Employment & Labour

See a lawyer before signing termination agreement: MacLeod

By Tony Poland, AdvocateDaily.com Associate Editor

It’s important to get legal advice before accepting a termination package to ensure you are getting the best possible deal, says Toronto employment lawyer Doug MacLeod.

What may seem like a fair settlement could be a lowball offer, says MacLeod, principal of MacLeod Law Firm, especially if you are not well versed in labour law.

“People don’t know what they don’t know,” he tells AdvocateDaily.com. “Employment lawyers consider different damages claims when meeting with a recently terminated employee. It might be very straight forward case, or there may be several potential damage claims. An employment lawyer can usually assess the case in an hour.”

MacLeod says people can be overwhelmed when they are brought into a boardroom with a supervisor and a human resources manager and told they no longer have a job. He says a person is typically handed a letter with details of the severance offer.

“Most employees are given about a week to accept a severance offer," MacLeod says. “If the person was told to accept the offer on the spot I would have a question about whether the deal is enforceable because I think there’s an argument to be made that it was signed under duress.”

MacLeod says most employers require new employees to sign an employment agreement which contains a termination clause.

“Most people don’t really read them that carefully and don’t realize that there’s a termination clause that takes away their right to common law reasonable notice of termination,” he says.

Theoretically, employees who are being dismissed should receive advance notice when their services will no longer be needed, MacLeod says.

“They’re supposed to bring you into the boardroom and say, ‘Look we’ve decided to reorganize the business, and your position has been eliminated. Unfortunately, we don’t have another position for you, so your employment will be terminated three months from now.’ That’s what employers are supposed to do,” MacLeod says.

“I would say that happens less than five per cent of the time. Instead, you’re called into the boardroom, and they say, ‘Sorry to do this, but we’ve eliminated your position. Today is your last day. Here’s a package.”

He says most termination clauses provide for less compensation than would be available without one.

“The termination letter may state you’re owed eight weeks’ pay and the employer says, ‘We’re going to pay you that and give you two more weeks if you sign a release, which means you’re not going to sue us,’” MacLeod says.

For some, the extra two weeks may be incentive enough to agree to the package, but he says taking the time to examine the offer is almost always beneficial.

“The employer will rely on the contract and the termination clause, but what employment lawyers do is carefully review the termination clause because it may not be legally enforceable,” MacLeod says. “There have been all kinds of litigation in the last five years, where employees challenge the legal enforceability of the termination clause. There are all kinds of case law where judges have bent over backward not to enforce them.”

MacLeod says when a terminated worker seeks legal advice, “The first question that the lawyer should ask is, did they sign an employment agreement with the termination clause because that’s where the conversation’s going to start.”

With or without an employment agreement, a terminated employee should still seek advice, he says.

“With some employers, it’s a strategy. They lowball all the time hoping that most people will bite,” MacLeod says. “For people who don’t, they’ll usually pay them eventually if the employee has a good case.”

He says a lawyer will look at issues an employee might not have considered, such as unpaid overtime entitlement, potential human rights violations or wrongful dismissal claims.

“In an initial consultation, an employment lawyer will canvas various issues to see whether the employee has one or more legal claims. It might be just a very straight forward how much pay in lieu of notice is fair, or there may be other potential damages,” MacLeod says.

He says an employment lawyer can advise the employee if they have received a “sweetheart deal” or a substandard offer and determine the best course of action.

“In many cases after the initial consultation, the lawyer will send a demand letter that basically says, ‘We’ve been retained, your offer isn’t fair for the following reasons, and here’s an offer we think is fair,’” MacLeod says. “It might be worth a letter, or it may be worth pushing a little bit further. You just have to do a simple cost-benefit analysis.”

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