Dec 19, 2023  By John Hyde

Red Flags for HR Professionals & When to Seek Legal Advice: Part III

One of the most important skills that effective HR professionals possess is the ability to recognize when to seek legal advice before taking steps which could create or substantially increase liability.

This article is the third installment in our series aimed at helping HR professionals recognize when they should seek legal advice. Accordingly, another three types of situations which warrant seeking specific legal advice to avoid common pitfalls, minimize exposures, and safeguard your organization’s reputation are set out below.

1. Demand Letters Alleging Wrongful Dismissal

One red flag situation is when an employer receives a “demand letter” from a lawyer representing a former employee threatening to sue the employer if it does not provide them with an acceptable severance package.

It is crucial to seek prompt legal advice after receiving a demand letter because: (i) whether an employee has been wrongfully dismissed depends on whether their employment contract contains a legally enforceable termination clause, which is something that only a competent employment lawyer can determine; (ii) it is necessary to understand how much pay in lieu of common law reasonable notice an employee is entitled to (if any), in order to respond to a demand letter and engage in settlement negotiations effectively; and (iii) failing to respond to a demand letter and engage in settlement negotiations in a timely and effective manner will frequently result in the former employee commencing litigation against the employer, which is very costly and time-consuming to defend against.

Simply put, an employer’s potential liability varies greatly depending on whether the termination clause in a former employee’s contract is legally enforceable, and this area of law is complex and always changing. For example, seemingly minor differences in how a termination clause is written can mean the difference between an employee being entitled to only 8 weeks of statutory termination pay or 24 months of pay in lieu of common law reasonable notice. Accordingly, where there are sound arguments for a termination clause being legally enforceable, clearly articulating the same in response to a demand letter can drastically improve an employer’s negotiating position.

Moreover, an employer that has not received specific legal advice is likely to make settlement offers that are not reasonable in light of the employee’s entitlements, which makes it far more likely that the employee will commence legal action. Further, where the termination clause is unenforceable and the employee does sue, then: (i) the employer may lose if they go to trial; (ii) the employer will spend thousands of dollars in legal fees defending itself; and, (iii) it will most likely be ordered to pay the majority of the employee’s legal fees too. Thus, employers would be well-advised to immediately seek specific legal advice after receiving a demand letter alleging wrongful dismissal.

2. Hiring Remote Workers in Another Province

Another high-risk situation, which has become far more common since the rise of work-from-home arrangements during the COVID-19 pandemic, is hiring employees to work remotely from another province.

In any given province or territory there are a myriad of legal requirements that apply to workplaces under applicable legislation, such as employment standards, occupational health and safety, and human rights legislation, and these requirements vary significantly between jurisdictions. Accordingly, where an employer hires an employee to work remotely in a different province for the first time, there is serious risk that they will inadvertently violate applicable legal requirements because they are not familiar with how they differ in that jurisdiction.

For example, Ontario’s Employment Standards Act, 2000 generally allows employers to dismiss employees without cause, so long as they provide the employees with their statutory termination entitlements, whereas Nova Scotia’s Labour Standards Code generally prohibits employers from dismissing employees without cause if they have at least 10 years of service. Similarly, an employee’s political beliefs are not a prohibited ground of discrimination under Ontario’s Human Rights Code, but they are a prohibited grounds of discrimination in other provinces such as British Columbia and Manitoba. These are only two examples, but there are countless legal differences between jurisdictions. Thus, employers that are considering hiring any out-of-province employees should seek specific legal advice before doing so, to avoid the costly fines and penalties that can result from inadvertently violating the statutory requirements of that province. 

Furthermore, where an employer seeks to use an employment contract that is tailored to the legislative requirements of one province in a different province, there is a good chance that the termination clause in the contract will not be legally enforceable. This is because the termination clause may violate the different employment standards requirements that apply to that province, which can massively increase an employer’s liability when terminating an employee. Therefore, employers should also have their employment agreements reviewed by a competent employment lawyer prior to hiring any employees in a new province.

3. Being Served with a Lawsuit, Application, or Complaint

A third red-flag situation is when an employer is served with a lawsuit, an application, or a complaint before the Human Rights Tribunal of Ontario, the Ontario Labour Relations Board, the Ministry of Labour, or another tribunal.

It is crucial to immediately seek legal representation in such circumstances because: (i) you need to put your best foot forward in defending against litigation, as you generally cannot amend your initial pleadings without the consent of the other party or leave of the court/tribunal; (ii) there are strict deadlines for filing a defence or response to a lawsuit, application, or complaint, and failing to meet that deadline will result in the employer being deemed to have admitted all allegations; and (iii) effectively defending against a lawsuit, complaint, or application requires substantive expertise in the relevant area of law, as well as knowledge of the often complicated procedural rules that govern the legal proceedings in question, which vary widely between different courts and tribunals. 

The importance of immediately seeking legal advice in these circumstances cannot be over-emphasized because any significant delay can have devastating consequences. For example, an employer which has been served with a certification application by a union seeking to unionize their workplace only has 2 days to serve and file a response to the application, and the Ontario Labour Relations Board will nearly always refuse to consider an untimely response. Accordingly, even one day of delay can mean losing half of the available time for preparing a response, which can seriously hinder responding effectively. Thus, employers should immediately seek expert legal representation when they have been served with a lawsuit, or an application/complaint before a court or tribunal.

The Bottom Line

Please do not hesitate to contact us for expert legal advice the next time you encounter one of the red flags noted above, and please stay tuned for the next installment in this series for more red flags that HR professionals should be aware of.

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