A Guide to Employers: Avoiding Employment Lawsuits
Employers frequently seek advice from employment lawyers on issues concerning their employees’ rights and entitlements. Employers who understand and respect those rights are better positioned to prevent disputes before they escalate into costly and protracted lawsuits.
This blog provides a practical guide to five questions employers most commonly ask and the pitfalls they should avoid to reduce the risk of employment disputes.
1. Can an Employer Reduce an Employee’s Hours?
Employers may wonder whether they can lawfully reduce an employee’s working hours. The answer depends on several factors, including whether the employee is paid hourly or by salary, the terms of the employment contract, the extent of the proposed reduction, and its impact on the employee’s compensation.
A significant reduction in working hours or compensation may (or it may not) constitute constructive dismissal, exposing the employer to a claim for damages. However, whether a reduction is sufficiently significant to amount to constructive dismissal depends on the circumstances of each case, such as the factors mentioned above. A reduction in hours is not automatically constructive dismissal simply because it is significant. The central question is whether the employer has unilaterally made a substantial change to an essential term of employment. The contractual terms and the actual impact of the reduction are therefore particularly important.
Before reducing an employee’s hours, employers should consult an experienced employment lawyer to assess the proposed change, identify the associated legal risks, and establish appropriate parameters for the reduction to minimize the risk of a constructive dismissal claim.
Without legal advice, employers should avoid implementing the following reductions in hours, as they may expose the employer to a constructive dismissal claim:
A substantial or permanent reduction in the weekly hours of an hourly employee;
A permanent change from full-time to part-time employment; or
Removing an employee from the work schedule for an extended period.
2. Temporary Layoffs
Ontario’s Employment Standards Act, 2000 (the “ESA”) sets limits on the duration of temporary layoffs. Generally, an employee may be laid off for up to 13 weeks in any period of 20 consecutive weeks. A layoff may extend beyond 13 weeks, but remain under 35 weeks in any period of 52 consecutive weeks, if certain statutory conditions are met. These conditions include, for example, the continuation of substantial payments to the employee, continued contributions to certain pension or benefit plans, supplementary unemployment benefits, or an applicable recall arrangement.
If a layoff exceeds the applicable ESA limits, the employee may be deemed terminated for the purposes of the ESA, with the termination generally effective as of the first day of the layoff.
Most importantly, compliance with the ESA’s layoff limits does not, on its own, give an employer the right to lay off an employee. That right must generally be authorized by the employment contract or otherwise arise from the applicable legal circumstances.
Employers seeking to reserve a right to impose temporary layoffs should ensure that their employment agreements contain a clear and enforceable temporary layoff provision. Without such a right, imposing a layoff—even one that complies with the ESA’s timelines—may be unlawful.
3. Notice and Pay-in-lieu of Notice Obligations
Perhaps the most asked questions are those relating to notice of termination. When terminating an employee without cause, employers must consider how much notice of termination the employee is entitled to receive, or how much pay must be provided in lieu of notice.
Under the ESA, eligible employees with at least three months of continuous employment are generally entitled to written notice of termination or termination pay. The statutory notice period ranges from one to eight weeks, depending on the employee’s length of service, although different rules may apply in certain circumstances.
However, an employee’s entitlement may extend well beyond the ESA minimums. Unless an enforceable employment contract limits the employee’s entitlement to a different amount of notice, the employee may be entitled to reasonable notice under the common law. This is often where employers face significant unexpected liability.
There is no fixed formula for calculating common law reasonable notice. The appropriate notice period depends on the circumstances of the particular employee, including their age, length of service, character of employment, and the availability of comparable employment. The resulting entitlement can vary considerably from one employee to another, and in some cases may exceed two years. Determining the appropriate notice period is what we call “the million-dollar question”.
Employers should also be careful not to confuse termination pay with severance pay. These are separate entitlements under the ESA. Termination pay compensates an eligible employee for the statutory notice period that was not provided. Statutory severance pay, by contrast, is available only to qualifying employees who meet additional service and employer-payroll or business-discontinuance requirements. An employee may be entitled to both.
Before terminating an employee, employers should have an employment lawyer review the employment agreement, assess the employee’s potential statutory and common law entitlements, and calculate the appropriate termination package. Providing only the ESA minimums when an employee is entitled to more can expose the employer to a wrongful dismissal claim and substantially greater costs.
4. Accommodating Employees with Disabilities
Most employers understand that they have a duty to accommodate employees with disabilities, however, not all understand how far the effort to accommodate must go. The law requires that accommodation to be “to the point of undue hardship” to the employer, which many employers feel is not sufficiently clear, which is why they seek employment law advice. We will advise and guide employers on modifying an employee’s duties, schedule, or workplace arrangements to address disability-related needs. Employers should approach accommodation requests individually, engage in a meaningful dialogue with the employee, and obtain relevant medical information where reasonably necessary to understand their restrictions and accommodation needs.
Employers should avoid assuming that an employee cannot perform their job simply because they have a disability. Failing to properly consider accommodation, or terminating an employee without adequately exploring reasonable accommodation options, may expose the employer to a human rights complaint or other legal proceedings.
5. Updating Employment Contracts to Existing Employees
Many times, employers reach out to us seeking to update employment contracts or introduce them to existing employees to better address issues that may otherwise expose the employer to legal liability. Introducing a new employment agreement for an existing employee requires careful consideration. Simply asking an employee to sign a revised agreement is insufficient to ensure its enforceability and would likely not result in a valid and binding contract. Principles of contract law require “fresh consideration” in exchange for agreeing to new contractual terms. Before rolling out new employment agreements, employers should consult an employment lawyer to ensure the agreements are enforceable and the process for introducing them is legally sound.
Conclusion
From managing changes to working hours and temporary layoffs to determining termination entitlements, accommodating employees with disabilities, and updating employment contracts, taking a proactive approach can help employers avoid costly disputes and litigation. While we hope this guide is helpful to employers handling common employment law issues, it is not meant to replace tailored legal advice.
Seeking legal advice early can help protect your business, ensure compliance with Ontario law, and prevent manageable issues from escalating into legal disputes.
We work with employers throughout Barrie, Simcoe County, Muskoka, and the surrounding region, and are glad to talk through a situation before any decision is made. Call our office at 705-468-1088 or reach out through our website to arrange a consultation.
The information provided in this blog is for general informational purposes only and should not be construed as legal advice. If you have legal questions, we strongly advise you to contact us.
