if the termination is part of a larger downsizing or is sure to attract media scrutiny.

Legally, outplacement or career transition services can often serve as an efficient tool to reduce an employer’s financial liability arising from a termination. This typically occurs in two ways: By assisting an employee to secure alternate employment and by minimizing the risk of a claim for additional damages for mental distress.

Under the common law, an employer bears the onus of establishing a terminated employee has failed to mitigate her claim for damages. More often than not, the onus is very challenging to rebut and courts have explicitly stated if an employer wants to argue a failure to mitigate, its own failure to provide outplacement counselling will be given considerable weight.

Any employee with good legal counsel will present a detailed job search diary. Technology has made this process almost effortless and courts often accept the job search efforts at face value. Where outplacement services are offered unconditionally to an employee and not used, this failure will support an argument the employee has not taken reasonable steps to mitigate damages.

Should an employee avail herself of outplacement services, an effective outplacement program can help ensure a job search moves beyond merely scanning want ads and subscribing to Internet job sites to proactive efforts, such as preparing a job-specific resumé, networking and interviewing for positions.

If an employee is non-compliant with the program, this can be used to backstop an argument the employee has failed to properly mitigate her loss. An efficient outplacement program can frequently help an individual secure new employment more quickly than would otherwise be the case, thereby lessening an employer’s financial exposure.

There is a second legal benefit of outplacement services. If an employer has the difficult task of terminating an employee known to have a particular vulnerability (such as a mental health issue) and she is left to fend for herself at the time of termination, the employer can expect to hear about it down the road.

While the value of the severance package may initially suggest outplacement is not justifiable financially, it is legally sound to take reasonable steps to minimize the risks of a claim for additional damages for mental distress arising out of an employee’s termination.

Before engaging an outplacement services provider, employers should assess the level of services required. Regardless of how long or expansive a program an employer provides, from a best practices perspective, there is no downside to having an outplacement counsellor present at the time of termination who can, amongst other services, assess an employee’s mental state and whether additional support services are required.

Further, an employer should be aware of what career training advice will be offered by the outplacement services provider. In one case, when an outplacement counsellor presented self-employment as a viable option to the employee, the employer was later prevented from arguing before the court the pursuit of self-employment was an unreasonable attempt at mitigation.

Finally, while employees rarely pursue outplacement services independently, the law does recognize, where appropriate, an employee can recover the costs of outplacement and career counselling if such services were reasonably necessary for the employee to conduct an effective job search. More often than not, an employer will want to control the quality and cost of an outplacement program, rather than leave the issue for assessment before the courts.

Paul McLean is a partner at labour and employment law firm Harris & Company in Vancouver. He can be reached at (604) 891-2227 or pmclean@harrisco.com.

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