Clients and friends often ask me what I like most about practicing on my own. My answer is frequently, “I like having no employees”. Now why would I say that? This blurb addresses this attitude.
I am not an employment law specialist, but in the course of acting as general counsel for business clients, I am called upon to give advice on employment situations. Human resources is a super-growth area for lawyers and consultants.
Many individuals have had to visit a lawyer for an employment matter, be it termination, WSIB complaints and appeals, discrimination, sexual harassment, or Employment Standards benefits. Unions address these cases for their members, but non-unionized employees have no such advocate.
However, employees in Canada have one thing going for them: the case law and governmental bodies (e.g., Human Rights Commissions) are incredibly biased in favor of the employee. (WSIB in Ontario is a glaring exception.)
The judicial and legislative/political rationale for creating this state of affairs is nothing more than an assumption, quite flawed in reality, that all employers have all of the power, so the weak, always abused employee must be protected/favored. There is no doubt that workers in non-unionized retail and hospitality are at the complete mercy of their employers. But, the judges and bureaucrats don’t help them anyways. These people don’t know how to use the legal or regulatory system, and the dollar amount at issue is usually too small to justify hiring a lawyer.
There is a large part of the workforce that receives disproportionate assistance from the law and government. My point is not to define the issue, but to alert business owners to it so they can avoid the worst pitfalls.
I feel so strongly about the unfair advantage given to employees that I refrain from acting for employees now. I prefer the challenge of protecting the employer!
Things That Will Amaze You
Let me tell you about some shocking examples of judicial activism in this area:
- Independent contractors entitled to reasonable notice: You probably think if you have a written contract with an independent contractor, which contract expressly states that the contractor can be terminated without notice or severance, that you can invoke that provision to end the contract. There is a recent decision where the Ontario court ignored the contract termination provision, and imposed an obligation to give reasonable notice! Wonders never cease!
The court regarded the situation as akin to employment, so it imputed the reasonable notice requirement. So, you might be required to give that agent five months notice before you terminate the deal. We can hope that this mushy-headed thinking will be overturned on appeal in the next 10 years or so.
- Wrongful Dismissal Can Kill Fiduciary Obligations: If you terminate an employee, and it turns out that the court doesn’t think you had “just cause” for termination, the non-compete, non-solicit and confidentiality obligations of the former employee may be negated.
- Why You Can’t Fire Anyone Anymore: Any employer who has received termination advice from me has heard me say, “It is virtually impossible to establish just cause to terminate, on the spot, an employee in Canada.”. And this is so. Believe me. The courts have basically pushed the bar up so high it is ridiculous. No matter what the employee has done, short of murder, rape and destruction of the factory, such employee can’t be fired on the spot.
No, you see you must tell the employee that he/she has been a bad person, and that if they do it again, they will be fired. That is, if you can prove the crime, have warned the employee in writing in the most clear of terms, and the person is given a reasonable period of time. And oh yes, you better hope the person doesn’t have a latent disability like alcoholism, depression, bad back, or halitosis, or a claim for sexual harassment or discrimination. If they do, then you probably can’t fire them at all.
- There’s No Such Thing as “Near Cause”: Now that you realize that just cause is so difficult, I’ve got another zinger. Let’s say the employee was stealing you blind and you caught him red-handed, firing him on the spot. The court then says that you should have told him to quit stealing and take him to therapy for kleptomania. You now think you can make a deal, and maybe finish the pesky litigation. So, you offer him one-half of what you would be required to pay him in damages in lieu of notice for the firing. Sounds reasonable? Not in Canada! Since the dismissal was unjust, you are liable for the entire amount of severance he would have been entitled to for a termination without notice or cause. The thief takes home 100% of the severance, or you are forced to take him back.
I could go on and on. It’s just too painful for both of us. Let me give you my short list of ways to avoid employment hassles:
- have written policies and give them to each employee.
- be consistent in applying policy.
- treat good or satisfactory employees well: humiliating someone can cost you a lot of money.
- always make notes of meetings, and confirm decisions in writing to the employee right after meetings.
- keep your eyes open; don’t condone misbehavior, and then expect to be able to deal with it later on summarily.
- sign employment agreements, with non-compete & confidentiality clauses, with significant employees.
- sub-out work to jobbers where practical, to minimize employees. Line up alternative jobbers for back-up. Be a virtual business to the extent you can. There is no glory, only grief to being a big employer.
- you can fire for just cause in Canada: it takes patience and strategy.
- always try to do a deal with a departing employee, even if it sticks in your craw. The emotion, executive time and legal expenses of playing tough are outweighed by the benefits of getting on with business. Most people don’t have the perseverance or stomach for litigation.
The old adage from Hamlet, “Neither a borrower nor a lender be” would be better fractured as “Neither a borrower nor employer be” for entrepreneurs in Ontario. If you can’t avoid having employees, you’re going to have problems. Experience says you can greatly reduce expense and heartache by the application of a balanced strategy and damage control.