Using the phone to terminate the employment of an employee generally does not meet a best-practice standard for human resources. The case of the former CEO of Yahoo! Carol Bartz being terminated over the phone by the chairman of the board, allegedly reading from a script, set a high water mark for what not to do.
While most managers understand the required respect and professionalism that must surround a dismissal, there are many examples of situations that have gone awry.
One situation that employers may not be aware of is a constructive termination or constructive dismissal, which describes the situation where the employer substantially changes terms and conditions of employment, such that the substantial changes constitute a constructive dismissal.
A recent Ontario Superior Court decision confirmed that where an employer reduced the employee’s salary from $54,000 to $40,000 and scaled back benefits such as vacation days and sick days, the situation constituted a constructive dismissal which would have entitled the employee to take the position that she had been terminated from employment and to seek damages.
Another example of an unintentional dismissal arises where an employer lays off an employee without the employee’s consent. A B.C. case dealt with this issue recently where a dentist laid off an employee due to lack of work. When the employee recognized that her employment had been terminated, the dentist tried to reinstate her by offering her job back to her.
The court found that the employee should have accepted the offer to return to work but only because the employer was respectful and courteous to her and had made a good faith effort to recall the plaintiff when he realized that he had misunderstood the law.
Where an employee has been terminated from employment, the employee is entitled to (in the absence of any contractual severance provisions which may govern the situation) reasonable notice at common law or pay in lieu thereof (assuming that the employee has more than the minimum skills and training that would entitle them to only statutory severance).
However, where the employee can show that the employer engaged in unduly insensitive conduct during the course of dismissal and the employee can show proof of loss (such as a resulting medical condition), the employee may be entitled to aggravated damages.
Punitive damages may be available where a decision-maker finds that the employer’s conduct was vindictive, reprehensive and malicious.
While the new standard for aggravated damages is a higher threshold than the previous bad faith Wallace damages threshold, it seems that circumstances still arise where employer’s find themselves tagged with both aggravated and punitive damages.
A civil arbitration decision, which ended up on review in an Ontario court, involved a long-term CEO of a wholesale company who was terminated after about 20 years of employment. He was entitled to damages for reasonable notice.
But at a holiday celebration held about one month after the individual had been dismissed, the new CEO said that changes had been made to “restore integrity and honour” to the company and that these steps had been taken to “take you out of the corruption that existed.”
An arbitrator agreed that the statements were intended to refer to the dismissed former employee and that there was some evidence that he had suffered by reason of the speech. These unnecessary and personal aspersions resulted in a $25,000 damage award to the dismissed employee.
A punitive damages award was issued against an employer that was found to have used “hard ball” tactics in firing an employee for cause where the company’s response to the conduct was found to be out of proportion with the employee’s actions.
It was found that the employer drew exaggerated conclusions about her conduct and also failed to take into account the fact that, as a foreign worker on a work permit, she was vulnerable to the company’s actions on termination. The employee was awarded $20,000 for punitive damages.
While firing a senior executive over the phone, in of itself, may not result in the kind of damage awards referred to above, the incident did generate a fair amount of media comment about appropriate firing etiquette and, in particular, demonstrated how a botched dismissal of a high-ranking or highly visible and well-known employee may hurt future recruitment efforts.
With the right kind of guidance and coaching, employers can ensure that the dismissal process, while stressful for everyone involved, can be implemented to avoid liability and preserve the company’s good reputation. •
