Restoring ‘Working Notice’ as a Termination Strategy

Somewhere, in a galaxy far, far away, many h.r. professionals and lawyers developed the following default approach to terminating the employment relationship…

• the decision is made, in secrecy, to terminate the relationship,
• legal advice about the employee’s entitlements upon termination is obtained,
• documentation (termination/offer letter, release, ROE, final pay, etc.) is assembled,b
• the employee is pulled into a meeting on a Friday afternoon,
• HR delivers an envelope and notifies the employee of his/her abrupt termination, and
• obtains the employee’s keys, credit cards, etc. and escorts him/her out the door.

This blind-siding can aggravate the employee’s hurt feelings and sense of rejection and can escalate into acrimony, hindering the process of settlement and execution of related documents.

It lays the groundwork for wrongful dismissal litigation and creates substantial liability relating to the automatic cessation of benefits/insurance coverage.

The Legal Entitlement – Reasonable Working Notice of Termination

Unless there is a binding employment agreement in place containing a valid termination notice formula, the starting point when it comes to a without-cause termination is reasonable working notice. The required working notice is determined pursuant to the common law (and, to a lesser extent, B.C.’s Employment Standards Act).

Equivalent pay-in-lieu of notice is often provided instead of, or in combination with, working notice. But using pay-in-lieu of notice is like fitting square peg into a round hole… more on this, below.

Remember, when it comes to the law of employment and wrongful dismissal, reasonable working notice is the requirement. This is critical for understanding why HR’s default approach to termination of employment is broken – because it starts off by breaching the contractual terms of employment.

The “Disability Gap”

Disability insurance (and sometimes life insurance) coverage usually halts automatically upon the employee ceasing to be actively employed – the moment h.r. pulls the employee into the meeting and delivers the letter. So, when the employer abruptly terminates the relationship as described above, legal problems arise. Potentially BIG legal problems.

That’s because the employer’s obligations in lieu of working notice arise from the premise that the employee is entitled to be made whole for the entire loss of working notice for the entire “reasonable notice” period. The employee is entitled to the benefit of all the usual employment perquisites, including insurance coverage.

Hence, what I call the “disability gap” occurs - the employee has an entitlement to ongoing benefits coverage during the notice period but the insurance coverage will normally have been halted according to the terms of the insurance plan. So…

•  If the employee becomes disabled during the notice period, the disability insurance is no longer there to provide him/her with wage-replacement benefits.
• The employer may be held liable for any benefits payments the employee would have enjoyed had she been given working notice – effectively stepping into the shoes of the insurer for as long as the benefits payments would have been paid (ie. potentially to age 65).
• The only way to “close” this “gap” is to obtain a (properly drafted) release of claims. If that doesn’t happen, the “disability gap” remains until whatever the notice period is elapses – as much as 24 months!

* (The same risk arises when the employer chooses to dismiss the employee summarily for just cause reasons. If the just cause grounds are rejected by a court – as they most often are - the employer will be liable for the lost benefits in the event of a disability arising during the notice period.)

Nobody Likes Working Notice  ☹️ 

The answer to this legal puzzle lays in working notice. Giving reasonable working notice of termination is the obvious answer because it solves all problems – it satisfies the employer’s notice obligations and it eliminates the “disability gap”.

But, nobody seems to like working notice. Employers don’t like it. Employees don’t like it.

Still, Working Notice Is The Answer  ☺️ 

There is a solution which lays in between terminating abruptly or enduring a full period of working notice. Instead of abruptly terminating the relationship and sending the employee home with an offer letter and a release, we…

• issue reasonable working notice (always erring on the high side) of termination,
• combined with a limited-time offer of some amount of pay in lieu of notice,
• conditional, of course, upon the employee signing a release,
• and give the employee a few days off, with pay, to consider the offer.

All of the risk of the “disability gap” is eliminated because the employment has not been abruptly terminated. If the employee accepts the offer and signs the release, the matter is resolved without that risk ever arising at all. Two factors tend to determine if the employee will accept…

• The lengthier the working notice, the more interested the employee will be in settling.
• The more $$$ offered in lieu of notice, the more motivated the employee will be to settle.

A Final Word, On Leverage

One aspect I particularly like, of approaching the termination in this fashion is that it places substantial negotiating leverage in the employer’s hands.

The leverage, here, arises because: the employer has not exposed itself to any liability; the employee won’t want to work through a lengthy working notice period; and, once the working notice is issued, the clock begins to tick down on the employee’s claim.

The very worst that can happen is the employee rejects the time-limited offer, electing to work through the notice period – but this is waayyyy better than the alternative - being sued for wrongful dismissal!

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This item is provided for general information purposes only and is not intended to be relied upon as legal advice. Informed legal advice should always be obtained about your specific circumstances.