Lowball layoff offer stings employer in $300,000 court case

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Note to employers: when it comes to layoffs, don’t try to lowball the employee. It could come back to haunt you.

In November 2012, Best Theratronics fired 31-year employee Matthew Arnone. There was no cause for dismissal, just restructuring. There’s nothing so wrong with that, except in regards to what the company considered “reasonable notice.”

When someone is terminated without cause — meaning they lose the job through no fault of their own, due to reasons like budget cuts — an employer must provide reasonable notice of termination or payment in lieu.

Payment in lieu of notice means your employer didn’t give you the legally-required written advance notice of your termination and instead just pays you the amount you would have earned in that same period.

There’s no specific legal definition of “reasonable notice,” but courts consider multiple factors, including:

  • type of job (physical labour or managerial work, for example);
  • length of the employee’s service;
  • employee’s age;
  • availability of similar employment.

That last point in particular was an important aspect of Arnone’s case. We’ll return to that in a minute.

Best Theratronics offered the statutory minimum 14.4 weeks of notice and severance as stipulated in the Canada Labour Code.

(See: Severance laws by province)

Arnone took that as a stingy offer, especially considering he’d been fired just over 16 months away from his full pension.

He took Best to court in April 2014, demanding 24 months’ pay in lieu of notice, as well as $65,000 in pension benefits, and a retirement allowance of approximately $55,000 plus legal costs.

Among Best’s arguments, the company claimed that Arnone failed to take advantage of similar employment after his firing and, in a related point, to “mitigate his damages” (basically, taking steps to reduce his losses and thus the award sought from the plaintiff).

Judge Martin James scoffed at that argument, noting that Arnone had applied for 800 jobs after his termination and eventually took a position stocking shelves at a Wal-Mart.

The pension was a real sticking point.

Judge James said there was no doubt the company owed Arnone at least 17 months’ notice, which would have “bridged” to his pension. In fact, James calculated that Best owed Arnone 22 months’ notice.

Arnone got pretty much all the damages he asked for, totalling just over $305,000 plus interest.

Best appealed, sticking by its 14.4 weeks’ notice and saying Arnone didn’t deserve a retirement allowance. Most shamelessly, it said it deserved credit for the mitigation damages during the notice period — meaning the overall award should be reduced by the amount that Arnone made working at Wal-Mart.

The Court of Appeal decision supported the original ruling on most fronts, including the 22 months’ notice and retirement allowance. However, it did give Best credit for the paltry mitigation earnings, which were somewhere between $10-20,000 dollars.

Of course, the overall hit in terms of damages and legal costs ended up running well over $300,000. But at least they got that sweet Wal-Mart money back.

Hopefully that’s a lesson learned: don’t try to shortchange your employees.
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