Going for broke

Employer’s financial situation can be a factor in determining notice of termination

By Jeffrey R. Smith

When tough times hit and the red ink stats flowing, employers often take action to trim expenses. One of the most common ways to cut costs and streamline a business is to let employees go.

Sometimes, particularly if the company is in the manufacturing industry or some other sector that has ebbs and flows in business, it may only need to temporarily lay off workers until business picks up again.

But if employment is terminated for good, should the employer’s financial situation be factored into how much the employee is owed? A few years ago, a Quebec forestry company terminated some employees because the industry was experiencing a crisis, particularly in the region where the company operated. One assistant manager, who had been working for the company for 34 years, was initially laid off but it later became a termination.

The Quebec Superior Court recently found an employee with such a lengthy term of service and a fairly important position was entitled to a significant notice period, or pay in lieu of notice. However, instead of ordering the employer to pay the dismissed employee around 24 months’ salary in lieu of notice —often considered the unofficial upper limit of notice entitlement by courts — the court found 18 months was more appropriate. This was because not only the terminated employee’s situation should be considered, but also the fact the employer was in rough shape as well, said the court.

So while much of employment law is set out to protect employees and ensure they’re not left out in the cold when their jobs are terminated, sometimes courts may recognize an employer that’s in financial trouble needs some level of protection, too.

Employers generally have more resources and are better able to weather tough times than individual employees, but sometimes things could be so precarious that having to pay out a big severance could topple the balance. But should the employer’s right to keep afloat trump an employee’s right to get what she is entitled to? Should an employee of one company get less than an employee of another company with a similar job and service just because the first employee’s company is worse off financially? Or is it fair for an employer in financial difficulty to have less of a severance obligation to terminated employees?

Jeffrey R. Smith is the editor of Canadian Employment Law Today, a publication that looks at workplace law from a business perspective. He can be reached at [email protected]. For more information, visitwww.employmentlawtoday.com.

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