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Forget Wrongful Dismissal: "Wrongful Resignation" is an Employment Law Trend to Watch in 2022

posted 3 years ago

Last week, I wrote about the dramatic reduction in wrongful dismissal cases that I see coming in 2022. With employers desperate to retain employees, there will be few terminations and, with the marketplace so buoyant, those employees who are laid off will have little difficulty obtaining new employment. They simply will not have damages to sue for.

For those who do manage to remain unemployed, as I discussed last week, employers will have little difficulty proving that those employees could have found other jobs and easily destroy their cases by intelligent work on the defence side.

As the last hammer on the wrongful dismissal nail, most employers have learned their lessons from two years of court decisions invalidating virtually every employment contract in this country and have engaged employment counsel to draft contracts that will now be effective. My firm has spent much of our last year drafting those for our employer-side clients.

Smart employers require employees to sign their new contracts at the time of annual raises or bonuses since a contract is legally invalid if an employee receives nothing in return for signing it. I might note that an employee has the right to refuse to sign the new contract and, if they do not sign, they simply will not receive that raise or bonus.

It is not only employment law that will be dramatically diminished in the coming year. Labour law will as well. The pandemic has demonstrated to unionized workers that unions are a burden, not an advantage. Non-unionized workers can sue for layoffs, reductions in pay or reductions in hours. Unionized workers generally have no recourse when that occurs. The law of constructive dismissal and wrongful dismissal simply does not apply to unionized workplaces.

With inflation at a 30-year high, non-union workers are negotiating greater salary increases than they have for many years while unionized employees are stuck with their long-term agreements that provide annual raises of about two per cent.

Private sector unions, which have had difficulty attracting new members for many years, are going to be in greater difficulty than ever. Indeed, as a result of layoffs in the unionized workforce and some union decertifications (which I have been active in), the percentage of unionized private sector workers in Canada has declined steadily for more than 20 years.

So, what actions might we see to replace these declining dismissal cases in the coming year?

Lawsuits for intentional infliction of mental stress or other forms of workplace harassment

Such actions have become much more popular as employee lawyers have looked for ways to attach such allegations to existing lawsuits. As I am writing this, I just finished preparing a statement of defence in one case where the employee is seeking only $30,000 for lost income for their wrongful dismissal but close to $100,000 for that employee’s alleged ill-treatment.

As social norms have evolved as to what is appropriate workplace behaviour, courts are more open to awarding damages if they believe that an employer has behaved “badly.” They find various ways to accomplish this: Honda damages, punitive damages, reputational loss, damages for mental distress and more.

Such actions could take the form of applications under the Occupational Health and Safety Act in various provinces, constructive dismissal, intentional infliction of mental distress, conspiracy to injure or negligent treatment of the employee in question.

Constructive dismissal

In addition to constructive dismissal based on an intolerable work environment, constructive dismissal cases for demotions, geographical transfers or reductions in salary and hours still exist. The problem for such employees is, again, it has become so easy to find alternate employment, with many vacancies for every job seeker, that they will have difficulty establishing sufficient damages to justify the lawsuit.

Wrongful resignation

This is the corollary of wrongful dismissal, a lawsuit against an employee for providing inadequate notice of resignation.

This could be the up-and-coming lawsuit of 2022. On my radio show on Thursday in Windsor, I had a number of calls and comments premised upon the concept that an employee can resign from any job on two weeks’ notice. This is a fallacy.

Just like wrongful dismissal, an employee has to provide an employer with adequate notice, with adequacy being defined generally as the length of time it should take that employer to find a qualified replacement. These days, when recruitment in many industries is well-nigh impossible, that could be many, many months. If an employee does not provide that advance notice, the employer can sue for all the damages which it can establish it suffered as a result of losing that employee for that number of months, including recruitment fees. If a sales employee, senior executive, or even a skilled mechanic leaves such that a machine must shut down until a replacement is found, those damages can be substantial.

Some, but few, employers stipulate the amount of notice of resignation that an employee must provide in employment contracts. If so, that will be binding. But usually, employers are much better off not having such contractual provisions because the courts, at a time of labour shortages, will be imputing very significant notice periods.

Employees thinking of resigning should try to come to terms with their employers and then concretize that agreement in a quick email so they cannot be accused later of resigning without adequate notice.

Damages for loss of opportunity

As I discussed in a previous column respecting the Acumen Law decision of the B.C. Court of Appeal, if a firing prevents someone from entering a high-paying career, the damages could be extraordinarily significant. The Acumen case dealt with a law student who was fired and then unable to pursue her articles and gain entrance to the Bar, so the measure of damages was based on lost income as a lawyer. The same principle could be true for any vocation, i.e., a licensed journeymen or a profession where a period of apprenticeship is required. It could also apply to a situation such as a stock broker who is discharged with the brokerage also filing a regulatory complaint which can derail a career and cause millions of dollars in future income loss. Although the law is clear, few “employment lawyers” have been aware of it and there have been few such cases to date as a result.

When I began practice, wrongful dismissal law was largely a tax-driven device. If you issued a claim, the (usually already agreed) severance would be paid without tax. Since then, it has increasingly become a bigger part of the legal landscape.

This year the number of cases of wrongful dismissal will dramatically shrink. But there is still much other litigation ahead.

BY HOWARD LEVITT

Howard Levitt is Senior Partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practises employment law in eight provinces. He is the author of six books, including the Law of Dismissal in Canada.

THIS ARTICLE ORIGINALLY APPEARED HERE: https://financialpost.com/fp-work/forget-wrongful-dismissal-wrongful-resignation-is-an-employment-law-trend-to-watch-in-2022