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Howard Levitt: Withholding References and Other Rookie Mistakes Lawyers for Employers Make

posted 2 years ago

I recently discussed the increasing trend of employee-side law firms issuing demand letters and Statements of Claim with exaggerated allegations which neither the firm nor their clients even believed, alleging ageism, racism, or other slanders thrown carelessly onto the public record.

Their goal: the hope of publicly embarrassing employers into a quick shake down. I discussed how these tactics ultimately rebounded against their employee clients as angered employers will often then more vigorously defend such lawsuits, demand costs against the employee at the end and ensure that any future potential employer receives a negative reference.

My advice was that employers not concern themselves with such allegations and fight them vigorously since, at the end of the day, they will either be abandoned or costs will be awarded against the employee.

But there is fault on both sides of the aisle. I see many counsel acting for employers make avoidable errors which similarly damage their clients’ interests. Some of the common ones:

1. Spurious allegations of cause

There is nothing wrong with alleging cause if an employer has an honest, well-founded belief that cause exists. It is simply not the case, as many employers believe, that a cause defence is inherently ill-fated. But often it is alleged when the employer knows or ought to have known that it has no prospect of success.

Since Statements of Defence containing these allegations are on the public record, courts react badly if they believe they were made in bad faith with no honest belief that the conduct alleged constitute legal cause. As a result, the courts award additional damages, called Honda damages – named after the Supreme Court of Canada case involving that employer – specifically for bad faith allegations of cause. As well, to the extent the case is elongated by these allegations, the costs awarded by the court will increase, to say nothing of the fact that costs paid by the employer to its own counsel will be higher.

Finally, although they are often made for the very purpose of extracting a lower settlement from the accused employee, they often prevent settlement at all as the employee pushes to trial to protect their reputation and their lawyers realize that the case has now become worth much more because of the potential of these Honda damages. Increasingly, with new jobs easy to come by in the current marketplace, the real battle can become the entitlement to these damages rather than lost income.

2. Spurious counterclaims made against the employee in response to a Claim

It may well be that the employee was incompetent, by way of example, but there are few circumstances in which a court will award damages against that employee for good faith errors. Professional in-house accountants missing filing deadlines might be one but such instances are rare. Courts react to counterclaims even more strongly than to unfounded allegations of cause because discharged employees, who are already receiving no severance, have no realistic prospect of paying anyway and it is seen by judges as a tactic to force the employees into dropping their actions.

3. Arguing that an employment contract is enforceable when it is obviously not 

Not only is this a hopeless task but the court will be upset that this prevented a case from being resolved and wasted court time when the lawyer was presumed to know that their argument was bunk.

4. Insisting that wrongful dismissal damages are not payable because the worker is an independent contractor

Wrongful dismissal damages are awarded to even dependant contractors who have their own businesses and are generally dependent upon one “principal.” Genuine independent contractor relationships, such as a printing company or a law firm which you call on when needed, but which has multiple clients and no expectation of business from you on any particular week, if at all, are relatively rare. Invoicing through a company or even having a contract stipulating that the worker is an independent contractor does not make them one. Eighty per cent or more of workers who believe that they are independent contractors simply are not. The court is not impressed by your wasting the its time with such allegations and again, it rebounds to the disadvantage of the employer because court time is wasted and they end up paying more costs to both their own lawyers and the employee’s lawyers as result, as well as possibly having a damaging precedent.

5. Not providing a reference when requested

Unless there is a serious cause allegation being advanced, there is no reason not to provide one. Sometimes employee lawyers slip a request for a reference in the midst of a long group of outrageous demands and the employer gets so caught up in the other allegations that they do not notice the reference requests. Or they are so inflamed they refuse to provide a reference.

Don’t. If a deserving employee makes a reference request, provide one. Courts award additional damages to employees who do not receive a requested deserved reference.  Don’t’ make that rookie error.

6. Making it more difficult for the employee to find other work  

There is much the employer can do to assist the employee. It is prudent to do so. If the employee obtains another position, the damages are reduced and it is helpful to the court’s view of you. Assist the employees with resumés, conduct a parallel job search and provide copies of good leads to the employee. Such a list of jobs will also prove that the employee could have mitigated and reduces your potential liability.

Many employers used to assist employees with external relocation counselling. It is not very popular any more, perhaps because of the cost, but providing at least a resumé service would be of assistance and result in the court reviewing your conduct favourably. Remember, how much severance the courts award is as much an art as a science and judicial sympathy can be important to the outcome.

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/howard-levitt-withholding-references-and-other-rookie-mistakes-lawyers-for-employers-make

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