Termination Without Cause Can Lead to Expedited Litigation

April 23, 2015

There are many circumstances that can arise that result in an employer terminating an employee without cause. An employee who is terminated without cause is entitled to reasonable notice of termination, or pay in lieu thereof. Often times an employer who is terminating an employee without cause will make an offer of severance (e.g. pay in lieu of notice) that is conditional upon the employee signing a release. If the employee refuses to sign the release, and the parties are unable to agree on the amount of pay in lieu of notice the employee is entitled to, litigation will often ensue.

In New Brunswick, the trend for several years has been for employees who have been terminated without cause to file an action for wrongful dismissal, followed shortly thereafter with a motion for summary judgment and advance payment of special damages. Special damages are those damages that have accrued as of the date of the hearing.

For example, in Lewycky v. EXP Services Inc., 2014 NBQB 110, two employees, a husband and a wife, were terminated without cause. The employer made an offer of severance at the time of termination. However, both the husband and the wife rejected the employer’s offer and instead filed an action for wrongful dismissal. EXP Services Inc. admitted that the employees had been terminated without cause.

The husband has over 19 years of service with the employer. The wife had almost 6 years of service. Both the husband and the wife were 57 years old at the time of termination. The husband found new employment 4 months after his termination. The wife found new employment 6 months after her termination. However, the compensation at both of their new jobs was lower than what they had received from EXP Services Inc.

The Court held that the employees were terminated without cause and therefore liability for wrongful dismissal was established. A summary judgment was granted on the issue of liability for wrongful dismissal. The only issue between the parties was the quantum of damages (e.g. how much pay in lieu of notice the employees were entitled to).

The Court held that, having established liability for wrongful dismissal, the employees were entitled to an advance payment of special damages. The employer argued that damages ought not be awarded as one of the issues raised in the Statement of Defence was that the employees had failed to mitigate their damages. The Court explained that this matter was not relevant in a motion for advance payment of special damages and that it could be argued fully at a trial on damages. The Court granted both employees an advance payment of special damages: the husband 18 months’ pay (less mitigation income); and the wife was granted 6 months’ pay (less mitigation income).

The motion for summary judgement and advance payment of special damages resulted in a large payment being awarded to the employees without a discovery or a full trial and was based merely upon the affidavit evidence before the motion judge.
This litigation trend has resulted in a shift in power between employers and employees who have been terminated without cause. An employer is no longer able to rely on the lengthy litigation process to prolong its obligation to provide an employee with pay in lieu of notice. Rather, once an employee is terminated without cause, they have the ability to file an action, and then a motion for summary judgment and an advance payment of special damages, to recoup (at least partially) the monies they are entitled to at common law.

Employers should carefully review their options when considering a termination without cause. Offering severance conditional upon executing a release may not necessarily be the best option. Employers may wish to consider providing an unconditional severance payment or a salary continuance that will cease in the event the employee finds alternate employment. Employers should discuss their options with legal counsel.

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